UAE Repeals Anti-Fronting Law

It is like opening of new horizons for Businesses in UAE. The UAE has taken a landmark decision to repeal the Anti-Fronting Law. The UAE has repealed its Anti-Fronting Law. Before, this law was created to restrict the foreigners from owning businesses secretly in UAE, by using fake identities and arrangements with local people. This Federal Law No. 17 of 2004, was officially repealed on October 1, 2024.

This marks a significant milestone in the history of the UAE with its ongoing journey towards the future. It shows the commitment level of UAE government for supporting corporate environment of UAE. UAE aims at creating a transparent, fair, competitive, and investor-friendly economy and UAE is taking serious initiatives regards to this.

Therefore, they have supported the changes to empower the foreign investors in the UAE. An anti-fronting law streamlines the business operations and processes. It is also aligned with the UAE legal structure and the international global standards. It is one of the wonderful amendments and advancements in United Arab Emirates.

UAE aims to become the leading global hub for business, and investment. UAE has introduced the exemplary initiative of repealing anti-fronting laws. This makes the business environment more appealing and attractive for foreign investors. These investors feel more secured and confident. This shows the UAE’s commitment to modernizing the legal structure, and promoting the economic growth. UAE continues to evolve this way, and businesses are well informed as well.

The Anti-Fronting Law is also called Federal Law No. 17 of 2004. Formally, it was introduced in 2004 to combat the practice of “fronting.” The term fronting refers to the situation where foreign investors operating business within the UAE under the name of a UAE national comply with ownership restrictions. The UAE nationals have no real investment in the company, and only their name is used. This law made it illicit for UAE nationals to act as a front man for a foreign investor to bypass legal ownership specifications. Any non-compliance with the requirements could lead to violations. It results in fines and imprisonment.

Many factors resulted in making this historic decision to repeal the Anti-Defamation Law. This historic decision has been taken after a careful evaluation. There is an introduction of 100% Foreign Ownership to increase the confidence of investors, and to attract more investors in UAE. The Federal Decree-Law No. 26 of 2020 has amended the previous UAE commercial companies’ law. This amendment has permitted 100 % foreign ownership in onshore companies in various sectors. This has eliminated the need for UAE national sponsors. Now the businesses do not need to engage in fronting arrangements.

This repeal of anti-fronting laws promotes transparency. The UAE has taken a crucial move to improve business transparency that aligns with global best practices. The repealing of anti-fronting laws ensures that the country no longer tolerates show arrangements. It encourages direct investments, because it provides security and safety to investors and they can be owner for that they have to invest.

It also boosts the foreign investor’s faith and confidence.  This offers legal clarity to foreign investors. The removal of outdated laws has strengthened faith in the UAE legal system. Besides, it promotes the country’s reputation as a safe and reliable place to conduct business.

The repeal of the Anti-Fronting Law has far-reaching implications for both local investors and foreign businesses. This encourages the business and investors to directly invest in the UAE without looking for sponsors from UAE nationals. Now, foreigners can easily establish their business in the mainland UAE in several different industries. This fosters direct control over the business operations. Moreover, it also boosts the foreign investors’ confidence by offering direct authority and 100 percent business ownership. Furthermore, it offers greater legal clarity to the business investment. The repeal of anti-fronting laws has restricted the shadow and grey areas connected to fronting arrangements. The new law clarifies the definition of rights and responsibilities of a foreign investor.

• The removal has increased the role of legal advisors or lawyers. The legal complexities still exist, and so the need for professional legal help is inevitable. The foreign investors in the UAE can take guidance from Dubai law firms and local Emirati lawyers.

Numerous investors, entrepreneurs, and business owners tend to engage attorneys in Dubai to better understand the sector-specific ownership laws. Furthermore, they help the business draft the shareholders’ agreements according to the changes. It reflects the legal changes and ensures compliance. The UAE offers ample opportunities to foreign investors, which can be explored by engaging a professional legal advisor. He can help in fully taking advantage of it.

The repeal of the Anti-Fronting Law is part of broader legal reform. Some prominent federal laws that contribute to the new business environment are as follows:

• Federal Law No. 2 of 2015 on UAE Commercial Companies Law
• Federal Decree-Law No. 26 of 2020 about Amendments to the Companies Law
• Federal Decree-Law No. 14 of 2018 concerning Foreign Direct Investment Law

Top-tier Dubai Law Firms fully support the investors, businesses, and entrepreneurs post-repeal. They ensure that due diligence is exercised over new investments to operate swiftly. Furthermore, it supports drafting contracts that highlight the upgraded regulations concerning anti-fronting laws. Furthermore, the lawyers in Dubai provide legal advice on dispute resolution and suggest strategies to resolve the issues amicably.

This initiative positively impacts the UAE economy. The repeal of anti-fronting laws will yield direct foreign investment FDI into the country. Besides, it supports stronger economic diversification that improves the competition. It allows the investors to have better competitiveness in the global markets. This generates more job opportunities for the UAE residents.

It also contributed to the overall reputation of the UAE as a global business and economic hub. Overall, it offers greater stability and thriving opportunities to the economy to develop, grow, and flourish.