Dubai: Today, the UAE's Ministry of Economy announced that the amended Commercial Companies Law will come into effect on June 1, 2021, allowing foreign investors and entrepreneurs to establish and fully own onshore companies.
Which companies can get a 100 per cent ownership and how can yo apply for one? Here is all you need to know.
Which activties are permitted?
According to Samer Qudah, Managing Partner at Al Tamimi & Company, the Department of Economic Development for both Abu Dhabi and Dubai have publicised a list of over 1,000 activities that can be 100 percent owned by foreign investors.
"Neither Abu Dhabi or Dubai has published any restrictions or qualifications to establishing 100 percent ownership onshore. This development will no doubt help boost the UAE economy and accelerate its rebound post the pandemic," Qudah said.
Neither Abu Dhabi or Dubai has published any restrictions or qualifications to establishing 100 percent ownership onshore.
“From a Northern Emirates' perspective, we await the release of their lists. However, we are seeing that the Department of Economic Development in Sharjah and Ajman have already started accepting applications for 100 per cent ownership registration of foreign branches without a local agent," he added.
Hani Naja, Partner Corporate and Commercial at Baker McKenzie Habib Al Mulla, also spoke to Gulf News about the new law and the changes that had already been implemented over the years, leading up to the recent announcement.
“The push for a relaxation in foreign direct investment in the UAE started a number of years ago. The first major change was in September 2018, with the issuance of the Foreign Direct Investment Law (FDI Law), which opened up the UAE market to foreign investors in certain sectors of the economy. The FDI law was then followed by the announcement on July 2019 of a Positive List of 122 business activities where foreign investors can own up to 100 per cent of the shares in an onshore company. The Positive List focused on the manufacturing, agricultural and services sectors,” he said.
“The second major change came in November 2020 with the amendment of the Commercial Companies Law (CCL), which was the main law limiting foreign ownership to 49 per cent. The amendment of the CCL rendered the FDI Law obsolete as the UAE moved from a principle of continued restriction but with a Positive List (under the FDI regime), to a complete liberalisation across all sectors and activities and emirates with a soon-to-be-announced list of strategic sectors where limited restrictions may apply. The amendments were put into effect on December 2, 2020, and the list of strategic sectors under the new Article 10 of the CCL should be issued and brought into effect six months after,” he added.
The amendments were put into effect on December 2, 2020, and the list of strategic sectors under the new Article 10 of the CCL should be issued and brought into effect six months after.
According to Naja, the key takeaway of the revised Commercial Companies Law is that foreign shareholders (including single shareholders) can own up to 100 per cent of any company in the UAE, except special-status companies with government ownership and companies operating the strategic sectors referred to above.
“Also, branches of foreign companies do not need a UAE national as the local service agent anymore,” he added.
James Elliot-Square, Business Development Manager at UAE company support specialists PRO Partner Group, also spoke about it.
“[The amendment] now paves the way towards the gradual loosening of foreign ownership restrictions in UAE and potentially allows expats and foreign companies to own 100 per cent of the shares in a mainland Limited Liability Company,” he said.
[The amendment] now paves the way towards the gradual loosening of foreign ownership restrictions in UAE and potentially allows expats and foreign companies to own 100 per cent of the shares in a mainland Limited Liability Company.
He also added that the detailed law, which has been published in the official gazette, included details of the changes that will affect limited liabilities companies (LLCs). Some of the important changes, according to Elliot-Square, include:
1. Removal of the requirement for a foreign branch office to appoint a UAE national service agent (NSA) with effect from March 30, 2021.
2. All companies in the UAE (including limited liability companies) will be subject to corporate governance standards to be issued by the government at a future date.
3. Changes to the process of convening and holding general meetings including:
a. Increase in the notice period to 21 days for holding a meeting;
b. One or more shareholders holding not less than 10 per cent of the share capital may request a general meeting to be called; and
c. Allowing for meetings to be held and called using modern means to technology.
We now know that the government will establish a committee and they will release a Strategic Impact List illustrating the specifics of this 100 per cent foreign ownership, including permissions around commercial activities and also perhaps additional approvals.
Which businesses can aim for 100 per cent foreign ownership?
Another change that business owners need to be aware of is the ‘positive list of economic activities’, which are eligible for the 100 per cent ownership. Saraa Gheewala, Head of Operations at Virtuzone, a company formation specialist, spoke about how the authorities are expected to announe a 'Strategic Impact List'.
"On or by June 1, 2021 we are expecting to know more about the types of licence activities this will apply to. Back in December 2020, when this news was announced there was a positive list released too, highlighting the activities that this amendment is applicable to. We now know that the government will establish a committee and they will release a Strategic Impact List illustrating the specifics of this 100 per cent foreign ownership, including permissions around commercial activities and also perhaps additional approvals," she said.
"Conversely, a 'Negative List' will also be published. This will include commercial activities that will be strictly excluded from 100 per cent foreign ownership legislation," she added.