The UAE has long been considered one of the best places in the world for foreign investment. Now, the country is set to become even more appealing to foreign investors and entrepreneurs, thanks to this year’s foreign ownership amendment. Read on for everything you need to know about UAE foreign ownership of companies.
The UAE foreign ownership amendment became effective as of June 2021. As an amendment to the UAE Commercial Companies Law (the “CCL”), this means that 100% foreign ownership of companies incorporated in the UAE is now permitted. Previously, it was required that UAE nationals held a minimum of 51% of the shares in an onshore company. Moreover, single-shareholder entities can also be 100% owned by foreign investors, whereas before the amendment, they had to be 100% owned by UAE nationals.
In the past, the foreign ownership restrictions that were in place were a hindrance to foreign investors in the UAE as they created additional complexity and obstacles for those who were looking to create or invest in a company — including those into private equity or venture capital. Now, with the UAE foreign ownership amendment, foreign investors are able to start, own, and manage companies without needing an Emirati shareholder or agent.
For this reason, this amendment makes the foreign investment in the UAE an even more attractive locale for foreign investors and is likely to strengthen the country’s position as a global investment destination. The UAE government made these changes as part of the country’s efforts to facilitate more business activities. For savvy investors and entrepreneurs, this is a welcome opportunity. For example, they can now acquire shares in growing economic activities, such as solar panels, green technology and hybrid power plants.
The program is set up to allow each Emirate to define which business activities are permitted to be allowed 100% foreign ownership within its territory. For example, the Dubai and Abu Dhabi emirates have published their lists including more than 1,000 enterprises that foreign investors can own.
Permitted activities include the majority of industrial and trading business sectors, the hospitality and F&B sectors, retail and wholesale trading, repair and maintenance services and manufacturing across multiple industries. Transport and storage are also permitted 100% ownership, meaning foreign nationals can invest in supply chain, logistics, cold storage, and e-commerce transport.
In the sciences, foreign owners are allowed to have research laboratories and work in biotechnology. Keep in mind that these permitted activities can be revised and updated at any time, so it is crucial to monitor these changes if you are considering opening or investing in a business.
Currently, there are still some restrictions for specific banking and financial services. Other sectors excluded from this amendment and are, therefore, not available for foreign ownership include defense, education, telecommunications, and publications. Furthermore, if a business provides professional services, this will continue to require a UAE national agent and possibly translation services.
As each emirate is authorized to decide on its permitted activities, there is a difference in what is allowed. Take, for example, Abu Dhabi, which has permitted broader healthcare activities than Dubai. Abu Dhabi has also included onshore and offshore oil and gas fields and facilities services, unlike Dubai. On the other hand, Dubai has announced that no additional fees, guarantees or capital are required for full foreign ownership.
The UAE is home to several free zones — areas where foreigners can own 100% of their businesses. These free zones were previously the default location for foreign companies looking to invest or trade within the UAE. However, now that the whole country can accept 100% foreign ownership, it is still unclear what competitive benefits there are for choosing to establish a business in a free zone.
There are many things to consider before you can start a business in the UAE, which is why it is highly recommended that you work with professionals who deeply understand the landscape and local procedures and can work with you on a range of business services. In order to ensure that you are successful in setting up a business in the UAE, you need to have a team that can provide you with a comprehensive step-by-step plan, offer strong project management skills, and advise you on resources and connections to help handle legal requirements and documentation.
You may also benefit from other UAE business setup services, including policies and processes related to immigration and employment laws and licensing laws. For this reason, if you are considering starting a business in the UAE, you want to work with a UAE-based business setup company that will partner with you on all aspects of the company, including UAE company formation services, strategic corporate sponsorship decisions, and corporate PRO services.
The new amendments to UAE foreign ownership are exciting for investors worldwide as this is a market that can facilitate exceptional business returns. If you are interested in UAE foreign ownership, reach out to one of the best auditing firms in Dubai who also specialize in UAE business setup and a wide array of other corporate services.
AUTHOR BIO: Naresh Manchanda is a Partner at MBG Corporate Services, an international organization supporting clients across Asia, Europe and the Middle East and providing sustainable solutions and strategies that drive business transformation. Established in 2002 and headquartered in Singapore, MBG is a 450-strong member team that operates out of Europe, the Middle East and Asia, providing Legal, Risk, M&A, Tax, Strategy, Technology and Audit Services.