Out-Law / Your Daily Need-To-Know

UAE allows 100% foreign ownership of onshore companies

Out-Law News | 16 Jun 2021 | 2:02 pm | 2 min. read

The United Arab Emirates (UAE) has implemented a legislative change that permits 100% foreign ownership of certain onshore companies.

The change follows the publication of amendments to the UAE Commercial Companies Law on 30 September 2020, which removed the requirement for a UAE national to own at least 51% of the shares in the capital of a UAE company, subject to some restrictions. The amendments also removed the requirement for branches of foreign companies in the UAE to appoint a UAE national agent, for most activities.

The Department of Economic Development (DED) in certain Emirates have now started issuing their lists of approved activities and requirements for foreign shareholders. The Abu Dhabi DED has issued a list of 1,105 activities, with 1,000 activities listed by the Dubai DED. Both lists are heavily focused on commercial and industrial activities.

The Ajman DED has confirmed that it has approved over 1,000 activities for 100% foreign ownership, and the Sharjah DED said it would implement its full foreign ownership policy in June 2021, which will also include mainly commercial and industrial activities.

“The changes to the UAE Companies Law and the publication of these positive lists represents a big change in the UAE’s foreign ownership restrictions,” said corporate law and M&A expert Mohammad Tbaishat of Pinsent Masons, the law firm behind Out-Law. “Although this stops short of allowing 100% foreign ownership across the board, it still represents a significant opportunity to many foreign investors and companies looking at expanding their business to the UAE. It will be interesting to see how these lists evolve over time and, ultimately, whether 100% foreign owned companies will be treated differently.”

The changes to foreign ownership rules are applicable equally to both new and existing companies, as long as they are carrying out activities which fall under the relevant ‘positive lists’.

Corporate law expert Christopher Neal of Pinsent Masons said: “While these changes do not automatically entitle existing UAE companies to transition to 100% foreign ownership, we expect many of these businesses will be giving this careful consideration. Whether or not an existing business will be able to transition to 100% foreign ownership will, to a large extent, depend on their relationship with their UAE shareholder and what existing written agreements are in place between the parties to facilitate this”.

Some sectors and activities are specifically excluded from 100% foreign ownership, including commercial agencies; ‘strategic activities’, including the military, banking, insurance and re-insurance, and telecommunication sectors; and professional activities such as consultancies. In addition, branches of UAE freezone companies are still required to appoint a UAE national agent.

In terms of a company’s incorporation, wholly foreign-owned companies will not be subject to higher fees or have greater guarantee or share capital requirements than would be the case for a UAE-owned or part-owned company. The law also grants flexible discretion to the relevant DED in each Emirate, and each DED will be able to grant exceptions in relation to the formation of companies carrying out projects that the local authority considers significant and which would support investment and value to the UAE market.

Tbaishat said there were still questions around the changes and how they would be implemented by the relevant authorities, which might take some time to be clarified.