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.
In June 2018, The Companies Law was first announced by the government of The United Arab Emirates (UAE), where investors were allowed to own 100% of their companies in some sectors of the economy. This limits the risk of disrupting the existing economic market. The UAE cabinet, chaired by Dubai ruler, Sheikh Mohammed Bin Rashid al-Maktoum, claimed that “This law would permit 100% foreign ownership of some UAE-based businesses, up from the current 49% limit by the end of 2018.”
Foreign nationals are allowed to register businesses with 100% total ownership in accordance with the Federal Law No. 2 of 2015 on Commercial Companies, which has since been replaced by Federal Decree-Law No. 26 of 2020.
However, the question that remains unanswered is – is this law affecting the locals?
The 100% foreign ownership opportunities’ main goal was to:
The chief economic advisor of Dubai’s Department of Economy and Tourism (DET), Mr. Safadi, further explains that the law would not hinder or damage the interests of the citizens who currently benefit from acting as a silent partner in a foreign-invested business. In fact, he believes that this law will create more opportunities for UAE citizens as “they have a lot to offer in terms of knowledge of local markets, the network, and the connectivity.”
The law is strategised in such a manner that it will not target or affect any silent partners as they generally deal with small-scale businesses. The government aims to target the impactful businesses that will leave a mark in Dubai’s economy and will further lead to an increase in job opportunities, technology scope, and boost the rates of import and export.
It has been reportedly claimed that free zones which already permit 100% ownership could be affected, as this could remove one of their unique advantages. Business owners and foreign investors consider free zones to be unique business models, which makes them individually attractive.
The executive chairman of the Dubai Multi Commodities Centre (DMCC), Ahmed Bin Sulayem, focuses on free zones and believes that it is a diverse sector, and it is going to be difficult to cope up with the law. He further notes “You are looking at a big market, representing over 15,000 businesses, and almost 100,000 people live and work there… People go there not just for the 100% ownership and the tax-free facilities that we provide; they go there to be connected to the market, to not miss out.”
With the implementation of this law, it can be said that all the citizens of the UAE, irrespective of being expats or locals, are certainly going to benefit.
Concerns and doubts have been expressed concerning this policy change’s effects on small companies and entrepreneurs in the area. On the one hand, the 100% ownership legislation enables foreign companies to create a greater presence in the UAE, which might draw more foreign direct investment, stimulate economic growth, and support innovation.
On the other hand, there are worries that local businesses, especially small and medium-sized enterprises (SMEs), may be harmed by the increasing competition from international corporations that are fully owned. Some claim that competing with established multinational companies that have more resources and experience could be difficult for local enterprises.
It is significant to remember that the UAE government has been working to create a balanced approach and encourage the expansion of both domestic and foreign companies.
Emiratisation is one of many programs that aims to encourage local entrepreneurship and the UAE national employment. The creation of an environment that fosters co-operation, innovation, and sustainable economic growth is still a top priority for the administration.
Creation Business Consultants will keep you informed about the latest regulations which could impact your business. Our team of Corporate Structuring and tax advisory experts will leverage the experience to help understand the latest changes while simultaneously providing you with all the details needed to run your company in Dubai. Contact a member of our team to learn more about setting up a company in the UAE and Saudi Arabia, email us at [email protected], or call UAE at +971 4 878 6240 and Saudi Arabia at +966 54 995 2676.