With a view of attracting investment into an economy reeling from the coronavirus pandemic and a decline in oil prices, the government of the UAE announced by the decree today that foreign investors can fully own local companies without the need for an Emirati sponsor. The UAE’s investment community has welcomed the initiative, which will effect from December 1, 2020. According to experts, the new law, which amends Law No. 2 of 2015 on companies and their shareholding, will create significant growth prospects and attract more foreign direct investment.
The long-anticipated and hugely discussed Foreign Direct Investment (FDI) law, which will have game-changing implications on the investment landscape of the country was approved by the President, His Highness Sheikh Khalifa bin Zayed Al Nahyan.
"The UAE now enjoys a fertile legislative environment for foreign direct investors in order to enhance the nation’s competitiveness"
What Does the Law Further Say?
As per the new FDI law, many categories of business licenses will no longer require Emiratis as sponsors with 51% shareholding rights from December 1. The FDI law, which was adopted in September of 2018 through Federal Legislative Decree No 19 of 2018 and an ensuing resolution by the UAE Council of Ministers No 16 of 2020 in March 2020, amends Commercial Companies Law (CCL) No 2 of 2015.
Under the current CCL, foreign shareholders are restricted to own only up to a maximum of 49% in a ‘Limited Liability Company’ (LLC) operating as mainland UAE business. The law, therefore, needs an Emirati individual or 100% Emirati-owned company to hold the balance 51% share as a local sponsor.
The new law has amended 51 articles of CCL and added new ones, mostly focusing on the regulation of provisions of established companies with limited liability shareholding.
However, several sectors deemed strategic are exempt from the new rules announced today. These include energy and hydrocarbons, telecommunication and transport.
Due to the announcement of this law, more new entrepreneurs will expand their activities in Abu Dhabi, Dubai, and other Emirates. More established businesses will consider the Emirates as their base for the GCC region and beyond. The impact should not only be visible on the investment side. More broadly, real estate should also benefit from new skilled workers in the country; the retail sector would see more visitors; the hospitality industry would organise more events and welcome more guests. In other words, the entire eco-system of the UAE is gaining importance.
How can we help?
We at Commitbiz are a business consultancy firm with an experience of more than 14 years in this field. Right from business incorporation to office space, we cover it all. The new law will bring down the steps to set up your business in the UAE, and we can make the process even faster and hassle-free for you.
Get in touch with us today - we’d be happy to assist you.
When did the cabinet approve the sectors with UAE foreign ownership?
2nd July 2019.
When will the law with respect to foreign ownership be implemented?
1st June 2021.
How will the firms work who are wishing to become joint-stock companies?
They can sell through IPOs, a maximum of 70% compared to 30% earlier.
What are the disadvantages for the sectors on the ‘negative list’?
The government disallowed foreign ownership for these unqualified sectors.
Which companies got affected after this law was implemented?
The LLCs and the other commercial onshore companies.