Can company owners get 100% ownership in Dubai mainland?
October 30, 2023 - 11:38 AM
Traditionally, 100% foreign ownership of a UAE company was only possible under two circumstances – when setting up in a free zone, or when establishing a professional services company. Until recently, the general rule was that all UAE mainland is mandatory required 51% shareholding by UAE nationals when foreign nationals wanted to have a business setup in Dubai or UAE. This requirement was a part of the UAE Companies Law.
What has changed?
The revised laws highlight the regulation of provisions for establishing commercial companies with a limited liability structure. A Limited Liability Company (LLC) can have a single owner or multiple shareholders. Only a few activities in the professional services sectors and certain free zones allowed ex-pats to have 100% ownership in UAE. Thus allowing genuine and legal persons to establish companies in the UAE mainland without the need for a local partner.
Key points in the new amendment
The key changes in shareholding patterns as per the new amendment are:
Eliminates the requirement for UAE companies to have a majority of Emirates shareholders and Local agents during company registration in Dubai.
Allows 100% foreign ownership of companies located on the UAE's Mainland, i.e., onshore companies, subject to the policies outlined by the UAE cabinet in the form of a cabinet resolution.
A joint-stock company is allowed to sell 70% of its shares through an Initial Public Offering (IPO). Previously, this percentage was as low as 30%.
If the company, through its directors and general managers, engages in an activity that causes the company to lose money, the shareholders have the right to sue the company in court.
Gives local governments authority over the recognition of required capitalization, shareholding percentages, and approval for onshore company establishments that are subject to cabinet resolution policies. Previously, these powers were restricted to the Ministry of Economy or the Economic Departments of each Emirate.
Meetings of companies are no longer required to be presided over by an Emirate they are now open to expatriates as well.
Similarly, the prohibition on Expatriates serving on the company's board of directors has been lifted.
Because of the global pandemic, annual general meetings can now hold electronic voting as well.
There is a provision for removing executive officers or company chairs if they abuse their power.
3 Things You Should Know About 100% Company Ownership rule in the UAE
The rule will help develop the economic sectors. Environment-friendly activities like hybrid power plants, solar panels, and other green technologies will grow with the aid of overseas investment and talent.
A positive FDI rule will attract new foreign investors from across the globe who see growth potential in the much sought-after Middle Eastern market.
This move will also increase global competitiveness.
How does 100% Ownership affect existing business in UAE-free zones?
UAE free zones already allow 100% foreign ownership, but in general, do not allow entities established within free zones to trade on the UAE mainland. Once the new foreign ownership changes go into effect, many free zones are likely to see decreased demand and new challenges in attracting business.
Despite this, the financial free zones will remain popular, particularly in the financial services industry, as investors and financial institutions will continue to be drawn to the common law legal frameworks, independent court systems, and well-developed financial regulatory regimes of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM).
Conclusion
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