100% Foreign Ownership for LLC’s Comes Into Effect from 1st June 2021: Here’s Everything You Must Know About It

July 21, 2021

In a bid to make the United Arab Emirates (UAE) a global investment destination, the government made landmark changes in the Federal Commercial Company Law No.2 of 2015. The changes were announced in December 2020 that advocated full ownership of LLCs to foreign investors. These ownership changes bring a breath of fresh air to global investors as they no longer have to allocate 51% share ownership to an Emirati-owned company or Emirati individual to run business in mainland UAE. The Ministry of Economy has announced this amendment will come into effect from 1^st June, 2021, and companies must change the corporate structure accordingly before 1^st June, 2022.

Key Changes Every Business Owner Must be Aware Of

Before the amendment, foreign investors were allowed to own up to a maximum of 49% shares in their UAE-based LLC, while the remaining 51% were required to be owned by an Emirati individual or an Emirati-owned company. It was not possible to register and operate a Limited Liability Company (LLC) on the mainland without an Emirati or a local sponsor, and this has been changed entirely due to the amendment. Foreign investors can now have 100% ownership in LLCs that fall in the following category:

Agriculture
Art & Entertainment
Administrative & Support Services
Construction
Education
Healthcare
Hospitality
Food
Information & Communication
Manufacturing
Professional Services
Scientific & Technical Activities
Renewable Energy
Space
Transport
Storage

Investors eyeing on running LLCs that fall in other categories or areas that may have a strategic impact will be subjected to restrictions, and 100% ownership won’t be granted. The new change is expected to bring in more investment from across the globe, giving a boost to the UAE’s economy.

What can Entrepreneurs expect from the New Changes?

With the 100% ownership clause coming into existence, the global investors’ community will view UAE as a golden investment hub. Foreign investors who already own established organizations in UAE with the mandatory old shareholding corporate structure can now consider regaining full ownership. They can also explore the option to own a fully-owned LLC in the mainland (onshore) as an alternative or an addition to their free zone setup. This development can also spark a debate in the business community about the long-term benefits of free zones.

Even though free zone offers a familiar legal regime and allows foreign investors to have full ownership of their organizations, they don’t permit companies established within their region to conduct trade on the mainland. With the new ownership clause coming into effect, businesses registered in free zones may now want to establish their entity in the mainland. As all licensed companies will change their corporate status according to the amended law, major movement can be seen in the business space.

Impact of the Changes on the Existing & New Businesses

Many investors were interested in being a part of the UAE’s booming economy, but the old shareholding norms made them reluctant to invest here. As the country moves up in terms of ease of doing business due to the new changes, global investors can now easily set up their business with full ownership. So if you’re a non-Emirati of any nationality, you are eligible to fully own your LLC if it falls under the allowed sectors.

Existing businesses can now reassess their corporate structure and retain full ownership by exploring possible options. If you own a licensed business in UAE or planning to register one, the following key points are worth noting:

Company meetings can now be presided by expatriates. Earlier, Emiratis would head any company meeting.
Joint stock companies can now sell up to 70% of its shares through IPO; the earlier limit was restricted to a mere 30%.
Prohibition on expatriates serving the entities’ board of directors has been lifted.

The need for the foreign investor’s owned companies to have a majority of local agents and Emirati shareholders during company registration no longer exist.
Executive officers or key chair persons can now be removed if they abuse their power.
If the company engages in any activity through its directors and general managers that results in losing money, the stakeholders hold the right to sue the company.

Knowing the new laws is crucial, but it is best to consult professionals and seek reliable services for an error-free implementation. If you own a licensed business or are planning to register one, you can contact us for a detailed, personalized consultation.

At Zenesis Corp, we have a diverse talent pool with years of experience in their respective fields. Whether you need professional help changing your current corporate structure or registering a new LLC in an onshore location following the new amendment, we can help you with all these activities with the highest efficiency.