Ownership

Now 100% Ownership for Dubai Business Owners

Ownership

When it comes to founding a company in the UAE, local ownership limits is likely the number one problem that leaves international entrepreneurs scratching their heads. Traditionally, 100 percent foreign ownership of a UAE firm was only permissible under two situations — when doing Business setup dubai mainland, or when creating a professional services company.

Until now, offshore entrepreneurs intending to establish up on the mainland are now confronted with the option of working with a local shareholder who must possess a 51 percent interest in the firm. Although there is lots of assistance available to help discover acceptable local partners, this process may be overwhelming for first-time entrepreneurs trying to establish up in a new nation.

While the reality is not quite as dramatic as it looks at face value, the concept of ‘handing over’ over half of your new firm is one that demands careful contemplation, and may turn off many from starting up in the UAE.

Major announcement

However, this is set to change. In an official declaration, issued through Twitter on May 20th this year, HH Sheikh Mohammed bin Rashid Al Maktoum said that after a cabinet meeting, ‘we agreed to allow 100 percent foreign ownership of enterprises in UAE’.

While still in its early stages, this statement looks to be wonderful news for the UAE economy — and of course outside investors eager to conduct business in the Emirates.

While still in its early stages, this statement looks to be wonderful news for the UAE economy — and of course outside investors eager to conduct business in the Emirates.

So let’s look at what it may imply for you.

What we know, and what we don’t

Exactly what these changes to ownership will look like, or when we may expect to see them enacted is unclear. As it is, details are scant. What we do know is Dubai’s authorities are committed to laying out a road for outside investors to be able to hold 100 percent of their UAE enterprises — but as yet, there is no clear schedule for this process.

As for who this would effect, again it’s fairly unknown at the time. However, we would anticipate 100 percent foreign corporate ownership to be permissible under specific situations. For example, it may only be offered to enterprises in particular sectors or to organizations that execute specified commercial activities. There is also likely to be an investment criteria that people desiring to keep 100 percent ownership of their firm would have to fulfill and also get golden visa benefits.

What may this imply for international businesses in the UAE?

The revelation of 100 percent foreign ownership of mainland UAE enterprises appears destined to bring about a range of advantages to international investors in the Emirates. For one, such a move would eliminate the necessity for international businesses to cooperate with local sponsors.

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The benefits here are two-fold. Firstly, it eliminates altogether the scary possibility of permitting a third-party to have a big share in your firm – something that might put international entrepreneurs off starting up in the UAE. Secondly, global investors new to the Emirates may get right down to work, without the need to canvas for an Emirati firm or person to serve as a partner. This will certainly cut time to market, and eliminate the extra red-tape and paperwork that comes with putting up such a commercial connection.

Then there are the perks of starting up on the mainland that at now are only accessible to professional services businesses or those ready to operate with a sponsor. Perhaps the most alluring of these is the opportunity for expansion. While free zone enterprises may be limited when it comes to personnel numbers, office space and trading with the local UAE market, none of these limits apply to mainland companies — allowing for unconstrained expansion across the Emirates.

Mainland enterprises are also permitted to perform a greater variety of work. For example, if you desire to broaden your offering on the mainland it is just a mater of re-registering your new business with the Department of Economic Development (DED) and you may trade freely. Free zone firms are generally more constrained in this sector, needing to request for sign-off by the appropriate free zone authorities — something that is routinely refused.

Mainland enterprises are also allowed to engage on lucrative government contracts – which is enormous business in the UAE. In 2016, government tenders in Abu Dhabi totaled AED 17.5bn (USD 4.76bn), whereas AED 1tr (USD 272.22bn) worth of government contracts were granted throughout the UAE in the first half of 2017 alone. These number are only going to climb. With Expo 2020 on the horizon, around AED 11bn worth of government contracts are likely to be performed between now and 2020.

Ultimately, 100 percent foreign ownership of mainland UAE enterprise would open the entire potential of the UAE’s growth-machine of an economy to global investors. Those desiring to make their imprint here in the Emirates would no longer have to struggle with the bother of partnering with third-parties, or finding loopholes to conduct business. Such a step would give the UAE a really equal playing field.

The free zone future

This announcement has pushed the possibilities of free zone and mainland closer together, but the distinctions are still unique and vital for enterprises to consider. Although complete ownership has long been a distinctive and direct advantage of the free zone, extra features of starting a business in one of the 50+ specific fields still have significance.

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The free zones are a proven way for a firm to access the UAE market. As every veteran knows, the time after the start of a company is both important and risky. Uncertainty combines with extended working hours and multi-tasking to endanger a young firm before it solidifies its position in its market.

While complete ownership is a historically unique feature of the free zones, its other perks still have value to a new venture: low tax levels, reasonable start-up expenses and limited engagement from the UAE government. We don’t yet know how complete mainland ownership will be executed; we do know everything that has made the free zones useful to businesses for decades.

That stability matters something, and more so to businesses that are eager to push beyond the cautious start-up phases to establish themselves inside the flourishing UAE economy. And with complete ownership possibly possible on the mainland, free zone firms may profit from an even brighter future ahead in their progress and ultimate growth.

With complete ownership possibly attainable on the mainland, free zone firms may profit from an even brighter future ahead in their progress and ultimate growth.

More business opportunities

Naturally, a flourishing environment for investors equals to a healthy economy for the UAE and its leadership. That’s one of the numerous reasons why HH Sheikh Mohammad Bin Rashid Al Maktoum is likely to be making this step. Opening up the UAE mainland to global businesses would definitely draw more business to our shores, boosting the country’s GDP and further consolidating its position as an investor-friendly country that is open for business.

Whatever the specific terms of the modifications to foreign ownership turn out to be, one thing is obvious — this step can only benefit international investors, UAE enterprises, and the entire UAE economy. Because anything that fosters entrepreneurship and offers businesses in the UAE more flexibility to trade can only be a positive thing and should be embraced with wide arms.

Connect Services Middle East is committed to helping customers create a business on the UAE mainland, giving guidance and support with every element of the company creation. To set up a consultation, please phone us on +97143316688
, send an email to [email protected] or click here.

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