Well off non-resident Indian employees in the UAE are being exhorted to turn entrepreneur and take advantage of the UAE’s recent announcement to allow 100% foreign ownership of onshore businesses.
The UAE government has changed the commercial company ownership rules obviating the requirement for onshore companies to have a majority UAE shareholder.
The UAE Commercial Companies Law has been amended to permit 100% foreign ownership of onshore companies incorporated in the UAE. The ownership amendments came into effect on 1 June 2021.
Complete foreign ownership is already available for companies located in the various free trade zones. The facility is now extended to companies throughout the country.
Abu Dhabi has drawn up a list of 1,105 commercial and industrial activities that will allow 100% ownership by non-UAE nationals. Owners of existing companies have the right to adjust their status, provided they comply with the regulations on activities or other applicable restrictions.
Dubai’s Department of Economic Development (DED) has issued guidelines on the procedures for the UAE law allowing full foreign ownership of commercial entities. Full foreign ownership is available for more than 1,000 commercial and industrial activities, excluding economic activities in strategic sectors such as defence production, banking and insurance.
Investment-friendly destination
The rules also abolished a provision mandating that a UAE national or UAE-owned company was required as an agent and that a company’s board needed to be made up of a majority of UAE nationals and chaired by an Emirati national.
The amendments are part of a series of measures introduced to make the UAE a more investment-friendly destination, which have also included the offer of 10-year visas, called golden visas, for investors and citizenship for talented individuals.
The status of existing business licences, in which full ownership of the activities is available and include an Emirati partner, remains unchanged as per the memorandum of association of the company and the partners’ decision.
A reduction of the percentage share of the Emirati partner from 51% or their withdrawal from the partnership is possible according to the legal procedures followed.
New entrepreneurs
The sponsorship rule changes come at a time when hundreds of professionally qualified and skilled expatriates turning entrepreneurs when they were rendered jobless following business failures in the wake of the long lockdowns during the covid-19 pandemic spread.
The changes to the commercial companies’ law are expected to encourage the flow of foreign direct investment into the country’s vital economic sectors and will bolster entrepreneurship.
“This is an ideal time for hundreds of expatriates with good business ideas and skills to turn entrepreneurs. Many start-ups have grown in stature and became successful, taking advantage of a conducive business atmosphere facilitated by the timely changes in government policies,” said Jamad Usman, chief executive and managing director of Emirates First Business Service, a leading business consultancy in the UAE.
“Though NRIs are enterprising, they are risk-averse. However, things are changing for better as many qualified and experienced professionals are exploring to become businessmen. They should avail the services of professional consultancies who can help them identify successful business models, promising sectors as well as arrange capital,” Usman said.
There is a school of thought which still supports the old sponsorship system arguing that having a local sponsor is beneficial for companies when dealing with government departments and ministries.
Usman advises prospective entrepreneurs to go for 100% ownership as the procedures are now transparent and easy that any investor can get things done in any government department or ministry without the involvement of a local sponsor.
“There are inherent issues while dealing with a local sponsor in the course of successful ventures. Some firms have the potential to progress to the level of raising capital from the public through the local stock exchange Nasdaq Dubai. The primary requirement is that the promoter should be 100% owner.”
With the new regulation coming to being, several companies, which were jointly owned by an expatriate and a local sponsor, have opted for 100% foreign ownership. As many as 60 investors in Dubai have already taken advantage of the new law.
