Prior to the recent amendment of the Federal Law No.2 of 2015
and its amendments (‘UAE Commercial Companies Law’), it was
a mandatory requirement for expats to have a local sponsor to be
appointed in the company. Such local sponsors would also be holding
51% of the total shareholding of the company. The local sponsor
will also hold additional duties as well as rights , or in some
instances, the parties would enter into a side agreement to ensure
that the full operational control rests with the foreign expat
alone.

With the latest changes effected in the Commercial
companies’ law, the previous restrictions imposed on foreign
entities is now greatly removed to a larger extend. A foreign
entity or person may now invest and own up to 100% of the total
shareholding in the company in the UAE and thus excluding the
previous mandatory requirement of a local sponsor. The new
amendments also provide the UAE authorities to determine certain
activities to hold a ‘strategic impact’ and thereby to be
reserved for Emirati participation on an emirate level. Each
emirate is thus required to release its list of business activities
that may be carried out with 100% foreign ownership and thus, do
not require a local sponsor. These changes have been affected under
the Federal Decree-Law no. 26 of 2020, and these changes are in
effect from 1 June 2021. The Dubai Economy has listed around 1000
commercial and industrial activities that are allowed for 100%
foreign ownership.

Clarifying the requirements under the new law, the Dubai
Economic department has released its statement that
” Full ownership does not bring any change to current
procedures or requirements for licensing, except that it’s no
longer mandatory to have an Emirati partner (Local sponsor) or
specify a fixed quota ratio for him/her. Dubai Economy clarified
that a reduction of the percentage share of the Emirati partner
from 51% or his /her withdrawal from the partnership is possible
according to the legal procedures followed”.

Steps for effecting the changes:

In order to effect the changes in an existing company that
endeavours to move from a 49 % foreign ownership to 100% foreign
ownership, the following steps may be undertaken:

• Existing companies can change to a 100% ownership structure by
  amending their existing Memorandum association (MOA) as registered
  with the economic department to reflect the changes. This would
  require the legal steps to be followed as per existing procedures
  of providing – Board resolution of existing shareholders to
  consenting to the said changes;
  
  • Obtaining initial approval from the economic
    department; 

  
  

  • Registering the amended MOA and paying the requisite
    fees; 

  
  

  • Amending the trade license of the company to reflect the
    changes made.




• It is not possible to change an LLC company with more than one
  shareholder into a Sole Proprietorship under the existing laws,
  however; instead, it is possible to transfer the license to a
  solely owned limited liability company.




• Also, no additional governmental fees, guarantees or capital is
  required to effect the changes for full foreign ownership.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.