Foreign ownership move is a ‘momentous change for the UAE’, say experts

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Greater levels of foreign investment into the UAE are expected after the country abolished a requirement for onshore companies to have a local shareholder.

The UAE on Monday confirmed changes to its commercial company ownership laws in a tweet. It means foreigners of any nationality can now own 100 percent of their business in the country and is the latest move to boost the economy’s competitive edge and make the country more expat-friendly.

The previous rule that onshore companies had to have a major UAE shareholder has been described by one investor as the “number one issue” for foreign companies.

Hamad Buamim, president and CEO of Dubai Chamber of Commerce and Industry, described the new changes to the UAE Companies Law as an important development that comes at the right time given that the UAE is doubling down its efforts to improve ease of doing business and enhance economic competitiveness. 

“By removing existing barriers and opening up the economy further, the move boosts the UAE’s appeal as an attractive market for foreign investors, businesses, startups and top talent from around the world, while it also puts the country in a stronger position as it prepares for post-Covid recovery and reshapes its vision for next 50 years,” he told Arabian Business.

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“The latest decision reflects the effectiveness on the part of the UAE’s wise leadership to respond to the evolving needs of the business community, as well as its proactive and pro-business approach to economic policies. I am confident that such measures will drive foreign investment,, attract a new wave of companies offering cutting-edge technologies and solutions that can contribute to the UAE’s vision and put the country on a steady path of progress and prosperity,” he added.

Adela Mues, a partner at Reed Smith, called the amendments a “momentous change for the UAE” that will “significantly change the business landscape in the UAE”.

“We expect that the immediate result of the enactment of the new provision will be an increased influx of private investment in the country. Many significant investment outfits, such as investment funds and private equity houses are likely to see this as an opportunity to increase their UAE investment portfolio. This is likely to bring additional working capital and expertise to local businesses and overall boost the UAE economy,” Mues said.

“At the same time, local-foreign partnerships will likely be reassessed and local partners will need to reassess their participation in businesses. This will be a great incentive for UAE nationals to increase their efforts in becoming more actively involved in businesses.

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“It will also be interesting to see how free zones will position themselves, when the main advantage they offer their clients (100 percent foreign ownership) is no longer applicable.”

Nour Gemayel, associate, BSA, said: “We believe that the amendments constitute groundbreaking changes in the way businesses will operate in the UAE in the future and will allow foreigners to set up businesses without the need for a majority local shareholder.

“We are confident that this will further reinforce and strengthen the UAE’s position as a leading international economic centre and will encourage the inflow of foreign investments to the UAE.

“We are waiting to obtain additional information in relation to any exclusions which will be decided separately by each local licensing authority.”

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Rudolph Lohmeyer, partner, National Transformations Institute, Kearney Middle East, told Arabian Business: “It is hard to overstate the potential economic impact of this change in the UAE’s commercial company ownership laws – particularly in terms of FDI.

“The change will undoubtedly strengthen the country’s FDI attractiveness… By removing the requirement to have a major UAE shareholder or agent, the UAE will expand the universe of potential investors and increase the depth of investment over time given the greater level of autonomy, reduced costs and improved ease of doing business that the overhaul will enable. Not only will this drive growth, it will also foster innovation by increasing the willingness of investors to bring substantive capabilities and knowhow into the UAE.”

Rizwan Sajan (pictured below), founder and chairman of construction major Danube Group, said that the UAE “is getting more and more favourable every day for the people to invest in the region”.

He added: “The UAE has become a hub for investment, where most of the organisations are taking advantages of business opportunities to the fullest. These timely decisions make the country a desired destination for starting and growing business in the local and global markets.”

Sachinn J Laala, CEO of shopper marketing agency Liquid, who is himself a foreign investor in the UAE, told Arabian Business: “When it comes to starting a business in the UAE, local ownership restrictions were perhaps the number one issue that left foreign entrepreneurs scratching their heads.

“Today’s announcement that 100 percent ownership of businesses is now permitted for foreign nationals signals great news for the UAE economy – and of course overseas investors looking to do business in the Emirates. This will further cement the UAE’s reputation for its pro-business culture and conducive infrastructure for foreign investment.

“In line with the UAE’s shift to a knowledge-based economy, this move will see these ambitions realised within an entrepreneurial environment that harnesses the talent and creativity of its residents, and future investors in the region.”

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Scott Cairns, managing director of Dubai-based Creation Business Consultants, said: “Any changes that encourage additional FDI inflows into the UAE and boosts investor confidence are very welcome and I’m sure we will see a flurry of activity once the new laws are implemented and applied. We eagerly await further detail to ascertain who will be able to take advantage of these ground-breaking changes.”

Ziad Daoud, chief emerging markets economist, Bloomberg, said: “Diversifying Gulf economies away from oil requires attracting foreign investments as well as fixing the distorted labour market. Most other measures are cosmetic. We’ll see how they’ll be implemented, but the initial assessment of the new regulations is positive.”

Companies in some sectors, including oil and gas exploration, utilities and transport, as well as state-owned entities, are exempt from the changes.

The move is the latest by the UAE to future proof its economy in the post-coronavirus era.

Recently, Dubai launched a virtual visa scheme, which allows remote working professionals from all over the world to relocate to Dubai with their families with access to all services in the emirate, including schooling, telecom and services.

In September, the emirate launched a retirement programme for resident expatriates and foreigners over the age of 55.

Retire in Dubai, the first of its kind in the region, is being spearheaded by Dubai Tourism in collaboration with the General Directorate of Residency and Foreigners Affairs.

Dubai has also recently launched the Virtual Company Licence, which allows global businesses to access a regulated e-commerce platform populated by Dubai-based companies, while also exploring new markets and investment opportunities digitally.

The initiative, which allows investors worldwide to do business in Dubai digitally without having to live in the emirate, is expected to attract more than 100,000 companies.

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