The Implication of '100 Percent Business Ownership' in Dubai Explained
Local ownership restrictions have always been an important consideration for foreign investors interested in setting up businesses in the UAE.
Until now, 100 percent foreign ownership of a UAE business is a condition available to investors either establishing companies in any of the free zones or setting up a professional services company.
Contrastingly, foreign entrepreneurs seeking to get a business license in the mainland are mandated to work with a local partner who by law must hold a minimum of 51 percent stake in the business.
This ownership structure is in accordance with the Federal Law No. 2 of 2015, Article 10 (1) which states that any UAE national entering into an agreement of local partnership with a foreign investor shall hold at least 51 percent of the shares in that company.
Despite the facts that a reliable business setup firm can help to simplify the process of finding a trustworthy local partner, the thought of handing over 51 percent of a new business to a third-party can be scary for first-time foreign investors.
How Will The New Law Benefit Foreign Investors?
The future looks bright for entrepreneurs and prospective investors seeking to enter the UAE growing market. The 100 percent foreign ownership of mainland UAE will bolster the economy, further making it the preferred destination for individuals and organizations wishing to establish a presence in the Gulf Cooperation Council.
First of all, the law when fully enforced will eliminate the existing model that mandates foreign investors to give up a large stake in their businesses to local partners. This will greatly improve the country's ease-of-doing-business as well as reduce the cost of business set up in the mainland and the time it takes to launch a new business
Secondly, this will mean more business opportunities for entrepreneurs and foreign investors. While establishing a business in any of the free zones does not require partnering with an Emirati, it does come with a host of restrictions, including restrictions from doing business outside the zones.
On the other hand, mainland businesses are allowed unrestricted access to any part of the country and can also take up lucrative government contracts.
If anything, this move will help the country to establish itself as a truly level playing field, further positioning it as the top choice for foreign investors.
For further information about company formation in the UAE, feel free to contact us.