To set up a mainland company, one had to look for an Emirati national to give them 51% of the ownership of their own company as an obligation. But before June 1, 2021 only. Yes, you heard that right, you can fully own your mainland company now after the UAE’s Ministry of Economy amended Commercial Companies Law (CCL), allowing foreign investors and entrepreneurs to establish and fully own onshore companies. The new changes were done by the Federal Decree-Law No. (26) of 2020 that amended some provisions of Federal Law No. (2) of 2015 on +commercial companies.
Mainland company vs. free zone company
The UAE boasts about 45 economic areas where goods and services can be traded, usually at preferential tax and customs rates. And the rest of the area other than free zones in the UAE is the mainland part. From a business perspective, the entire UAE can be divided into three regions – Mainland Area (onshore), Free Zone and Offshore – where one can set up their company. Each area comes under different jurisdiction and has its own set of pros and cons when it comes to business set-up. While the free zone area allows the companies to trade only within the free zones, the mainland area lets the companies carry on their business activities not only within the UAE (including free zones) but also in any part of the world. Not only that but establishing a company in a free zone area has several other benefits as well such as 100% foreign ownership, 100% repatriation of capital & profits, 100% corporate & personal income tax exemptions, exemption from all import and export duties. Import into mainland UAE is not permitted, though. On the other hand, a mainland company has to have office space and receive government authorisation to incorporate. And besides that, the non-UAE nationals can only hold 49% of their company’s share, giving the rest to a local sponsor. Most business persons turn to free trade zones in the UAE, so they can get the advantage of 100% foreign company ownership, which doesn’t come with a mainland company. But not anymore. As you know, you can incorporate a company in Dubai mainland with full ownership after the amendment done by the UAE cabinet to the CCL with an aim to boost the country’s competitive edge and to facilitate doing business
Revised benefits of mainland company formation
The biggest perk of having a mainland firm is that their business activities are not restricted to any particular area/s like free zone companies, thus allowing them to freely trade with any firm, public or private, located within and outside of the UAE – free zones, onshore and offshore. The wider the scope, the better the opportunities to expand business globally, opening the door to tons of opportunities and greater profits. Plus, who won’t like to work on government projects with less competition! In addition, no minimum capital requirement and the possibility to attain a residence visa are some other benefits of setting up a mainland company in the UAE. Although there are so many advantages of doing business in the UAE mainland, just one disadvantage i.e. 49% ownership seems no less than a buzz kill. Thanks to the new law that this is not applicable anymore. And one more benefit is now added to the list viz. A hundred percent ownership.
100% foreign ownership in the UAE: Significance
100% foreign ownership is sure to boost more investment in the UAE and contribute to the economy of the nation. The UAE government’s this step will also heighten UAE’s position in the global investment map, where industrial activities can be performed with complete ownership by a foreign and legal non-citizen. There’s a huge significance of gaining 100% foreign ownership in the UAE. As an expat business owner, you:
- Don’t have to look for an Emirati partner to be appointed in your company, which means you can fully own the company
- No longer have to negotiate and debate with UAE partners to get the 51% share in the capital of the company
- Will have more freedom in managing and planning your work
- Have larger scope to expand your business location out of the free zone areas across the UAE
- Furthermore, the previous 49%-ownership law cannot hold you back from living your dream of starting your own business in Dubai or any other emirate of the UAE. Bonus? You have the chance to enjoy a long-term stay in your favourite emirate after the issuance of the long-term visa for investors.
Updates related to the 100% foreign ownership in the UAE mainland establishment
Prior to the implementation of the new law, it was a mandatory requirement for expats to find a local sponsor and appoint them in the company who would be holding 51% of the total shareholding of it. The local sponsor would also hold additional duties as well as rights, or in some instances, the parties would enter into a side agreement to ensure that the full operational control rests with the foreign expat alone. But June 1, 2021 onwards, a foreign entity or person may invest and own up to 100% of the total shareholding in the company in the UAE and thus excluding the previous obligatory requirement of a local sponsor. However, for the existing mainland companies, the Dubai Economic department explained that “Full ownership does not bring any change to current procedures or requirements for licensing, except that it’s no longer mandatory to have an Emirati partner (Local sponsor) or specify a fixed quota ratio for him/her. Dubai Economy clarified that a reduction of the percentage share of the Emirati partner from 51% or his/her withdrawal from the partnership is possible according to the legal procedures followed”.
With the latest changes effected in CCL, the majority of the previous restrictions imposed on foreign entities are now taken away. I am sure you might be wondering – what if there are any hidden surprises behind this new law. And if no then why would one form a company in free zones, after all this was one of the major reasons people choose the costlier option i.e. free zones over the mainland to trade. You can’t have your cake and eat it! Read on for more clarity on 100% ownership in a mainland company.
- Be informed that 100% foreign ownership has been approved for certain business activities (under commercial & industrial licences), but that too is over 1000. And yours is sure to fall in the category.
- The joy of joys is that you don’t have to fork out any additional fees to request the changes to be effected on existing trade licences.
- Even you don’t have to pay extra capital in order to effect these changes on existing trade licences.
- 100% is still not permitted for ‘professional licences’ in the UAE. For instance, you need a professional licence to open a salon or a restaurant, and you can’t own them fully if you open them in a mainland area.
- In addition to full ownership in the mainland companies in the UAE, the branches of foreign companies in the UAE have to no longer look for a ‘National Service Agent’ (NSA).
- The commercial activities that are now eligible for 100 per cent foreign ownership in the UAE include amongst others the business segments of, ‘general trading’, ‘gold’, ‘pearls’, ‘jewellery’, ‘cars’, ‘luxury watches’, ‘food’ and others.
- Industrial activities that now qualify a hundred per cent foreign ownership in the UAE include amongst others the industrial segments of ‘construction’, ‘building materials’, ‘water production’, ‘paint’, ‘food’, ‘flooring’, ‘flooring metal’, etc.
- In the light of new changes, the steps for either a decrease of the share capital of the Emirati partner from 51% or their full withdrawal can be effected on the trade license of the company.
- Limited liability companies can be transformed to single-person ownership with a limited liability structure along with a 100% foreign ownership.
The 100% foreign ownership positive list in the UAE
The nation made public the full list of 122 categories for 100% ownership in the mainland under the Foreign Direct Investment (FDI) Law. As per the amended law in CCL, the expats are allowed to have complete foreign ownership of their mainland company if the economic activities they are planning to carry out belong to any of the 13 sectors mentioned on the list below:
- Administration & Support
- Art & Entertainment
- Civil Construction
- Food & Hospitality Services
- IT & Communication
- Product Manufacturing
- Renewable Energy
- Scientific Activities
- Space Technology
- Storage & Transportation
You will be spoilt for the choices you have at your disposal to register a new business in UAE.
Who can benefit from the new law allowing 100% ownership?
Foreign investors, entrepreneurs and businessmen are the ones who will take advantage of 100% mainland company ownership in the UAE. Plus, if you have been thinking of starting your own business but couldn’t initiate because of involving a local sponsor and losing 51% ownership of your company to them, then now is your chance. You may set up a mainland company with your name written all over it without searching for national partners while enjoying full ownership. Click here to know which mainland area can be the best for your business.
Steps for effecting the changes
There are certain steps to follow if you wish to move from 49% foreign ownership to 100% foreign ownership in your company, such as:
- Existing mainland companies can switch to a 100% ownership structure by amending their existing Memorandum of Association (MOA) as registered with the economic department to reflect the changes. This would necessitate the legal steps to be undertaken in accord with existing procedures of furnishing – Board resolution of existing shareholders to consenting to the said changes;
- Acquiring initial approval from the economic department;
- Registering the revised MOA and paying the requisite fees;
- Amending the trade licence of the company to reflect the changes made.
- It is not possible to convert a limited liability company that has more than one shareholder into a Sole Proprietorship under the existing laws, however; instead, it is possible to transfer the licence to a solely owned LLC.
- There are no additional governmental fees, guarantees or capital required to effect the changes
The impact of the new 100% foreign ownership law on the UAE’s economy
The amendment is every bit attractive for wealthy foreign investors and entrepreneurs all across the globe. And they are rushing to take 100% company ownership after UAE law changed. The new offer is certain to amplify the UAE’s appeal as a fascinating destination for foreign investors. It’s pretty visible in the rising numbers of foreign investors every month. Let’s see how the decision is affecting the economy of the UAE positively, making a win-win for both the expats as well as the nation, by:
- Luring more investors from the world over.
- Growing the flow of investments.
- Bolstering the country’s position as a significant global economic centre.
- Making UAE’s atmosphere more exhortative for expats to develop an independent business.
- Maintaining the nation’s image as the world’s one of the most expat-friendly countries.
- Making it a more sought-after location for investment by individuals all over the world.
Meet your business advisor in Dubai
Dubai today has become the most ideal location on the world map when it comes to business set-up, expansion or investment. If your heart is set on Dubai or any other emirate of the UAE to set up a business, now is the time. Get in touch with Adam Global, one of the best business set-up consultancies in Dubai, UAE to learn how easily you can settle down in Dubai with your own business. Click here for a free consultancy from our crème de la crème business advisors.