100 Percent Foreign Ownership and its impact on UAE’s Economy

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The UAE government has implemented the most-awaited policy in the Nation by removing the requirements for foreign investors in certain onshore companies to have a local UAE partner in operating the activities of the business. The guidelines were issued and implemented on 1st June 2021. These changes have encouraged the flow of Foreign Direct Investment into the vital economic sectors of the country. The vision behind these measures were to make UAE the more investment friendly destination. This policy will bring significant raise in the number of startups looking for setup their businesses in UAE or investors who are looking to invest in UAE based companies. This strategic decision will boost the attractiveness to UAE’s investment, ultimately benefiting the economic recovery of the nation and will strengthen its position on the global business indicators and indices.

For onshore startups, the alteration of regulations has resulted in termination of their previous foreign ownership arrangements where a local UAE entity or individual was being required to hold 51 percent of their business .These arrangements were expensive and have created complexities while executing transactions where owners were required to sign any investment related documentation or appear at notarial appointments. Therefore the onshore venture ecosystem is likely to significantly benefit from a lowering of their cost of business and increase in their ease of handling the operations and transactions.

For startups, already operating as an onshore company either Mainland or Freezone, the implementation of 100 percent foreign ownership has made external fundraising easier. Lately, it was a difficult cognitive leap to provide comfort to investors in somewhat more developed venture ecosystems that they were needed to share ownership in their investment target with a UAE national individual or entity who will (typically) have no involvement with the running operations of the business. By eradication of this obstacle, the onshore UAE investments will get more attractions from Foreign Investors who will be likely be more comfortable by the simple ownership structures.

According to Dubai Economic Department, more than 1,000 commercial activities like general trading, vehicle trading etc. and industrial activities like water production, paint sectors etc are included in the list of 100 percent foreign ownership. Owing a kindergarten, school and a hotel also sought 100 percent foreign ownership.

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