The UAE government on 19th May, has announced an overhaul of foreign ownership rules applicable to commercial companies which enables 100% stake of onshore companies from June 1st, 2021.
It might be an enormous relief for the foreign investors in UAE, now you can invest and own your own business it’s easy now!
The UAE government on 19th May, has announced an overhaul of foreign ownership rules applicable to commercial companies. This enables 100% stake of onshore companies from June 1st, 2021.These arrangements and schemes are historically used to document and safeguard the interests of foreign investors within the UAE. This exemption is barely allowed for businesses above a selected limit.
The industry being favored mainly will be tech and digital focused businesses who need to set up in the mainland rather than going for free zones.
Effects
- Instead of having 51% ownership by natives to start a limited liability company (LLC) in areas other than free zones, foreigners can have 100% ownership.
- For other than LLC, an Emirati national who would be remunerated as part of the business agreement without holding shares was required earlier, but the amendment doesn’t mandate the current requirement
- Instead of having the right to issue the 30% shares to the general public, the new amendment allows issuing of 70% shares, i.e., the changes will increase the percentage shareholding that the companies wishing to become joint stock companies through an IPO can sell – 70 per cent of the company from the current 30 per cent.
Any noncompliance or contradiction gives the right to shareholders to file a civil case against the chairman and key managerial personnel of the company.
Exemption applicable for every business?
The sectors such oil and gas, telecom and utilities and other public related sectors are still on the negative list, i.e., will remain to the foreign ownership restrictions, it is foreseen those activities like ‘commercial agency’, banking, insurance, labor supply, etc., would be termed as activities of strategic importance and foreign ownership is probably going to be restricted here. But taking into account the UAE’s open FDI policy, these could also be revised in future.
Implementation is dependent on a Committee under the UAE Cabinet resolution; the Committee will have representatives from the Economic Departments to decide on the level of foreign shareholding in an entity. In principle, the Economic Departments will determine the percentage of foreign shareholding based on its activity and merits
Atik Munshi of Enterprise House
Can it be applied retrospectively for Present Businesses?
The other big question within the market is how these changes applies to the existing businesses when it comes to 100 percent ownership? It is said that all present companies can change their statuses according to the new amendment, the new amendment was announced in December 2020 which brings major changes to Federal Commercial Companies Law No.2 of 2015.For now, there is “no further guidance on how to move forward and remove local partners from LLCs and by which instrument it should be made,” said Abou Zeyd at Abdulla Alawadi & Associates.
How can Tass & Hamjit help?
We can assist businesses in acquiring 100% of shares in their businesses subject to the rules and regulations laid out by the Government. For further details contact –
Tass & Hamjit Financial Advisory LLC
WAFI Residence Office block-LHEU Al Razi Street, Dubai Health Care City,
P.O box.119631
+971 4308 3000, +971 43386668, uae@tasshamjit.com.