100% Ownership in Dubai Mainland Companies allowed by UAE from June 1st
100% ownership in Dubai Mainland
Foreigners forming a company in the United Arab Emirates would no longer need a United Arab Emirates shareholder or agent, according to amendments to UAE company law (100% Ownership in Dubai Mainland) set to take effect on June 1.
“The amended Commercial Companies Law aims at boosting the country’s competitive edge and is a part of UAE government efforts to facilitate doing business,” Minister of Economy Abdulla bin Touq Al-Marri has said.
Last year, the United Arab Emirates announced a law authorizing 100 percent foreign ownership of businesses, one of many measures aimed at drawing investment and foreigners who were severely harmed by the coronavirus outbreak.
Foreigners could already own up to 100% of companies registered in designated business parks classified as “free zones” under a previous law passed in 2018.
Until now, if expats wished to start a company in the UAE, the general rule was that 51 percent of the shares had to be purchased by UAE nationals (or entities wholly owned by UAE nationals). The UAE Companies Law included this requirement.
Although the general impression has been that it is possible to modify the economic power of the international and local shareholders to some degree when it comes to economic ownership and decision-making in the company, there has always been concern about the feasibility of such agreements.
Points in the amendment to focus over
As a result of the latest provisions of 100% ownership in Dubai Mainland, the following primary adjustments in shareholding practices have occurred:
- During business registration in Dubai, it is no longer necessary for UAE companies to have a majority of Emirati shareholders and local agents.
- Allows 100 percent foreign ownership of business organizations on the UAE’s Mainland, i.e. onshore companies, according to UAE cabinet policy specified in the form of a cabinet resolution.
- An initial public offering (IPO) allows a joint stock partnership to sell 70% of its stock. This percentage of the population was formerly as low as 30%.
- The owners have the right to sue the corporation in court if the company, by its directors and general managers, engages in an action that causes the company to lose revenue.
- Allows local governments to acknowledge necessary capitalization, shareholding percentages, and consent for onshore business establishments subject to cabinet resolution policies. Previously, these powers were limited to the Ministry of Economy or each Emirate’s Economic Departments.
- Meetings of corporations are no longer expected to be supervised over by an Emirati; instead, they may be presided over by an expat as well.
- Similarly, the ban on foreign nationals members of the board of directors has been lifted.
- Annual general meetings will also have automated voting as a result of the worldwide pandemic.
- If corporate officers or business chairs misuse their authority, they may be removed from their positions.
Why is the 100% ownership in Dubai Mainland law implemented
The UAE focuses on building on its already established popularity as a market for global buyers, entrepreneurs, startups, and top talent from around the world by lifting existing roadblocks and opening the economy up, while also placing the nation in a stronger place as it prepares for post-Covid recovery and redesigns its vision for the next 50 years.
How will new businesses be affected by 100% ownership UAE Law
In terms of flexibility of business establishment, new investors in the UAE market have a strategic edge. Non-Emiratis of all nationalities can now entirely own their businesses under the new legislation, as long as they are in one of the permitted industries.
Effects on the existing businesses
The registration of an existing LLC corporation can be renewed by selling the shares of UAE nationals to foreign nationals and becoming the sole owner of the company.
According to the Amendment, existing businesses must ‘change their positions’ by January 2, 2022. To match quorum, note, and meeting specifications with the Amendment, LLCs’ Memorandums of Association may need to be amended.
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