What’s new?
June 2021 marks the implementation of the amendments to the UAE Commercial Companies Law (CCL) in respect of foreign ownership. The CCL was amended to, among other things, permit foreign ownership of a limited liability company subject to restrictions imposed by the Department of Economic Development (DED) in each Emirate and a federal decision limiting foreign ownership in companies carrying on activities with a ‘strategic impact’. Further information on the amendments to the CCL can be found here.
To date, only the Abu Dhabi and Dubai DEDs have materially responded to the foreign ownership changes. The Abu Dhabi DED has published an extensive list of cross-sector activities eligible for 100% ownership (more information can be found in our previous Structuring Alert here); the Dubai DED has confirmed that a similar list of activities will be forthcoming.
Neither DED has provided confirmation of the nature and extent of restrictions that will be imposed. There are, however, indications that the Dubai DED and the Abu Dhabi DED may take different approaches in this regard.
What we say
The launch of the amendments to the CCL in respect of foreign ownership marks a historic and exciting change to the UAE’s business landscape. For investors and existing and future UAE business owners, the changes have the potential to give them greater autonomy and control over their business performance, output and governance. For the UAE, the changes are anticipated to improve the ease of doing business, enhance economic competitiveness and drive foreign investment.
It is hoped that the pathway to achieve increased or complete foreign ownership will become clearer once more detail is provided by:
- the Federal government on the activities deemed to have ‘strategic impact’; and
- the DED’s in each Emirate on what, if any restrictions will apply to companies undertaking activities listed as eligible for increased foreign ownership;
An indication from sector-specific regulatory bodies (such as the newly created Supreme Council for Financial and Economic Affairs) on the implication of increased foreign ownership on the eligibility of companies to obtain their approval to conduct business will be particularly important to enable companies to assess the relative merit of increased or complete foreign ownership.
Team M/HQ is monitoring.
While waiting for further details on the foreign ownership rules, there is an opportunity for companies to update their memorandum of association to align the provisions with the amended CCL (particularly in the relation to the procedure for convening and holding a general assembly). This is required to be completed before 2 January 2022. However, our latest information is that the Notary Public is now rejecting the notarisation of memorandums of association that does not contain the updated provisions. Further information about these changes to the CCL can be found here.
See our publication: Increased foreign ownership in mainland entities – Preparing for the transition
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