Restrictions On Foreign Ownership In Dubai Mainland

Dubai, one of the seven emirates that make up the United Arab Emirates (UAE), has emerged as a global business hub, attracting investors from all over the world. The city’s strategic location, robust infrastructure, and investor-friendly policies have made it an ideal destination for setting up businesses. However, when it comes to business setup in Dubai Mainland, there are certain restrictions on foreign ownership. Here, we will explore these restrictions in detail.

Local sponsorship requirement:

UAE Commercial Companies Law stipulates that mainland businesses must have a local sponsor who holds at least 51% of the company’s shares. This local sponsor can be an individual UAE national or a UAE-owned corporate entity. The local sponsor’s role involves ownership of the majority shares and involvement in decision-making processes of the company. This sponsorship arrangement is a fundamental requirement aimed at promoting partnerships between UAE nationals and foreign investors.

Exceptions and clarifications:

While the 51% ownership requirement for local sponsors is a standard practice, there are exceptions and variations depending on the type of business and its location within the UAE. For certain professional activities, such as legal consultancy, engineering, and medical services, full ownership by foreign professionals is permitted under specific licensing categories.

Legal structures and ownership options:

Entrepreneurs establishing a mainland company have several legal structures to choose from, such as Limited Liability Company (LLC), Public Joint Stock Company (PJSC), and Private Joint Stock Company (PrJSC). Each structure has different requirements regarding minimum share capital, number of shareholders, and governance regulations. Despite the ownership structure, the presence of a local sponsor or partner with majority ownership remains a standard requirement.

Free zone vs. mainland ownership:

In contrast to mainland requirements, free zones in Dubai and across the UAE offer 100% foreign ownership of businesses operating within their jurisdictions. Free zones are designated areas with specific regulatory frameworks tailored to different industries, facilitating international trade, investment, and business operations without the need for a local sponsor. Companies in free zones benefit from incentives such as tax exemptions, full repatriation of profits, and streamlined business setup processes.

Steering ownership restrictions:

Steering the ownership restrictions in Dubai mainland involves careful planning, legal consultation, and compliance with local laws and regulations. Entrepreneurs seeking to establish a presence in the UAE mainland should consider the strategic advantages of partnering with a reputable local sponsor who can provide insights into local market dynamics, regulatory compliance, and business operations.