What’s new?
The Dubai Department of Economic Development (Dubai Economy) has published clarification of the procedures for full foreign ownership of limited liability companies and a list of activities eligible for foreign ownership. This much awaited publication follows the implementation of the amendments to the Federal Law No. 2/2015 on Commercial Companies in respect of foreign ownership on 1 June 2021.
According to the announcement Dubai Economy has “started implementing the new decision on foreign ownership…..[and] [i]nvestors seeking full ownership can complete the procedures …..through … the ‘Invest in Dubai’ digital platform.”
The “Full foreign ownership activities” list published by Dubai Economy (“Dubai List”) contains more than 1,000 commercial and industrial activities in respect of which 100% foreign ownership is available. By contrast to the list published by the Abu Dhabi DEDA, a broad spectrum of trading activities is featured on the Dubai List. Trading activities are absent from the Abu Dhabi DEDA list.
Key takeaways from the Dubai DED’s announcement are:
- No additional fees, guarantees or capital requirements are attached to the activities eligible for 100% foreign ownership;
- existing businesses where full foreign ownership of their activities is available are advised to follow the procedure set out in their memorandum of association to reduce or fully divest the Emirati percentage ownership;
- the procedures for setting up a company and licensing requirements are unchanged save for the removal of the mandatory requirement to have an Emirati partner and specify a fixed profit and loss distribution ratio between the partners; and
- full ownership does not apply to commercial agencies, as they are regulated by the Federal Law No. 18 of 1981 on commercial agency.
The announcement also reiterates the removal of the requirement for a branch of a foreign company to have a UAE national service agent appointed as a mandatory requirement to operating in the mainland UAE.
What we say
The scope of activities contained in the Dubai List together with the confirmation from Dubai Economy of no restrictions or conditions on companies conducting activities eligible for 100% ownership are very exciting developments. Dubai Economy is effectively fast tracking what was anticipated to be a gradual move towards foreign ownership liberalization, that is likely to set a trend for other Emirates to follow.
Dubai Economy’s announcement is also notable for its apparent difference in approach to the Abu Dhabi DED who are understood to be taking a more conservative view to the foreign ownership changes. The omission of trading activities from the Abu Dhabi DED list as well as the lack of clarification of whether conditions or restrictions will be attached to activities eligible for 100% ownership has led to speculation that the Abu Dhabi DED will be more cautious in their roll out of the foreign ownership procedures; preferring to exercise discretion on a case-by-case basis.
As the processes and procedures become gradually clearer, there is an opportunity for business owners to:
- assess their business activities against the permitted 100% ownership activities lists published by the relevant Emirate;
- review and refresh their existing shareholder contractual arrangements to clarify the procedure for adjusting foreign ownership; and
- consider the strategic advantages of improving the existing corporate structure by utilizing modern tools designed to protect an operating company from personal disputes and ensure business continuity.
See our publication: Increased foreign ownership in mainland entities – Preparing for the transition
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