How to make the new 100 percent foreign ownership rules work for you
There has been much excitement in the UAE business community following the recent announcement that 100 percent foreign ownership is now available for over 1,000 business activities carried on in ‘mainland’ UAE. It is evident that now is the right time for existing business owners and investors to reconsider the ownership and corporate structure of their UAE businesses.
For existing businesses, as well as potential investors contemplating UAE market entry, 100 percent foreign ownership is a highly attractive offering. However, as with all important legislative changes, business owners and investors alike should carefully evaluate the legal and commercial implications this may have on their business before acting. We provide an overview of the key considerations to be made when deciding whether to start-up or restructure a business in the UAE to benefit from the new ownership regime.
With respect to existing businesses, the foreign shareholders will have to take into consideration their relationship with their UAE national shareholders, and business objectives of the company. They need to ascertain whether the activities conducted by their company fall under positive list in the Emirate where the company is registered, the mode of property registration (whether owned or leased) and whether they have registered as LLC in one Emirate and then set-up a branch in another Emirate. It is imperative that before going ahead with restructuring of the LLC, they need to be sure that the business activity on their licence does allow 100 percent foreign ownership.
A key point to note here is that the business activities on the positive lists in each Emirates are not identical. The business activity list, in Dubai for example, has been updated whereby several activities that used to fall under a ‘commercial’ licence and subsequently could be an LLC, have now moved to the ’professional’ category which doesn’t allow the option of an LLC but rather a sole establishment or civil partnership. This carries individual unlimited liability and therefore the company must appoint a local Emirati national service agent. In addition, other requirements may apply at time of registration which are determined on a case-by-case basis.
Additionally, there are several legal formalities to consider, such as:
· preparation, authentication, and translation of a suite of legal documents
appointment of an individual to manage restructuring formalities
obtaining DED’s initial approval
signing a Share Transfer Agreement in the presence of a Notary Public
signing an amended Memorandum of Association in the presence of a Notary Public to change the legal structure to a single-shareholder LLC
registration of the transfer with the DED
UBO filings to reflect the new shareholders/ manager
Before the legal structure of the entity can change to a single shareholder LLC, bank accounts need to be updated and amending company details with the bank account may also require submitting new KYC documents of new shareholders.
Labour and Immigration accounts also need to be updated to remove the local sponsor and signatory and, if required, authorised signatories are updated to ensure that Labour and Immigration transactions take place without interruption. The new shareholder’s signature will be used to counter sign the MOHRE contracts entered into with each employee who holds an employment visa or labour card with the company. This is done electronically, usually by a PRO.
Active and ongoing management of the company labour account is imperative to ensure that the company remains compliant with applicable laws and regulations. These matters remain the responsibility and liability of named signatories and fines as well as other penalties can be applied to MOHRE accounts that are not maintained. Companies like CBD can be engaged to continue managing and overseeing company MOHRE accounts and visa applications and renewals, along with family renewals and other ad-hoc requests such as domestic workers.
Set up companies can leverage their Middle East legal and commercial expertise in advising and assisting international organisations and entrepreneurs with their ‘mainland’ market entry (i.e., outside a UAE Free Trade Zone, which is reserved for specialised activities). This includes ensuring that the business is correctly structured and holds all the correct authorisations and licences it requires to comply with local laws and regulations. They can also provide a ‘business health check’ to determine if your new or existing business may be 100 percent foreign-owned and, if so, what steps needs to be undertaken to ensure compliance with the new licensing regime.
If, however, your business requires the participation of a UAE national, you need to explore a range of secure partnership solutions to ensure that you maintain full control of your UAE business, its assets and ultimately, of your wealth.
About the author
Wayne Merrick is a business structuring and corporate services expert who has lived and worked for 13 years across multiple jurisdictions in the Middle East. With 10+ years of industry experience, he has assisted hundreds of international companies and investors with their market entry and corporate restructuring requirements in the UAE, Qatar, KSA, Kuwait, Oman and Bahrain.