Calling all foreign investors to UAE
The latest reform in the UAE for overseas business investors is that they will be legally permitted to take 100% ownership of business from 1st December 2020. This new piece of legislation is now known as the Foreign Direct Investment Law and will replace the existing Commercial Companies Law (CCL) No 2 of 2015.
Under the current CCL, business ownership by foreign investors is capped to a maximum of 49% for limited liability companies in the UAE. In turn, this allows for 51% ownership by an Emirati individual or 100% Emirati company to hold most of the shared ownership in these companies.
Ultimately, this new law will transform the investment dynamic in the UAE, shifting the balance of business ownership into the hands of overseas shareholders. The new law no longer requires Emiratis as majority sponsors because these overseas holders are now eligible to hold 100% ownership of such companies. In addition, as part of this Foreign Direct Investment Law, this will not only apply to limited liability companies, but to several other categories of business licences. Thus, this will significantly maximise the scope of foreign investment in the UAE, one of the UAE government’s aims.
The grounds behind this legislative reform is to encourage competitiveness by introducing a more fecund environment for these investors.
The only prerequisites for benefitting from this law is that certain sectors must be enlisted on the ‘Positive List’ provided by the UAE Cabinet Resolution, companies must be outside the free zone and a strict line of criteria must be satisfied. What must also be noted is that local authorities still hold certain powers to set specific standards for onshore companies either solely owned by foreign investors or if they are majority shareholders. This includes laying down conditions for the configuration of onshore companies’ Board of Directors, setting a minimum standard for share capital and so forth.
Now, the only questions that remain uncertain are:
- What are the criteria that need to be satisfied?
- How will this piece of legislation be implemented?
It is anticipated that new guidance will be released on this over the course of six months once the new law has taken effect, meanwhile the foreign investment and ownership changes are being actioned.
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