Setting up a 100% foreign owned company in the UAE:
Expat business owners were previously unable to set up a 100% foreign owned company in the UAE. The foreign party was only able to own 49% while the remaining 51% belonged to a UAE National or a Local Sponsor/Partner. The Commercial Companies Federal Decree-Law no. (32) Came into effect on 1st June 2021, to allow 100% foreign ownership of onshore companies in the UAE for the majority of business activities.
By easing the restrictions and opening opportunities for foreign ownership, the UAE has been able to capitalize on the market for foreign investment, attracting business, start-ups, and talented working professionals to the Emirates to secure its economic future.
What activities can be 100% foreign owned in the UAE ?
Although there are still some activities that are restricted, most can be 100% foreign owned. The Department of Economic Development (DED) and The Abu Dhabi Department of Economic Development (ADDED) have a list of eligible business activities that allow for 100% foreign ownership. See the activities listed in the links below:
Steps to set up a 100% foreign owned company in mainland UAE
- Identify the business activities
- Register your trade name with the Department of Economic Development (DED) in your chosen Emirate
- Initial Approval – The UAE Government has no objection with the establishment of the business
- Legal documents – including submitting Memorandum of Association (MOA) / Power of Attorney (POA)
- Select location / secure office space
- Regulatory approvals
- Obtain the final DED license
Convert Foreign Branch / Civil Business / Sole Establishment to 100% foreign owned LLC?
1. The first step required in converting to a Limited Liability Company (LLC) is applying for the new company name. The route of the name can be the same as your previous business name, but it would have to reflect the new entity type. As an example of this in practice, your prior-listed entity ‘Coffee Couture Sole Establishment’, would now need to be changed to ‘Coffee Couture LLC’.
2. As a result of changing the legal entity type, the next step is to update the company’s documents. This includes making amendments to MOA, Trade Licence, Immigration Card, E-Signature Card and Labour Cards.
3. The next step is to undertake a share transfer and update the licence to establish the 100% foreign owned LLC. In the case of a Civil Company, the Partnership Agreement will be submitted, and an MOA established.
4. The Trade Licence number will remain the same and the company can continue to use the same bank account and government department files – with the updated name and company form as now LLC.
A LLC is a limited liability structure which prevents individuals from being liable for the company’s financial losses and debt liabilities. Liability is thus assumed by the company rather than its partners or shareholders. The shareholders liability is limited to the value of the share capital. Other entity types – Establishment, Civil Business, Foreign Branch have unlimited liability which places much more risk on the individual or mother company. This is therefore one of the many reasons clients may choose a Limited Liability Company over other entity types, and why many clients are looking to convert their current Establishment, Civil Business, Foreign Branch structure to an LLC, now that LLCs can we be 100% foreign owned in the mainland UAE.
Should I retain a local partner ?
There are benefits to retaining a local partner or opting for a minority shareholder (99:1) structure. Depending on your business activities, retaining a local partner can assist with government contracts, regulatory approvals and to allow the local partner to perform PRO services such as staff visas and government liaison services. The best option is to choose a Corporate Partner as local minority shareholder, to allow the company to act as PRO, Company Secretary and Authorized Signatory to undertake assistance and Government Liaison services.
How can SIGMA help?
We at SIGMA assist companies with setting up a new LLC and assess if your business activities can allow 100% foreign ownership in the UAE. If eligible, we can assist with helping to convert a company to a LLC as well as any other company formation, re-structuring, PRO services including license amendments and share transfer services in Abu Dhabi, Dubai and other emirates in UAE