The Commercial Companies Law is a hot topic of conversation across the country, but the changes are not clear to everyone. Here is a quick primer of salient points, and some pointers to 100% ownership - and 100% success
What are these changes to the UAE Commercial Companies Law?
According to the recently amended law, most onshore (mainland) companies in the UAE do not require to have a major UAE shareholder, or a UAE national or UAE-owned company as its local partner. Further, the company’s board neither needs to be made up of a majority of UAE nationals, nor be chaired by a UAE national.
In summation, a foreigner, group of foreigners, or a foreign company can now have 100% fully-owned businesses in the UAE, subject to stipulations.
When were these changes announced, and when will they come into play?
These changes were first announced in November last year through Federal Decree-Law No. (26) of 2020 amending some provisions of the Federal Law No. (2) of 2015 on Commercial Companies They came into effect on 1 June, 2021.
How does this affect foreign individuals or institutions who want to establish a business in the UAE?
Global corporations may not have been comfortable about operating as minority partners in the UAE, and large companies may have hesitated about going into business with local partners they were not familiar with. This will now change. Also, branches of foreign companies will not require an Emirati service agent any more.
The ability to own 100% capital of an onshore entity will also draw interest from foreign investors or institutions looking at acquiring UAE businesses, and we expect it to spark more company merger activity.
And finally, it makes a huge difference to investors who wish to establish wholly owned start-ups, SMEs, or large-scale businesses. So many possibilities are now open to them to set up business in the UAE.
What categories of business does full ownership include?
Dubai Economy has announced 100% foreign ownership status for more than 1,000 commercial and industrial activities, to ensure smooth business set up in Dubai. The Abu Dhabi Department of Economic Development has revealed a list of 1,105 registered commercial and industrial activities that are now open to partial or full foreign ownership in the capital. The Departments of Economic Development in Ajman and Sharjah have also announced full foreign ownership in numerous economic sectors.
Are any categories or sectors exempted from full ownership?
Only seven sectors with strategic impact are exempt from full ownership in the UAE, pertaining to security, military and defence services; banks, exchange houses and financial institutions; Haj and Umrah services; Holy Quran memorising centres, banknote printing, fisheries, and communications. Full ownership also does not apply to commercial agencies, as they continue to be regulated by the (separate) Commercial Agencies Law.
Does full ownership change any/many current licencing requirements?
Full ownership does not bring any change to current procedures or requirements for licensing, except that it is no longer mandatory to have an Emirati partner, or to specify a fixed quota ratio for him/her.
Has anyone applied for full ownership of business? Are there any success stories?
At A&A Associate, we have helped some of our clients open fully-owned businesses in Dubai, during the last month. Dubai Economy has announced that many foreign investors have taken advantage of these changes to set up business in Dubai, with 100% ownership. Enquiries continue to pour in.
Which activities and sectors have these investors in Dubai applied for?
With a choice of more than 1,000 business activities in Dubai, investors have successful applied for full ownership in a wide variety of sectors: general trade, contracting, gold and jewellery, construction, cargo and shipping, food and water production, and paints. Schools and hotels have also applied for full ownership.
Does full ownership involve more fees, more capital, or more processes?
The changes clearly stipulate that there are no additional fees, capital guarantees or capital requirements for full foreign ownership. This decision also allows branches of foreign companies to conduct their business in the UAE without a local agent.
Can foreigners expect any help with setting up a new business in the UAE?
A&A Associate is in the business of helping individuals and institutions establish their business in the UAE – onshore, offshore, and in the nearly 50 free zones located in the country. We help with all aspects of new business set up in Dubai and elsewhere in the UAE.
With in-house lawyers, chartered accountants and financial consultants, we are efficient at feasibility studies, due diligence, corporate structuring/restructuring, and company formation. We have helped thousands of foreign individuals and entities open a new business in the UAE – with ease, speed and success.
During the course of setting up a new business, our teams provide end-to-end services covering initial approvals, trade name reservation, fee payments, bank accounts, applying for and procuring the best-suited licence, and assistance with visas and office requirements.
Our sister concerns offer professional services in the fields of accounting, auditing, book keeping and taxation, to ensure smooth start-up and set-up.
In a broader context, what are the larger and long-term benefits of the changed laws?
With the global economy still recovering from the pandemic, entrepreneurs are looking for investments in safe and progressive countries, and the UAE is ideal. The amendments to the law are part of many new measures that make the UAE a more investment-friendly destination, including 10-year visas for investors, virtual work visas, and citizenship for talented individuals.
The UAE already has world-class infrastructure and offers a premium quality of living, and this new step underscores government commitment to support the economy, and enhance its readiness for the future.
Changes to this law are also expected to encourage the flow of foreign direct investment into the country’s vital economic sectors. FDI to the UAE surged 44 per cent to $20 billion in 2020, although it decreased globally by 42 per cent.
What happens to existing business licences with Emirati partners?
The status of any existing business licence with an Emirati partner will remain unchanged as per the Memorandum of Association (MoA) of the company. Dubai Economy has clarified that a reduction of the UAE national partner’s share (from the current 51%), or their full withdrawal from the partnership will be allowed, subject to legal procedures. Although the legal form of a company cannot be changed from an limited liability company (LLC) to a sole proprietorship entity under a foreign name, the license can be amended to a one-person company with limited liability.
At A&A Associate, our team of lawyers, chartered accountants and management consultants offer bespoke solutions for company formation or re-formation in the UAE.
Is the new Commercial Companies Law only valid in Dubai? What if I want to open a onshore business in the other emirates?
The changes in the Commercial Companies Law will be rolled out across the UAE. Abu Dhabi, Dubai, Sharjah and Ajman have already announced 100 per cent ownership to foreign investors in different commercial and industrial sectors. New business set up in Dubai and Abu Dhabi is in full swing. Detailed announcements and the list of commercial activities for full ownership are expected soon from all emirates.
Cost and ease of setting up business in the UAE
We offer extremely affordable and almost-instant company formation packages across the country. A sterling example is Sharjah Research, Technology and Innovation Park (SRTIP) – an innovation ecosystem that promotes triple helix collaboration between industry, government and academia. The free zone issues a wide variety of 100% foreign-owned licences in the sectors of trading, services and media. These licences are priced at a mere AED 5,500/- and paperwork is usually completed in a few days.
Contact A&A Associate for more information.
The author is Director – Legal and Business Advisory at A&A Associate. Equipped with LLB and MBA (human resources) degrees, and over 15 years of experience in four countries, he and his teams have helped establish thousands of new companies in the UAE.