The UAE cabinet on 2nd July, 2019, has approved the sectors and economic activities eligible for 100% foreign ownership in the Emirates. The decision was chaired by His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai. The cabinet has approved a total of 122 economic activities across 13 sectors to be eligible for up to 100 percent foreign ownership. These sectors include renewable energy, hospitality, space, communication, information, manufacturing, and agriculture.
The initiative will provide investors with an opportunity to acquire many shares in several economic activities including the production of solar panels, green technology, power transformers, and hybrid power plants. Areas of foreign ownerships will also include transport and storage, which allows investors to own projects in the field of e-commerce transport, logistics, supply chain, and cold storage for pharmaceutical products. While this is a centralized decision, each of the seven Emirates will have the right to regulate the permitted level of foreign ownership in their individual Emirate.
The more liberalized approach is intended to attract more foreign investment into the UAE, create jobs, and make the Emirates a competitive market globally. While the new guidelines allow foreign ownership in the regions on the Positive List, it also disallows foreign ownership in others. These unqualified sectors are on what is known as the ‘Negative List.’ Foreign shareholders hoping to own higher percentages in a particular industry sector that is on neither list may still apply for sanction according to the procedures set out in the law.
Here are the sectors which are on the Negative list:
- Exploration and production of petroleum materials
- Investigations, military, security, explosives and military equipment, manufacturing of arms, devices, and clothing
- Banking and financing activities, dealing with cash, and payment systems
- Insurance facilities
- Hajj (pilgrimage) and Umrah services, providing employment and staffing services for workers and domestic workers
- Water and electricity facilities
- Services related to fisheries
- Postal services, audio and video services, and telecommunications services
- Land and air transport services
- Printing and publishing services
- Commercial agents’ services
- Medical retail such as private pharmacies
- Blood banks, quarantine centers, and venom
With reforms like these, UAE is set to bring more foreign investment in the country. This move will facilitate more investment by the expat community in the UAE and more importantly, will encourage many more investors to bring fresh capital into the country. The decision will reiterate the UAE’s position as a haven in the investment community.
The publication of the Positive List is likely to change the foreign investment scene in the Emirates, particularly to those wanting to invest a higher majority in UAE Onshore companies, or to foreign investors looking to rearrange their prevailing shareholding arrangements in the UAE to own a controlling majority, if not all the stocks, in UAE Onshore companies. The anticipation is that foreign investors will find the UAE a more appealing investment hub, particularly as we approach Expo 2020 Dubai.
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Who is an Ultimate Beneficiary Owner (UBO) in the UAE?
The UBO is defined as the individual who directly controls or owns the license, whether indirectly or directly, through a minimum of 25% of the capital.
On which companies the UBO decision cannot be applied?
The companies in financial free zones and the ones which are indirectly or directly owned wholly by any government of the country or an Emirate.
What all needs to be maintained by the companies that are subject to the UBO decision?
They need to maintain compliant registers and file the details of their UBO without delay to their competent licensing authority.
What all should be included in the compliant registers in the UAE?
A register of the UBOs and a register of the shareholders.
What is the penalty in case of any breach in the UBO decision?
A fine of up to AED 100,000 and license suspension.