e.g. I heard about how in Dubai nationals must own 51% of a company. Plus something similar in Thailand as well, and perhaps in various other countries. When faced with such laws, why don’t people start holding companies that would sell to foreigners a service of holding the percent of stock under an appropriately restrictive contract? Is it a matter of lack of trust in such potential holdings? Or can laws be written in such a way as to make this strategy unworkable?
If you could get around the laws this easily, they wouldn’t be worth writing.
If the holding company is not located in Thailand (or wherever), presumably it could not hold more than 49% of the company. If it were located in Thailand, then 51% of its stock would have to be held by Thai nationals, so you’ve gained nothing. The foreigners could not hold more than 49% either directly or indirectly.
This is the case in Cuba too, but since the government is the only entity allowed to enter into partnerships with foreign nationals or corporations, there really isn’t way around the law.
With contracts and derivative instruments anything is possible.
So says the man that lives in the United States under the US Tax code.
The point is that places like Dubai are pointedly not like the U.S. They aren’t free states and the rulers really rule. They want control and you do not screw around with their country’s money.
The goofier posters here say that businesses own the U.S. government. That’s not quite true but it’s understandable that some people can say it. Nobody ever says that about Dubai.
That’s the point.
I think the idea behind “selling the service” would be to simplify the process of starting a business there, reducing the number of hoops to jump as well as to provide more security to the foreign partner. If it is a respected Dubai based holding company that has a long history of providing such a service, perhaps the new foreign clients would trust that they will not get ripped off by them.
The thing is - you go to Dubai, invest a million of your dollars, build a shop/restaurant/whatever business. The government says "it has to be 50% DUbai-owned. So you basically have to find some guy in Dubai with half a million to buy half your business, or you find some guy and GIVE him a half million of your business. Or, more likely, he buys in for a fraction of the real price. Either way, unless you are buddy-buddy and old college roomate with the guy, you are handing half your money to some stranger.
If it comes down to a court battle over the business, you are trusting that the courts will believe you, a stranger and foreigner, over some local. Because the third world, especially Arabia, is known for its honest, straight-up fair and unbiased courts and governments…
Plus - the guy can screw you over. Why assume he’s any more honest than a local American businessman?
So if someone did start a business to help “own” other foreign businesses - why would I trust it?
If the holding company is 49% foreign owned, then I assume you can only count whatever proportion of a business it owns as only 51% Dubai owned; So if Joe’s and Abdhul’s, buys 50% of a business - the business is so far only 25.5% Dubai owned and still has to find another partner besides J&A.
If there are enough rich Dubai businessmen to go around, then it givces them a leg up on competition to buy local shares. And it limits how the shares are traded. (How would a local stock market work? - more red tape!!) If there aren’t enough rich Dubians (?) to go around, it stifles development.
I wonder how it works for foreign or partly foreign banks that need to repossess a business? More red tape…