His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, issued a decree stating that foreign investors can fully own local businesses without the need for an Emirati sponsor. The new legislation replaces the Commercial Companies Law (CCL) No. 2, passed in 2015.
Prior to this, only up to a maximum of 49 per cent ownership was allocated to foreign shareholders in a ‘limited liability company’ (LLC), operating as a mainland UAE business. As per the law, a 100 percent Emirati-owned company or individual was required to hold the remaining 51 per cent share. The amended law allows companies to be fully established without the need for a UAE national involved in the ownership.
Despite the long-awaited reform, a few business sectors are exempt from the FDI law, including energy and hydrocarbons, telecommunications and transport. The law will also not apply to those companies that are either wholly-owned by federal or local governments or their subsidiaries.
Nevertheless, the UAE can now welcome a boost of foreign direct investment that will benefit and revive the economy with fresh business ideas and opportunities. Local and established UAE businesses will also benefit from the enhanced competition as they improve the quality of their products and how they deliver them to the market. As two of the leading, most powerful financial hubs in the world for businesses, Dubai and Abu Dhabi will flourish under the new international influx of trade.
The Foreign Direct Investment law was first adopted in September 2018 through Federal Legislative Decree No. 19 of 2018 and was followed up with an ensuing resolution by the UAE Council of Ministers No. 16 of 2020 in March 2020.
The UAE Cabinet Resolution in March 2020 determined a ‘Positive List’ of sectors and economic activities permitted under the FDI law. It further outlined that in companies outside free zones, the percentage of ownership is 100 per cent. This approval, however, remained subject to certain criteria being satisfied.
In recent years, foreign nationals and companies could acquire the remaining stakes on a case by case basis, but this varied between individual Emirates. Now, the highly-anticipated 100 per cent ownership by licensed and registered foreign businesses in the UAE is allowed according to Cabinet Resolution No. 16 of 2020.
What does it mean for the UAE?
UAE Minister of Economy, Abdullah bin Touq Al Marri, stated that the amendment is an additional step in a series of efforts that the UAE is taking to strengthen the national economy. It will also support the country in preparing for the future by developing commercial and investment opportunities, in line with the current and rapid economic changes taking place in the global economy.