Mainland Company Formation in Dubai

Ownership of mainland/onshore companies in UAE was a vital concern for foreign investors primarily on account of having to partner with UAE nationals. This partnership is quite tilted, as an Emirati partner had to own at least 51% of the company shares, whereas foreign investors could only own a maximum of 49% of the company shares. The minority stake did not allow the foreign investors to independently run the affairs of their company. Even in some company forms (sole establishment and civil company), the foreign investor was required to appoint a local service agent (a UAE national), who would charge compensation for his appointment without owning any company shares. These aspects made every foreign investor think twice before setting up a business in Dubai mainland.

To attract foreign investment and to boost the confidence of foreign investors, the United Arab Emirates amended the UAE Commercial Companies Law to permit 100% foreign ownership of onshore companies incorporated in the country. This law was implemented with effect from 1^st June 2021.

100% foreign ownership is permitted for companies that are carrying on certain business activities mentioned in the UAE’s ‘positive list’. This list consists of more than 1,100 activities across multiple sectors.

Pursuant to this decision, the Dubai Economy released guidelines explaining the procedures for full ownership of Dubai mainland companies. Below are the key takeaways of the Dubai Economy guidelines:

• The Dubai Economy invites 100% foreign ownership for multiple commercial and industrial activities. The commercial activities include general trading, contracting, jewellery, gold, pearls, luxury watches, etc. The industrial activities comprise of metal and construction, flooring, building materials, food, water production, paint sectors, etc. Education and hospitality are also included in Dubai’s positive list.
• If any existing mainland company in Dubai wishes to reduce the shareholding of an Emirati partner or if the Emirati partner wants to resign from the partnership, then they can do so by amending the company documents by following the available legal routes.
• The amendment of the Commercial Companies Law does not change the processes of licensing, incorporation, and renewal of Dubai mainland companies. The services can be availed via the already existing channels of Dubai Economy.
• The amendment also does not bring in any change in the already existing legal structures of Dubai mainland companies i.e. sole establishment, civil company, and Limited Liability Company (LLC).
• The Dubai Economy guidelines do not permit transforming the legal form of the company from a Limited Liability Company (LLC) to a sole establishment under a foreigner’s name. However, the guidelines do allow transferring the license of the Limited Liability Company (LLC) to a one-person company with limited liability.
• A branch of a foreign company does not require an Emirati agent. Existing agents can also be removed.
• This amendment does not apply to commercial agencies as they are not regulated by the Commercial Companies Law. They are owned by UAE nationals only.

This change in law has attracted massive foreign investment in the whole of UAE and Dubai in particular. Multiple mainland companies are being set up in Dubai, especially due to its attractive tax-free benefits. In the first week itself, as many as fifty-nine (59) Dubai onshore companies were incorporated.

InZone specialises in mainland company formation in Dubai. If you wish to be a first mover and enjoy the benefits that a fully owned Dubai mainland company has to offer, then do contact us today.