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How can foreign nationals acquire 100% ownership of LLC companies in Dubai?
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The United Arab Emirates, in a move that has delighted entrepreneurs worldwide, has eliminated the need for an Emirati shareholder or a local service agent for many UAE companies. Until this change, companies in the UAE mainland required a specific percentage of shares to be held by Emirati citizens or a local Emirati agent, depending on the company's legal structure. So, what is 100% foreign ownership in Dubai, and what does it mean for your business?
This amendment has wide-ranging implications for entrepreneurs with existing businesses in the UAE, as well as for those looking to register a company in Dubai or establish a new venture. The most significant change is that the law now permits both natural and legal persons, regardless of nationality, to establish and own 100% of their companies in Dubai, UAE.
However, not everything is as black and white as it may seem. It's natural to have a few questions and concerns about this new amendment. We will address all of them in this guide to 100% foreign ownership for LLC companies in Dubai. Continue reading to learn more about this change and how it could impact your business plans in the UAE.
Until recently, the general rule for anyone wishing to start a business in Dubai or the wider UAE mainland (i.e., outside of the free zones) was that UAE nationals were required to hold a mandatory 51% stake in the company. This was a core part of the UAE Companies Law. While it was common knowledge that it was often possible to alter the economic interests of the foreign and local shareholders (with many foreign investors entering into so-called 'side agreements' with the local shareholder) regarding economic ownership and decision-making, a degree of uncertainty always lingered over the effectiveness of such arrangements.
The Foreign Direct Investment Law (FDI Law), passed in 2018 (and supported by Cabinet Resolution No. 16 of 2020), began to relax foreign ownership restrictions in specific business sectors (known as the 'Positive List'), permitting up to 100% foreign ownership for businesses on that list. However, to qualify for the foreign ownership exemption, applicants had to meet several relatively demanding requirements, including significant capital contributions, the use of technology, and the employment of UAE nationals. Furthermore, the final approval rested with the relevant licensing authority.
As we understand it, the new law amends the Companies Law to permit 100% foreign ownership in UAE limited liability companies established on the mainland, removing the general requirement for 51% UAE national ownership or the need to engage a UAE national to act as an agent for a branch of a foreign company. In short, any individual, regardless of their nationality, can now have full ownership of their company, even on the UAE mainland.
These changes represent a significant departure from the controlled, sectoral approach of the FDI Law, which we understand will be repealed once the new law takes effect.
Local licensing authorities in each Emirate will retain the discretion to impose an element of UAE national ownership, and we understand that certain strategically important sectors, such as oil and gas, telecommunications, and utilities, will continue to be subject to foreign ownership restrictions.
According to reports, most of the changes in the new law will take effect on June 1, 2021. Companies will be given a one-year grace period to comply with all the changes mandated by the new legislation.
The significant changes in shareholding models according to the new amendment include:
By removing existing barriers and opening up the economy, the 100% foreign ownership in Dubai, UAE, aims to build upon its already established appeal as a market for foreign investors, businesses, startups, and top-tier talent from around the world. It also hopes to better position the country as it prepares for a post-COVID recovery and redesigns its vision for the next 50 years. Some of the rewards the government hopes to reap include:
The jury is still out on the precise impact of the 100% foreign ownership law on the UAE mainland. As we await the full implementation of the new law, the move to allow 100% foreign ownership in Dubai Mainland businesses will significantly enhance the UAE's appeal for overseas investors, especially those who may have been hesitant to enter the UAE market due to ownership concerns.
Foreign companies that have already established businesses in the UAE with mandatory local shareholding may wish to reconsider these arrangements in light of these developments if full legal ownership is desired.
These developments may also spark an interesting debate about the long-term benefits of free zones. Although UAE Dubai free zones generally allow 100% foreign ownership and provide a more familiar legal regime for foreign investors, they typically do not permit entities established within their jurisdictions to trade on the UAE mainland.
Some businesses that have established themselves in free zones may now find it more attractive to set up on the mainland as a result of these changes.
According to previous announcements, all existing and previously licensed businesses in the UAE can adjust their status according to the new commercial companies' law.
If you are an entrepreneur who was reluctant about company formation in Dubai or the UAE due to ownership restrictions, you no longer need to worry. New investors in the UAE market have a competitive advantage in terms of ease of business setup. Under the new law, non-UAE nationals of all nationalities can fully own their businesses, as long as they fall within the list of permitted sectors.
If you have a business in the UAE with previously mandatory local shareholding and you desire 100% legal ownership of your business, you may want to review these arrangements based on these new developments.
The existing LLC company owner can amend their license and become the 100% owner of the company by selling the UAE national's shares to the foreign national.
According to the amendment, existing companies need to adjust their positions by January 2, 2022. This may require LLCs' Memorandum of Association to be amended to bring quorum, notice, and meeting requirements in line with the Amendment.
UAE Free Zones already permit 100% foreign ownership, but they generally do not allow entities established in Free Zones to trade on the UAE Dubai mainland. Still, many investors prefer to set up businesses in UAE Free Zones due to various incentives where favorable regulatory and tax regimes play a significant role. However, once the new foreign ownership changes take effect, it is likely that many free zones will see a decrease in demand and new challenges in attracting business. Despite this, financial free zones like the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) will likely maintain their popularity, especially in the financial services industry, as investors and financial institutions will continue to be drawn to the common law frameworks, independent court systems, and well-developed financial regulatory regimes of DIFC and ADGM.
If so, we can help! Whether you're looking to open a business in Dubai or already own a UAE Dubai mainland or free zone business, you can be sure that World Company Setup will continue to assist you in setting up a company with 100% foreign ownership on the Dubai mainland or help you change the UAE national ownership by amending the license.
Here are some of the most frequently asked questions about 100% ownership in Dubai and the UAE, and their answers to guide you on your journey to successfully owning your own business on the UAE Mainland.
A foreign national who is the existing owner of an LLC company can hire a business setup consultant who can help with the removal of the UAE national from the LLC company in the UAE. The following steps can be taken:
Yes, foreigners can and frequently do start businesses in Dubai. Over 80% of the local population consists of expatriates, many of whom run their own businesses. Since the new 100% foreign ownership law has come into effect, they will have full control over their businesses.
Businesses involved in commercial and industrial activities are included and eligible for 100% ownership on the Dubai Mainland.
No, according to the new Law, you don't really need a sponsor to open a company on the Dubai Mainland. However, if a foreign national wishes to provide services or consulting, a local UAE national will act as the company's agent, not a 51% shareholder.
You can set up a company in the UAE by following 6 simple steps.
The cost of setting up a business in Dubai depends on the business activity, business location, and visa requirements. The minimum cost for mainland company registration is around AED 8,000/- for a Service/Professional license and AED 14,000/- for a Commercial license. Apart from this, there will be UAE local sponsorship fees for a professional license, professional service fees for business setup consultancy firms, office rent, and visa costs as needed. If an investor wants to amend a license and remove their local partner under the new commercial companies law, it will cost approximately AED 5,000/- plus professional service fees.
Previously, it was mandatory to appoint a UAE national in commercial and industrial companies, holding a minimum 51% share in LLC companies in the UAE. This has recently changed, and the UAE government now allows foreign investors 100% foreign ownership in commercial companies. This is a great advantage for foreign nationals as well as for the UAE government to bring more investment into the UAE. Foreign nationals with 100% ownership are not dependent on the local UAE national for any signature or representation in any government department, no documents belonging to the UAE national are required in bank KYC, there is no capital or profit sharing of the company with the UAE national, and being a mainland company, the foreign national can take on government and semi-government projects and can do business freely in the local market.
Yes, any foreign national can open a business on the Dubai Mainland with 100% foreign ownership of the company.
Yes, when the company is established under a foreign national, the UAE government will issue a partner/investor visa to the foreign national, which is valid for two years, but it is not mandatory to stay in the UAE at all times.
Not exactly, but some terms and conditions will apply depending on the commercial activity.
The UAE has a concept of issuing a residence visa valid for 2 years, which is renewable for the same period if the company is active. If a foreign national's net worth is more than AED 2 million, that foreign national will get a 10-year Golden Visa, which can be renewed for another 10 years upon expiry.
There is no tax on income or profit in the UAE, and one can contact tax consultants in their home country. The UAE government also issues tax residency certificates to avoid double taxation for foreign nationals, so people can take advantage of that.
No, once the visa is issued for the owner, a person can come once a year to keep the residence visa active.
Yes, foreign nationals can now get 100% ownership in Dubai for a Mainland company in some trading activities and most manufacturing activities, except for certain strategic sectors like insurance, defense, and activities related to civil aviation. So, according to the new amended commercial companies law no. 2 of 2015, there is no need for a UAE national when registering a company on the Dubai Mainland.
Yes, foreign nationals can amend their existing LLC companies on the Dubai Mainland and become 100% owners of the company by removing the UAE national from the company.
All company shareholders, including the UAE national, need to sign the resolution to amend the license and get approval from the Dubai Department of Economic Development. If the existing UAE national who is the sponsor of the company is ready to sign the sale share agreement, then it becomes easy to amend the license. Otherwise, it will lead to legal paperwork and court proceedings.
If the UAE national sponsor does not agree to remove their name from the existing LLC company in Dubai, foreign nationals have multiple legal and arbitration-related options to remove them from the LLC company. At World Company Setup, we will assist the client with legal and arbitration matters.
No, there is no such restriction on nationalities for 100% ownership of the LLC company on the Dubai Mainland; however, some nationalities need to go through a standard security approval and just paperwork. The UAE is an open market for all foreign nationals and treats them all equally, just like UAE nationals.
No, the Trade license issuance fees in Dubai will remain the same if the company license is issued with UAE national partnership or without UAE national partnership. There is no increase in the LLC license issued in Dubai. So, in simple terms, foreign nationals continue to pay the same fees to the government for the issuance of the Trade license in Dubai.
No, there is no such requirement from the Dubai Department of Economic Development to issue a company license under a foreign national's name with 100% ownership in Dubai without appointing a UAE national in their company.
The 100% ownership for foreigners of onshore companies will be a game-changer for UAE and Dubai business growth, especially for investors who wanted to invest in the UAE Mainland but were restricted by the previous law that required giving 51% to local citizens.
Now, investors have an incredible opportunity to set up a business in Dubai and get 100% ownership of the business. Be sure to consult with a top business setup service provider like World Company Setup and get your business started right away.
World Company Setup is a team of business setup professionals specializing in providing company formation services for potential investors. We offer full-fledged business setup services, including company formation, registration, and licensing, as well as accounting, bookkeeping, and auditing. The World Company Setup Team is at your doorstep to help you set up a company in Dubai.
The 100% ownership of onshore companies for foreigners will be a game-changer for UAE and Dubai business growth, especially for investors who wanted to invest in the UAE Mainland but were restricted by the previous law allowing local citizens 51% of the capital. In the previous law, a local sponsor had a majority stake in your business even if they were not much involved with your company's operations, which is why some foreigners preferred to set up their business in the Dubai Freezone where they would have full ownership, instead of the Mainland where they would be left with only 49% of the business.
Effective 1 June, the UAE will allow 100% foreign ownership of LLC companies in Dubai Mainland. How did this happen? In November 2020, a Presidential Decree was issued announcing major changes to the foreign ownership rules in the UAE's 2015 Commercial Companies Law.
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