UAE Government Decided to Offer 100% Foreign Ownership of Commercial Companies

It’s exciting to know about the newest initiatives the UAE is taking to ensure the country’s and people’s long-term growth in the face of global economic downturn worries. 

On June 2, 2021, the Sharjah Economic Development Department (SEDD) stated that the UAE will implement a full 100% foreign ownership policy from that day forward. The new laws allowing foreign investors and entrepreneurs to create and completely own onshore firms, according to the UAE Ministry of Economy. 

“The amended Commercial Companies Law intends to improve the country’s competitive advantage and is a part of the UAE government’s efforts to make conducting business easier,” said Abdulla bin Touq Al Marri, Minister of Economy. 

UAE’s FDI Law

The UAE’s Commercial Enterprises Law stipulates that UAE citizens control at least 51% of the share capital of any firm formed in the UAE (other than those governed by its free zones’ rules and regulations) (or entities that are wholly owned by UAE nationals). 

Many international investors have found the requirement to comply with local ownership standards to be an unpleasant feature of the UAE’s legal system, resulting in either unnecessarily convoluted ownership arrangements or, in the worst-case scenario, a reduced inclination to commit significant resources.

The FDI Act does not serve as a comprehensive policy proposal or eliminate all local ownership restrictions; rather, it establishes a mechanism for increasing the proportion of a corporation’s share capital that can be controlled by non-UAE nationals through the implementation of subsequent UAE Federal Cabinet decisions and regulations enacted by the governments.

100% Foreign Ownership: UAE’s New Rule 

President Sheikh Khalifa has backed the long-awaited and hotly debated Foreign Direct Business Legislation, which would transform the country’s economic climate.

Foreign ownership was restricted at 49% under previous regulations. Only free zones and professional services businesses were allowed to have 100% foreign ownership. However, the long-awaited 100% foreign investment of businesses is now permitted in the UAE, according to Cabinet Resolution No. 16 of 2020 on the determination of “The Positive List.” 

Positive List of Economic Sectors and Activities

The positive list includes 122 economic operations in 13 different economic areas. The selection of industries is clearly based on the UAE government’s confidence in those industries that it feels would gain the most from increased foreign investment and are capable of acting as long-term drivers of sustainable economic growth.

Some key sectors included are:

• Manufacturing

• Transport and storage

• Hospitality and food services

• Information and communications

• Science and technology

• Healthcare

• Education

• Art and entertainment

• Construction

• Space and agriculture

According to the FDI Law, foreign investors establishing businesses on the “positive list” may be subject to minimum capitalization requirements on a case-by-case basis. Furthermore, the licensing authority in each Emirate and industry-specific authorities may impose additional restrictions on such businesses.

Negative List of Economic Sectors and Activities

Foreign investment of more than 49% is still prohibited in sectors of the economy that appear on a “negative list” under the FDI Law. In the “negative list,” there are presently 13 sectors listed, including…

• Fisheries services 

• Security and military-related activities

• Oil and gas exploration and production,

• Banking and finance services

• Insurance services

• Postal & telecommunications

• Transport services

• Commercial agency 

• Printing and publishing services

• Hajj and Umrah services

• Labor and servant services

• Medical retail businesses

• Electricity and water services 

Furthermore, the Department of Economic Development (DED) in Ajman also announced its decision to allow foreign owners total ownership of economic operations in both the commercial and industrial sectors. This decision was made in order to expand investment possibilities and entice investors to the UAE for a long-term economic future.

Planning To Set Up Your Business in the UAE? 

The approval of the 2020 FDI Act is a positive move for new and existing investors like you, and it increases the UAE’s appeal as a regional investment center, especially given the present economic effect of the Covid-19 issue. We are certain that this step would help the UAE achieve new heights in its development. So, if you are planning for company formation in the UAE, MMF is your perfect business advisor who will assist you at every step of your business setup in Dubai. For a free consultation, call us on +971 52 673 9777 or visit us at https://www.makemyfirm.ae/.