100 PER CENT FOREIGN OWNERSHIP OF MAINLAND COMPANIES IN THE UAE
20 May 2021
In November 2020, the UAE Government announced a landmark amendment to the Federal Law No. 2 of 2015 on Commercial Companies (“the Commercial Companies Law”). These amendments to the Commercial Companies Law permitted foreign investors to own 100 percent of their business in UAE.
Until these recent amendments, the Commercial Companies Law had restrictions for foreign investors enjoying 100% ownership of commercial businesses in the UAE. A foreign investor was permitted to own only up to 49% of the shares in a Limited Liability Company (“LLC”) in the mainland and foreign businesses operating as a branch office required to have a UAE National as a Service Agent.
According to these amendments, a foreign investor will now be able to enjoy up to 100% ownership of shares in an LLC in mainland UAE. Branches of foreign companies (in certain sectors) will no longer require to appoint a UAE National as a Service Agent.
The amendments also provide that the Committee established by the UAE Cabinet is expected to advise on the list of activities of strategic importance and also the levels of controls necessary to license such companies which practice those activities. As such we expect a Cabinet Decision to be issued with the list of activities having a strategic impact and the extent of restrictions. It is also expected that the government in each Emirate will have the power to issue decisions with regard to foreign ownership independently.
We believe the “Negative List” (which was classified by the authorities in the Foreign Direct Investment Law) will still remain and will not be open for 100 percent foreign ownership and will be subject to restrictions. The Negative list included activities like: banking, insurance, labour and recruitment, oil and gas, telecom, military, commercial agency etc.
While the immediate beneficiaries of these amendments are expected to be new businesses, we expect the authorities to issue guidelines by June 1st for existing investors to convert their current businesses into 100 percent foreign owned. Until further guidance and information is made available, we believe the process of recovering shares from existing local partners will be handled on a case-by-case basis.
These amendments are likely to boost the confidence of international investors and enhance the attractiveness of the UAE as a competitive business hub.
We are closely monitoring this major development and working with the licensing authorities in the UAE to provide you with regular updates.
The above is a brief outline of the amendments that have been announced and a more detailed newsletter will follow once the legislation is published.
Being one of the top law firms in Dubai, James Berry & Associates have qualified and experienced lawyers in Dubai who can assist you by reviewing your LLC’s constituent documents and recommend any changes in line with your requirements and in accordance with the laws and regulations.
To know more contact us.
This is a general guide on the subject matter and should not be construed as specific legal advice.