Officials in the UAE are hoping for an explosion of foreign investment, that’s because they’ve revamped their company laws to allow foreign investors to fully own local companies without the need of an Emirati sponsor. This is a huge deal for foreign entrepreneurs! Up until now, foreign shareholders could only own 49 percent of the local company while a local partner held 51% of the majority. But not anymore! Companies can now be fully established by non-emirates of all nationalities. The new move is aimed at boosting the country’s already competitiveness and attract more foreign capital.
The United Arab Emirates is already a booming business hub because of its strategic location and great tax benefits, but now, flexibility for foreign business owners is a big benefit with this new rule. Let’s dig deeper into what this new rule means for current foreign owners and how it could impact business setup in UAE in the future.
What is the New Foreign Business Ownership Rule in the UAE?
As we mentioned earlier, before this new rule was put into place, it was mandatory for all foreign business owners to have a UAE citizen sponsor, and their ownership was capped at 49 percent for companies that were outside the Free Zones. Now foreign investors will have the flexibility of operating their business anywhere in the country with complete ownership. However, some sectors are exempt from the new rules, like energy and hydrocarbons, telecommunications, and transport.
Two other big changes that were announced in this new business ownership rule is that UAE nationals won’t be required on boards of private joint-stock companies. Previously, it was a requirement for Emiratis to hold the majority of board positions and serve as chairs for onshore companies. And companies that want to be publicly traded can sell up to 70 percent of their shares instead of the current 30 percent.
The new law will allow the UAE Cabinet to keep UAE shareholding mandatory for certain businesses that they consider of strategic importance. Local authorities in each emirate will have the power to set the minimum UAE shareholding levels and any other requirements for activities that aren’t classified as strategic.
When Do These Rules Take Place
Are you planning on company formation in Dubai in 2021? If so, you’ll want to wait until at least March 30 to take advantage of these new rules. Although the changes went into effect on January 2, they don’t go into full force until six months later.
Are you already a foreign investor in the UAE, and you’re wondering what this means for your company? This includes the removal of UAE national ownership, the removal of service agents for branches, and the removal of UAE nationals on the boards of public and private joint-stock companies. If these changes aren’t made, the penalties are pretty strict – the company will be considered dissolved, and you could also be high with big fines for not cooperating.
What Should You Do Now?
The best advice for foreign shareholders in Onshore UAE companies is to consider your current situation with your UAE partner that is a national, and access their ability to walk away from the arrangement.
You’ll also want to update your company’s memorandum of association with the new information in it regarding matters that changed regarding the new law. You may have to get everyone to appear in front of the UAE notary public to have the amendments executed, so make sure you allow yourself enough time for everyone to be able to attend in person.
What Are the Benefits of This New Company Ownership Rule?
This long-anticipated amendment to the 2015 commercial company law is expected to bring positive changes to the UAE business landscape. The full ownership law is expected to have a multiplier effect in the form of job creation, an increase in productive capacity, and resulting in a less need to import because goods are produced in the domestic economy.
Dubai and Abu Dhabi are already recognized as two of the most powerful business and financial hubs in the world. Foreign investors are so attracted to the region for its global recognition, great infrastructure, no corporate or personal tax, and a quick and easy company formation. This new law that allows full ownership for foreign investors is just another benefit that will attract entrepreneurs to the area.
How MSZ Consultancy Can Help?
Not sure where to begin with this new company ownership rule? You can trust MSZ Consultancy to guide you through all the changes you need to make for your current business, or we can help you with everything you need to form your new company.
If you currently have a business in the UAE, we will advise you on the options concerning your existing arrangement. We can also assist you in negotiations with your UAE partner, we can help you implement your new changes, and we can prepare the documents that are needed to make the transition into full ownership.
When it comes to opening a new business under these new regulations, we can help you understand the rules as well as help with trademark registration in Dubai and PRO services in Dubai for an easy company formation.
We take pride in providing the absolute best consumer service. We’ve been in business for over 15 years, so we have close connections to government authorities throughout the UAE to help make your business formation a quick and easy process. Let us help! Call us today at +971 52 544 1248 for a free consultation.
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