Owning a business or investing in companies in the UAE is a dream of many savvy investors and entrepreneurs around the world. If you are considering expanding your portfolio, read on to find the answers to the top FAQs about UAE foreign ownership.
1. Does The UAE Allow Foreign Ownership?
The quick answer to this question is “Yes! Absolutely!” The UAE has long welcomed the partial foreign ownership of businesses; however, in June 2021, the country decided to expand this ownership and now allows foreign nationals to own 100% of companies incorporated in the UAE under the UAE Commercial Companies Law (the "CCL").
In the UAE, a company can be formed in three jurisdictions: mainland, free zone and offshore. For companies formed in the mainland (known as “onshore companies”, the Department of Economic Development (DED) of each respective emirate oversees and regulates the foreign ownership of companies.
2. What Does The Amendment To The CCL Mean?
Before June 2021, foreign nationals were permitted to own 49% of a company incorporated in the UAE, meaning a minimum of 51% of the company needed to be owned by one or more UAE nationals. The amendment to the CCL removed Article 10 and overhauled the foreign ownership rules related to commercial companies in the UAE.
As a result, foreign investors and entrepreneurs are now permitted to own 100% of their onshore companies without needing any UAE nationals involved. This makes starting a business in the UAE significantly easier for foreign investors and entrepreneurs. They no longer have to deal with complicated arrangements, additional costs and legal uncertainty when setting up or investing in a company.
In addition, previously, single-shareholder entities had to be owned entirely by UAE national(s). As a result of this amendment, single-shareholder entities can now be 100% owned by foreign investors or entrepreneurs.
3. What Types Of Businesses Can Be Foreign-Owned In The UAE?
Based on the new amendment, each emirate monitors and manages its own list of approved business types.
In both the emirates of Abu Dhabi and Dubai, the approved list of business types is over 1,000 across a wide range of sectors. While there are some variations in the lists of the two emirates, both have approved of foreign ownership of businesses operating in contracting, transportation, hospitality, and manufacturing and production.
Additionally, Abu Dhabi has approved businesses involved in maintenance and repair and hospitals. On the other hand, Dubai has approved investment and trade-related activities. There are, however, specific industries that will have to continue to require an Emirati partner, including finance, banking, and insurance.
4. What Does The Amendment Mean For Existing UAE Companies?
Companies that are already incorporated in the UAE have started to restructure in accordance with the CCL amendment. In some instances, this may include giving notice to and removing their national service agent.
Alternatively, some companies have opted to transfer their Emirati partners’ shares to foreign owners through a notarised instrument. Suppose this is something your company is interested in doing; in that case, you first need to ensure that your company falls under the licensed activities list released by the relevant emirate. You will also have to ensure that all existing partners agree that it will only be owned by foreign partner(s) moving forward.
Finally, if the transfer of shares from Emirati partners is going to mean that there is only one foreign partner moving forward, your business will have to be converted from an LLC to an LLC owned by a single owner. Again, you can do this through your relevant company registration authority.
5. How Is This New Foreign Ownership Structure Going To Affect UAE Investment Moving Forward?
As a result of this new amendment, you can expect to see an increase in foreign investment and foreign-owned businesses in the UAE. After all, fewer restrictions and more significant ownership opportunities are desirable to foreign investors and entrepreneurs worldwide. Not to mention that having a more streamlined incorporation process will encourage a variety of stakeholders to invest more heavily in the UAE.
The UAE was already one of the highest-ranking countries for foreign investors because of its welcoming business climate, steady capital flow, political stability, and beneficial taxation laws. All of these factors combined have created an environment that is appealing to foreign investors and entrepreneurs across various sectors.
This new foreign ownership structure is already making the UAE an even more attractive location for foreign investors and entrepreneurs as it is contributing to an increased level of confidence in the UAE market. For this reason, you can expect to see increased business opportunities for both foreign and Emirati investors and entrepreneurs.
Set Up Your Business With Ease In UAE
In order to set yourself up for success in the Emirati market, it is vital that you work with professionals who specialise in creating sustainable solutions and strategies that propel business growth and transformation in this region. Furthermore, when looking for a potential corporate services provider, you want to ensure that they offer customisable solutions adapted to fit your organisation's unique needs.
For example, you may benefit from technology advisory, legal advisory, audit and assurance services, or strategy and transformation services. All of these areas of expertise are crucial when scaling a company — especially when entering a foreign market. The best auditing firms in Dubai help guarantee that your business is operating in compliance with Emirati rules and regulations. They can also assist you with taxation and risk advisory services to help your business stay on the right track. Plus, if you are setting up a new business in the UAE, they can offer UAE company formation services.
Conclusion
By working with these professionals, you can spend more time working on your actual business, feeling confident that you are set up for success.
Are you considering investing in a business in the UAE? Or, are you looking to start a company there? What do you think of the new foreign ownership structure? How does it affect your decision to enter the Emirati market?
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.
