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The UAE’s new company law: Everything you need to know

The UAE has a reputation as one of the most welcoming business environments in the world. Low tax, a great location, and supportive regulation make it popular with entrepreneurs and investors the world over.

In recent years, the UAE’s rulers have taken steps to further cement this reputation and encourage greater foreign investment in the country. These changes have made it even easier for non-GCC entrepreneurs and business owners to launch and run companies in the Emirates for the long-term.

The first initiative was to introduce and then expand the UAE golden visa process. This allowed a wider range of professionals to benefit from the scheme which permits a much longer stay in the country than previously possible.

Around the same time, the government also reformed UAE company law, allowing for 100% foreign ownership of mainland companies within certain industries. This relaxation of the regulation allowed non-GCC investors, within around 100 permitted sectors, to trade within the UAE without the services of a local agent. Now, this regulation, along with several others, has been relaxed further still.

Here’s how the recent updates may make it much easier for you to start your business in the UAE.

Changes to UAE national minimum ownership law

Previously, non-GCC investors who wished to start a UAE mainland business could only do so with the help of a local sponsor.

The local sponsor would own a 51% stake in the business with the non-national retaining 49%. While the foreign investor would maintain control over decision-making and profits, the local sponsor would be paid an annual fee for their services.

This was recently relaxed to allow for 100% foreign ownership within some industries, including agriculture, construction, hospitality, and manufacturing.

Under the latest regulations, 100% foreign ownership is now possible in almost all industries, other than those of national importance to the UAE economy, such as oil and gas.

Changes to joint-stock company laws 

There have also been somewhat significant changes to the UAE’s joint stock company laws. Directors’ liabilities provisions now include senior management, and there is no longer any requirement for such companies to have a UAE national on the board of directors.

Joint stock company shareholders may also sue companies over the failure of duty of directors resulting in loss or damage. Other amendments will see these companies able to appoint non-shareholders as directors and to sell up to 70% of shares through an Initial Public Offering (IPO) – up from the current 30%.

Finally, joint stock companies may now be owned by a single corporate shareholder.

Opening a branch of a foreign company in the UAE

Up until now, anyone wishing to open a branch of a foreign company in the UAE mainland would require a local agent. The agent would be named on the license, and once again, paid a fee for their services.

This is no longer the case. Overseas business owners can now open branches within the UAE mainland without acquiring a local agent.

When will the new laws come into force? 

The official timeline for all changes to UAE company law is yet to be published. Many amendments will come into effect on January 2, 2021, while others are expected to follow later.

The removal of the need for a local agent for foreign branches of companies and the further relaxation of 100% ownership rules, for example, will come into force six months after publication in the official gazette.

Who will the new laws benefit?

The latest changes to UAE company law coincide with the relaxation of several other laws regarding minor financial crimes, cohabitation outside of marriage, and the consumption of alcohol. The goal is to make the UAE an even more welcoming place for investors from outside the region.

The new laws have set the UAE apart in the Middle East. Not only as a great place to do business, but as a great place to live, build a life, and integrate for the long term. The result can only be a more prosperous and diverse business environment, thriving industries, and a stronger, more stable economy.

Start your UAE business with Business Incorporation Zone

The changes to UAE company law make it much easier to start a range of businesses in the UAE. However, getting started out here still requires a level of prior knowledge of the process. What’s more, it is important to note that the application process is only straightforward if your license application is complete at the time of submission and free from errors.

To help you ensure that this is the case, it’s a good idea to work with a company formation specialist such as Business Incorporation Zone (BIZ) when establishing a new company in the UAE.

We are a team of company registration professionals who are passionate about bringing the dreams of aspiring entrepreneurs and SMEs to life.

As well as handling your license application, BIZ can also assist with the opening of corporate bank accounts and advise on the most appropriate financial institution to suit your specific needs.

We also offer visa and immigration services and can handle all government formalities, permissions, work permits and visas applications that are required to trade in the UAE.

In short, our experts can establish your company on your behalf, make your license and visa applications, and take care of all the necessary admin – leaving you free to get on with what you do best, running your business.

To find out more about the recent changes to regulations, or to start your trade license application, get in touch with the expert team at BIZ today. Call toll-free on 800 BIZ (249) or email info@bizincorp.ae.

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