100% ownership is possible in Mainland professional companyBusiness Registration Dubai
Local ownership restrictions for a long time have been the number one issue that leaves foreign entrepreneurs in UAE scratching their heads. Traditionally 100% foreign ownership was only possible under two circumstances. First when setting up in a UAE free zone or second when establishing professional services company. But that’s not the case anymore.
A law allowing 100% foreign ownership of companies in the UAE was announced in 2018 and is now in force. Previously oversees entrepreneurs wishing to setup on the Dubai mainland had to join hands with a local shareholder who must hold 51% i.e. majority stake in the company.
Well in first quarter of this year, the government is expected to announce a full list of sectors that come under the 100% foreign ownership rule but certain sectors however will still be restricted from 100% foreign ownership rule.
- Oil exploration and production
- Investigation, security, military
- Banking and financing activities
- Pilgrimage and Umrah services
- Certain recruitment activities
- Water and electricity provision
- Fishing and related services
- Post, telecommunication and other audio visual services
- Road and air transport
- Printing and publishing
- Commercial agency
- Medical retail (including pharmacies)
- Blood banks, quarantines, and venom/poison banks
So what exactly does this mean for foreign entrepreneurs in the UAE?
Firstly, it removes the entirely daunting prospect of allowing a third party, hold a large stake in your business.
Secondly overseas investors new to the country could get straight down to business that is they don’t need to canvass for an Emirati company or individual to act as a partner for their company setup in Dubai.
Why not free zones?
Now a question may arise that what was the problem in setting up in free zones?
Well there are way too many benefits of setting up on the mainland. Free zone companies are restricted in terms of staff numbers, office size and trade with local UAE market. And these rules don’t really apply generally to the mainland businesses. They have no such restrictions.
So if you wish to diversify your offering on the mainland, it is simply a case of free registering your activity with the DED. On the other hand, the process with free zones is much more complex.
What does it mean for the UAE nationals who currently sponsor companies and get 51% share?
One of the benefits for UAE Nationals is that e.g. you are a UAE National and your expatriate partner leaves or defaults, you are held legally responsible and you are of course majority owner of that company. But now the new law in theory frees Emiratis from that responsibility.
What does it mean for the free zones and the companies that did initially operate?
Free zones still offer plenty of benefits to the companies that are starting now and those who are trying to find a way into the region through the UAE. If there are companies that leave the free zone to go onshore, there will be more 5, 10 companies from abroad that would be still want to be able to setup in the free zone. So everyone will benefit from this. Free zones offer organizations benefits other than 100% foreign ownership; being part of the business hub, the networking, the licensing that’s done through the respective free zone authority. There are still benefits through it.
Encouragement for entrepreneurs
UAE 100% foreign ownership law is a game changer for entrepreneurs. Now it is very difficult to be a freelancer in terms of costs especially if you have setup in a free zone which is more expensive than not setting up in a free zone such as cost of licensing. It just makes things easier and it will attract more human talent here and also more capital. So for startups and entrepreneurs it is also very significant.
So now that we know how it benefits the foreign investors. How exactly is this going to benefit UAE?
There is expected 15-20% increase in FDI due to the law coming into effect. The rule will also attract more foreigners to the country. Benefiting the real estate market as there will be an increase in demand and supply in the property sector by attracting and retaining long term investors.
Now’s the perfect time to start a business in the UAE…
UAE is a leading global platform in the Middle East. So your first choice to invest in Middle East is UAE. Therefore, this new decision has come just at the right time because Expo 2020 is coming round the corner. So it makes absolute sense for companies to come here and when they test the water they will see all the facilities for them, simple business setup process, great business environment and security; it will allow investors to stay and invest more in the country.
If you need help in this regard, contact our business setup consultants at Business Registration Dubai. We help companies setup in the UAE. Visit our website or send your query at email@example.com.