This article was updated on July 6th, 2023
This article was updated on July 6th, 2023
This article has been researched and written by Rehan Abid and the team at Creation Business Consultants and has not used AI in generating this article.
Previously, foreign entrepreneurs could only own up to 49% of their businesses, and the remaining 51% must be owned by a citizen of the UAE, also referred to as an Emirati sponsor or partner. However, on the 2nd July 2019, the UAE Cabinet decided on 122 economic business activities across 13 sectors to avail 100% foreign ownership opportunities. The primary aim of the 100% foreign ownership opportunities was to:
According to the requirements of Federal Law No. 2 of 2015 on Commercial Companies now replaced by Federal Decree-Law No. 26 of 2020, revising the provisions of the Companies Law, foreigners are permitted to register firms with 100% complete ownership. Additionally, firms that want to become joint stock companies can sell no more than 70% of the company through initial public offerings (IPOs), as opposed to the previous 30% cap, with the approval of the competent authorities.
This is a welcoming news to for foreign investors and companies looking to enter and expand, to a new market and setup a business in Dubai and the UAE.
The relaxation of foreign ownership restrictions for 122 economic business activities was specifically within the manufacturing sector and certain services categories. This follows the issuance of the Foreign Direct Investment (FDI) Law in September 2018 to open the UAE mainland market to foreign investors. Furthermore, this is the UAE’s attempt to appeal and attract more companies to establish and setup in Dubai and the UAE.
The previously released 122 economic activities across 13 sectors that were specified to be eligible for up to 100% foreign ownership included renewable energy, space, and the agriculture Industry. Other areas of foreign ownership included transport and storage, which allowed investors to own projects in the fields of transport, supply chain, logistics, and cold storage for pharmaceutical products, hospitality, and certain food services, as well as professional, scientific, and technical activities.
Ownership in laboratories for research and development in biotechnology, administrative services, support services, certain educational activities, and certain healthcare services may be eligible for 100% ownership. The decision for 100% ownership abolishes the old law that limits foreign ownership to just 49%.
Reviewed percentage of foreign ownership to be determined:
Although the UAE Cabinet allows up to 100% foreign ownership for each of the listed business activities, the Department of Economy and Tourism in Dubai (DET) of each of the separate Emirates still determines the percentage of foreign ownership allowed for their mainland / onshore businesses.
Currently, according to DET’s published criteria, more than 1,000 commercial and industrial activities are eligible for 100% foreign ownership, with the exception of economic activities with strategic importance that pertain to seven sectors.
The lists provided by the authorities in charge of company registration encompass a variety of industries, certain ones (such as finance, banking, and insurance) will still be required to have Emirati partners own at least a portion of their shares in the two major emirates.
With these changes, global firms and entrepreneurs continue to be encouraged to invest in the UAE by fewer limitations, more ownership opportunities, and an easier incorporation process. Investor trust in the UAE market is continuing to increase as a result of the recent CCL amendments and compliance standards, including the Ultimate Beneficial Owner (UBO) and Economic Substance Regulations (ESR) law. Business prospects are now available for both foreign investors and Emirati companies.
Certain conditions imposed on a few of the business activities in order to take advantage of the relaxation of the foreign ownership restrictions include companies that are licensed to conduct certain business activities must maintain a minimum share capital set by the authorities.
This legislation was the initiative of the UAE business landscape being presented by new opportunities for foreign owned businesses. It was a good strategy for the country to open the business activity list as this will appeal to more entrepreneurs and investors to start a company in Dubai and the UAE.
Should you wish to know more about doing business and setting up a company in Dubai and the UAE or require a free restructure analysis, contact our corporate structuring team of experts at [email protected] or call +971 4 878 6240 to explore your options.