The population of the United Arab Emirates is estimated to be almost 90% expatriates. Being an internationally popular business destination, the nation tends to attract investments and business owners from every corner of the globe. Initially, investors from overseas were unable to maintain full ownership while operating on the mainland. However, this is not the case anymore as the amendment made to the corporate law allows 100% Foreign Ownership in Dubai for all companies.
The new rule came into effect on 1st June 2021 as a new dawn for the country’s business community. In this blog, we will explore in depth the new amendments, and how they would benefit the entrepreneurs as well as the UAE economy.
Amendment regarding 100 ownership of a business in UAE
Earlier, entrepreneurs setting up companies in the UAE Mainland were only able to retain a 49% stake in their business, while the remaining 51% belonged to a UAE national, also known as a local sponsor. These sponsors could be either individuals with a professional standing or established corporate entities operating in the UAE. Though they did not hold any decision-making powers in business operations or any claims in profits, they were entitled to an annual fee for their services in the company, such as business registration, license acquisition, documentation, etc.
Nonetheless, there were certain exceptions to this particular rule. Foreign entrepreneurs with a professional license in the UAE could fully own their companies. Similarly, the Freezone business setup in Dubai also allowed 100% foreign ownership, along with zero currency restrictions, 100% tax exemptions, and profit repatriation.
Now the rules have changed. According to the Federal Decree-Law No. 26 of 2020 amending the provisions of Federal Law No. 2 of 2015 on Commercial Companies, expatriates are allowed to establish companies in the UAE with 100% ownership. It means they no more need a local partner to form their business, however, can partner with a local service agent to help them with all the paperwork and licensing procedures without holding any shares in the company.
Reasons to revise the laws:-
- Create a dynamic legal environment for foreign companies
- To raise the inclination of the UAE’s economy
- Facilitate ease of doing business
- Boost investment and commercial opportunities in order to prepare for the future
- To match the rapid economic changes and developments taking place in the global economy
- Counter to the growing needs of the business community
- Attract expat investors, firms, and start-ups
- Authorize foreign investors with complete operational and legal control over their businesses
Important features of the new amendment
The new amendment has enabled the following adjustments to shareholding patterns in the UAE company formation –
- Eliminates the need for Emirati shareholders with majority shares in the company.
- Enterprises availing 100% Foreign Ownership in Dubai have to abide by the rules outlined in a cabinet resolution approved by the UAE cabinet.
- Replacing the previous percentage of 30%, a joint-stock company can now sell 70% of its shares through an IPO (Initial Public Offering).
- The shareholders have the right to sue the company if the directors and general managers engage in an activity that results in a financial loss.
- Meetings of companies are now open to Expatriates as well.
- There are no more restrictions on foreign nationals serving on the company’s board of directors.
- Electronic voting can now be held in annual general meetings.
- If executives or chairpersons abuse their powers, there is a provision for their eviction from the company.
To avoid any confusion and learn more about the revised rules, get in touch with the legal advisors of UAE Expansion.
Business activities that allow 100% Foreign Ownership in Dubai
The law and executive resolutions of the United Arab Emirates have listed thousands of business activities that allow foreigners to avail full ownership of their company. Below given list will help you narrow down the exact type of business you can set up in Dubai or anywhere across UAE –
- Mining and Quarrying
- Accommodation and food service activities
- Trading and services
- Social and personal services
- Transport, storage, and communication
- Real Estate, Renting
- Health and Social Work
- Electricity, Gas, and Water
- Financial Intermediation/Financial brokerage/Cash dealer
Start your business with 100% Foreign Ownership in Dubai
The first thing to do while starting a company with 100 business ownership in Dubai is to partner with UAE Expansion. Working with UAE Expansion company formation experts will help guide you through the following process, coordinating with all relevant authorities along the way.
1. Select your business activities
Firstly, outline your intended business activities and cross-check with the permitted list of activities issued by the DED. It is an important step as it would determine whether your chosen activity allows for 100% Foreign Ownership in Dubai. Moreover, it will also impact your choice of location as well as the type of setup that is right for your business.
2. Register your company name
Next, choose a name that is unique, attractive, and also abides by the strict set of naming conventions drafted by the UAE government. In simple words, the name should not include any offensive or blasphemous language or any kind of abbreviations or initials. Also, make sure that it does not resemble the names of any well-known organizations in the UAE, and is available for registration.
3. Make an application for the license
Now that the business activity and name are in line, next you need to place an application or request for a business license. You can either apply to the DED (Department of Economic Development) in your chosen Mainland region or the respective authorities of the Freezone, where you are willing to set up your business.
UAE Expansion business consultants can assist you in this step by managing the entire application process on your behalf.
4. Apply for necessary visas
Once your license and other business requisites are in order, make the applications for the visas you would require. It may include visas for self, employees, family, and domestic helpers. A Dubai visa allows its holders to legally stay and work in the UAE. Hence, for the application process, the applicant will have to undergo biometric scanning, a blood test, medical, and a chest X-ray.
4. Open a corporate account
Last but not least, you would require a corporate bank account to manage your business-related finances. However, it is not always easy for expats to secure reliable banking services in the UAE. Hence, it is always better to partner with the local experts at UAE Expansion who can suggest some of the finest banks in the UAE that offer long-term benefits to the company.
How UAE Expansion Can Help You Setup a Business in Dubai with 100% Foreign Ownership?
With the revised law pertaining to 100% Foreign Ownership in Dubai, the UAE is determined to draw numerous foreign businesses into its thriving economy. Though the number of international companies in the country is already in the millions, it is projected to rise to as much as 1 million in the coming decade.
UAE Expansio has assisted several global investors in taking the initial step toward setting up business in Dubai. Their highly qualified experienced experts take charge of all the procedures and legalities so that firms can focus on their core business activities.