The commercial sector in the UAE is buzzing with news of the latest changes allowing for 100% foreign ownership in the mainland companies. The UAE has delivered on its promise, and the federal government had announced in November 2020 that that foreign nationals would be allowed to own 100 % of mainland companies within the country, eliminating the need for a UAE national to hold the majority share percentage. Post the initial announcement, the new changes have now in effect from June 1 ,2021.
The new resolution allows for 100 % foreign ownership limited to commercial and industrial activities, whereas professional business activities are excluded at this stage. With this change, a new UAE mainland company (as opposed to a free zone company) can be constituted with its full ownership rights vested with foreign ownership. This is sea change compared to the previous position wherein it was a mandatory requirement that 51% shareholding was vested with a UAE national (individual or corporate entity). Additionally, a foreign company was not allowed to establish a new branch in the UAE without having nominated a UAE national as a local service agent.
The key take- away point include:
- Foreign shareholders, including single shareholders, can now have 100 5 ownership in a mainland company in the UAE subject to certain exceptions.
- Professional licenses are excluded, and the new changes are applicable only for commercial and industrial business licenses.
- The new changes are not a temporary measure but constitute the futuristic picture of the UAE economy, which seeks to enhance the foreign direct investments and partnerships in the region.
- The new changes allow for the most common and popularly used trade license structure of ‘limited liability license’ to transition from 49 :51 % to a 100% foreign ownership model.
- Professional licenses such as marketing consultancy business activity, real estate consultancy, financial auditing, business consultancy etc. are excluded from the new changes, and it is still mandatory to have a UAE local service agent to be appointed.
How to effect the changes in existing companies:
The companies with 49:51 % shareholdings can adopt the changes by amending the ‘memorandum and articles of association of the company’ and obtaining a revised ‘trade license’ from the Department of Economic Development (DED). It is also required that the company obtains a ’No objection certificate’ (NOC) from the local sponsor in order to effect the changes.
