Securing the foreign investor’s money has always been a priority for the UAE and with this goal in mind, the government has ratified the new FDI Law. This gives a new fillip to the viability of business setup in the UAE as it grants 100% ownership to the foreign investors in select sectors from 1st December 2020. It is welcoming news for the foreign entrepreneurs as the government scrapped the previous requirement of having a UAE national as a local sponsor in mainland companies.
However, the entrepreneurs should be enlightened about the new law while setting up a business in Dubai, UAE as the law applies to some specialised sectors and other conditions has to be met. Given this, business set up consultants in Dubai here provides the entrepreneurs with detailed guidance on the benefits and applicability of the new FDI Law in the UAE. Read on…
What has changed as per the New Law?
UAE President His Highness Sheikh Khalifa Bin Zayed Al Nahyan has issued Cabinet Resolution No. 16 of 2020 that allows 100% foreign ownership in mainland companies. The new UAE FDI Law effectively amended the previous Law No. 2 of 2015 on companies and their shareholding. The new also supersedes UAE Federal Law No. 19 of 2018 on Foreign Direct Investment.
As per the older law, the foreign investors were required to appoint a UAE national as a sponsor who will hold 51% of the shares. In recent times, individual emirates have implemented 100% ownership with Abu Dhabi being the latest to do so. However, the new Cabinet Resolution has broadened its scope.
What are the Priority Sectors?
While setting up a business in the UAE as per the new FDI Law, the investors need to be aware of the priority sectors. The government’s priority for granting 100% ownership is focused on mainly three sectors: Manufacturing, Services and Agriculture. The government calls this the ‘Positive List’ in the Cabinet Resolution. Getting the new FDI License, therefore, is limited to these sectors. Consult with the best business setup consultants in Dubai for further guidance on the sectors and associated business activities (Currently, there are a total of 122 activities in the Positive List).
Legal Structure Permitted For FDI License
As per Article (3) of the Cabinet Resolution, The Foreign Direct Investment Project can be set up in any of the following legal structures:
- Limited liability companies, including single owner firms
- Private joint-stock companies, including single owner firms
Foreign investors who are confused about the legalities of the FDI Project can seek advice from business setup consultants in Dubai. Unlike the normal projects, the FDI projects need to meet the conditions as per the FDI Law as well as the requirements of the relevant licensing authorities. This is where experienced company formation specialists can assist foreign investors.
Conditions & Requirements for Setting up FDI Project
Setting up an FDI Project in the UAE is subject to certain conditions and requirements as per the Cabinet Resolution. There is a minimum capital requirement for each sector which comes in millions. The companies in the Manufacturing and Agriculture sector should,
- Use Modern Technology
- Bring in high added value
- Must contribute to Research & Development
- Meet the requirements of the Licensing Authority in the UAE
Apart from this, the legal consultancy offices activity in the Services Sector should meet the conditions such as,
- Should not plead before UAE
- Should not take any legal action in courts, tribunals and judiciary and administrative committees
- Should not carry out notarization Activities
- Must obtain external approvals from the relevant authorities
- Should possess sufficient qualification and experience in the legal field
These are some of the conditions to be eligible for setting up a business in the UAE as per the FDI Law. Foreign investors should learn specific requirements mentioned against their desired activities before initiating the process of business set up in the UAE. Business setup consultants in Dubai will aid investors with more knowledge about the requirements.
Seek Advice with the Best Business Setup Consultants in Dubai
Foreign investors have welcomed the UAE’s Cabinet Resolution No. 16 of 2020 that grants 100% foreign ownership in mainland companies. The FDI law removes the previous requirement of granting 51% of shares to a UAE national who acts as the company’s local sponsor. However, before forming a company in the UAE as an FDI project, the foreign investors need to have a thorough understanding of the priority sectors, minimum capital requirements and other conditions. This is why reputed business setup consultants in Dubai such as Jitendra Business Consultants (JBC) provides specialised company formation advice to foreign investors. JBC has a team of business setup advisers who helps foreign investors easily set up a company in the UAE in compliance with the laws.