UAE to Allow 100% Foreign Ownership to Companies from June 1, 2021

Note – The article has been updated as of June 3, 2021, in accordance with new inclusions mentioned by the Ministry of Economy.

Starting from June 1, 2021, foreign entrepreneurs and investors can completely own mainland companies in the UAE. According to the Ministry of Economic, the Commercial Companies Law aims to boost the Emirates competitive edge and is a part of the UAE governments' effort to facilitate doing business. This reform is limited to commercial and industrial business activities. However, all the professional business activities will not be a part of the full foreign ownership law and remain to require a Local Service Agent in order to be incorporated.

The list of permitted business activities is mentioned here for your reference.

The regulation will strengthen the country's position as an international economic centre and encourage the flow of investments to its vital economic sectors.

The long-anticipated and widely discussed reform, which will have game-changing implications on the investment landscape of the nation, was approved by President His Highness Sheikh Khalifa bin Zayed Al Nahyan last year.

The new law has positively affected the tech and digital sectors. Entrepreneurs and business owners who want to set up technology or digital focussed business can do so in the Mainland.

The UAE will also form a committee of members, comprising representatives from each of the DED entities to determine –

• List of commercial activities considered to have a strategic impact on UAE’s economy
• Additional licensing controls to impose on companies undertaking commercial activities in sectors listed in the Strategic Impact List.
• A negative list containing important sectors like oil and gas, telecom and utilities which will not be included in the new reform

What Changed?

According to the Commercial Companies Law, Law No. 2 of 2015, foreign shareholders were limited to own 49% of shares in their business, while most shares, i.e. 51%, were owned by a Local Sponsor. In other firms, it was required for foreign companies of specific categories to have a local service agent (Emirati national) who would not have any shares but would be reimbursed as part of the business setup agreement.

But now, the amended law will allow a natural and legal person to set up and own 100% shares in the business, regardless of their nationality. It will also allow foreign companies to establish a branch office without the need of having a Local Service Agent. The law, however, will not apply to few companies that are excluded based on decisions by the Cabinet and those that are either wholly-owned by federal or local governments or their subsidiaries.

The changes are part of a series of measures introduced to make the UAE a more investment-friendly destination, including the offer of 10-year visas for investors and citizenship for Investors and talented professionals.

What else does the Commercial Companies Law include?

There are exceptions for a few businesses operating in sectors that are strategically important to the UAE. The new decision is not applicable for companies wholly owned by the Federal or local Government or their subsidiaries.

All current and previously licensed businesses in the UAE can amend their statuses according to the new amendments to the Commercial Companies Law. In December 2020, the UAE government announced significant changes to Federal Commercial Companies Law No.2 of 2015, bringing an overhaul of foreign ownership rules applicable to commercial companies.

The law supports openness and flexibility in legislation to provide an economic climate in line with the latest and best investment practices. It also eases the setting up and doing business in the UAE and further attracts foreign direct investment in various vital sectors.

The move also aims to raise the attractiveness of the investment environment through open and flexible legislation to provide a business-friendly environment in compliance with the best international investment practices in preparation for the next 50 years.

Conclusion

Earlier, a few restraints made a foreign ex-pat sceptical of setting up a business in UAE Mainland. But with the new law, these restrain have loosened up due to which the investors and foreign ex-pats can freely set up a company. The full foreign ownership law is a once in a lifetime opportunity for a business person like you to kick-start a dream venture in Dubai.

If you want to know more about this law or have decided to incorporate your business in UAE, our consultants at Commitbiz can assist you. Right from business incorporation to office space, we cover everything. Get in touch with us – we'd be happy to assist you.