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UAE allows 100 per cent ownership for investors
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June 20, 2018
Written by:
Marcel Trost

Until now, foreign nationals who wanted to set up a company in the United Arab Emirates had to implement a number of legal requirements. This also included the search for a local sponsor or a co-investor, i.e. a UAE national or UAE company.

According to Article 10 of the UAE Federal Law 2/2015 on commercial companies, the latter had to hold at least 51 percent of the shares. In practice, trading partners were often involved in this process, who renounced their right to a say in society or the company and stayed away from everyday business and made no claim to profits, but also no participation in losses. An exception was made for the so-called free zones. This is a kind of free trade zone which is not subject to the above mentioned law. The attractiveness of locating a company in a free zone will continue to exist, as these offer further attractive benefits such as customs and tax exemptions.

The UAE cabinet allow 100 percent foreign ownership of companies

At the end of May there has now been a significant change: The UAE Cabinet, led by Sheikh Mohammed bin Raschid Al Maktoum, Vice President and Prime Minister of the country, has announced its decision to allow 100 percent foreign ownership of companies in the United Arab Emirates. The resolution of 20 May 2018 is to be implemented, which will significantly change the current situation of ownership restrictions in the UAE. Implementation of the law is expected from the third quarter of 2018.

Cross-industry attractiveness:

The prospect of 100% ownership rights should be of interest to companies of all sizes and orientations. The UAE offers a large local market and proximity to the major emerging markets. With the possibility of 100 percent ownership rights, a significant improvement in the attractiveness of the UAE as a business center can be expected. More companies, entrepreneurs and talents from all over the world are to settle there. This should also contribute to the improvement of the business index for the United Arab Emirates.

The new visa system:

This is part of the country's decision to introduce a new visa system for international "investors and talents", which provides for a long-term 10-year visa for certain professions. Sheikh Mohammed also instructed the Ministry of Economy to coordinate with the parties concerned to implement the resolution and follow its developments, saying that the decision will be implemented by the third quarter of this year. The new system provides for a residence visa of up to ten years for professionals from the fields of medicine, science, research and technology as well as for scientists and innovators. This means that entrepreneurs and start-ups working on innovative solutions in these areas will emerge as direct beneficiaries of this change. There are also five-year residence visas for students in the UAE.

No such change was foreseeable in the UAE. However, it is clear that the country is prepared to use all possible levers to promote the diversification of its economy. The government has recognised that this is also accompanied by changes to the legal framework conditions. The incentive for foreign entrepreneurs and investors to become active in the UAE is now greater than ever - and should be used where possible. Considered an attractive business location worldwide, the UAE also offers interesting opportunities for start-ups, especially in view of Dubai EXPO 2020, which invites companies from all over the world to present their innovative solutions and participate in this major project. It is to be hoped that the efforts for the reindeer state can be carried out without complications and above all: pay off.

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