UAE’S 100% OWNERSHIP POLICY & WHAT DOES IT MEAN?

This article was updated on May 16th, 2024

This article has been researched and written by the Business Development Team at Creation Business Consultants. AI has not been used in generating this article.

In June 2018, the UAE government, under the leadership of Sheikh Mohammed Bin Rashid al-Maktoum, announced a pivotal change to the Companies Law, allowing foreign investors to own 100% of their companies in selected sectors. This was a significant shift from the previous cap of 49%, aimed at reducing risks to the economic market and enhancing the UAE’s appeal as a global investment destination. This change was enacted through the Federal Decree-Law No. 26 of 2020, which replaced the older Federal Law No. 2 of 2015 on Commercial Companies.

However, the question that remains unanswered is – is this law affecting the locals?

The 100% foreign ownership opportunities’ main goal was to:

• Accelerate the nation’s overall growth.
• Encourage a thriving business climate.
• Maintain the UAE’s status as a desirable market.
• Reaffirm the UAE’s status as a major international economic hub.
• Advocate for the UAE market to attract more investment.
  

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.”

HOW WILL THE COMPANIES LAW CREATE MORE OPPORTUNITIES FOR UAE CITIZENS

• The 100% ownership law is expected not to harm silent partners who are usually involved in small-scale enterprises. Instead, it targets larger, impactful businesses that contribute significantly to the economy.
• It is anticipated that this move will boost job opportunities, expand technological scopes, and enhance import and export rates, fostering an environment where both local and international businesses can thrive.

Concerns have been raised about the impact of the UAE’s 100% ownership legislation on small and medium-sized enterprises (SMEs), which might face increased competition from fully owned international corporations. While this policy could attract more foreign direct investment and foster economic growth and innovation, there is a worry that local businesses with fewer resources may struggle to compete with larger, more established multinational companies. However, the UAE government is striving for a balanced approach to support the growth of both domestic and foreign companies. Programs like Emiratisation are designed to boost local entrepreneurship and employment, ensuring that the drive for cooperation, innovation, and sustainable economic growth remains a priority for the administration.

WHAT DOES THIS MEAN FOR YOUR BUSINESS?

• The adjustment to 100% foreign ownership covers 122 economic activities across 13 sectors, including manufacturing and certain service categories.
• While DET of each Emirate retains the authority to determine the exact percentage of foreign ownership, over 1,000 commercial and industrial activities are now eligible for 100% foreign ownership.

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 because 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.

TAKEAWAY

• This legislative update presents a substantial opportunity for foreign-owned businesses looking to expand or establish a business in the UAE.
• The change not only promises to enhance direct foreign investment but also supports the UAE’s long-term vision of becoming a leading global hub for business and innovation.

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 54 511 2494