The UAE government has announced that the long-anticipated 100% foreign ownership of onshore limited liability companies will be permitted starting 1st June 2021.
The implementation follows the introduction of amendments to the Federal Law No. 2/2015 on Commercial Companies (“CCL”) in December 2020 which, among other changes, removed the statutory requirement for a limited liability company to be 51% owned by a UAE national.
Companies carrying out economic activities deemed by the UAE government to have a ‘strategic impact’ will remain subject to some level of Emirati participation. A UAE federal government committee has been created to identify the list of activities having ‘strategic impact’ and the appropriate controls.
Companies not undertaking economic activities of ‘strategic impact’ may nevertheless be subject to some degree of Emirati participation requirement in the share capital and/or the board of directors as determined by the Department of Economic Development in each Emirate.
What we say
The announcement is fantastic news for both new entrants to the market and long-time operators.
It also accelerates the needs for companies to take action to review their existing structures and contractual arrangements to ensure that they are able to smoothly transition to 100% ownership.
This is a particularly opportune time for structural review and implementing optimization strategies, while the market waits for final guidance on:
- which activities will be categorized as having ‘strategic impact’;
- what conditions will be imposed by the Department of Economic Development in each Emirate on companies not carrying out activities having a ‘strategic impact’; and
- the practical mechanisms for full implementation of the regulatory changes.
Aside from potential structural improvements, all companies will also need to update their constitutional documents before 2 January 2022 to bring them into line with the related changes to corporate governance procedures. Introduced in December 2020 as part of the amendments to the CCL, these changes include the procedures for holding and convening a general assembly. Failure to do so is likely to attract penalties.
M/HQ is closely monitoring updates on the implementation of foreign ownership changes and will provide regular updates as further details are released.
See our publication: Increased foreign ownership in mainland entities – Preparing for the transition
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