This past year has been one of sweeping legislative innovation for the UAE and emblematic of the country’s expansive, international outlook when it comes to easing the way for businesses of all kinds to thrive. January saw the UAE Cabinet’s announcement of certain targeted amendments to Federal Law No. 18 of 1981, more widely known as the ‘UAE Commercial Agency Law’. In the ensuing months, Federal Law No. 11 of 2020 (the Amendment) was published in the UAE Federal Gazette and, subsequently, implemented on the first day of June.
The purpose and effect of the Amendment is to expand the categories of eligible individuals and entities who may act in the capacity of commercial agents under the auspices of the UAE Ministry of Economy. Prior to the adoption of the Amendment, this was the exclusive preserve of UAE citizens or such companies as were wholly-owned by citizens. Under the old law, only such rigidly defined categories could invoke the closely held protections it enshrined.
However, these same protections, while created for the purpose of protecting Emirati businesses had the concurrent effect of dampening the enthusiasm of external investors. The ‘smarts’ of the Amendment lies in its simultaneous retention of the mechanisms which has served the interests of UAE business interests so well, while combining these with the freedom to seek and the means to attract investment from abroad through an IPO (initial public offering) or private placement.
Critically, the criteria for Ministry registration remain in place under the Amendment, requiring any agreement to be exclusive to a given emirate or the broader UAE and must be underpinned by notarised documentation and the appropriate licences. As before, an applicant must be a UAE National or an entity owned in its entirety by UAE nationals. However, two additional entities have been added, those being a UAE public joined stock company (PJSC) option with a minimal 51 per cent Emirati ownership or, alternately, a private company owned by a PJSC, thus diluting the shareholder requirement to 51 per cent and allowing substantial foreign participation.
Local companies are now able to avail themselves of the global markets to a greater degree, facilitating the considerable interest in the UAE which will continue to be dependably steady and, thereby, affording the national investment markets a desirable boost at the same time.
-- The writer is Founding Partner at the DIFC law firm Davidson & Co.