In the most consequential regulatory changes in memory to the business regulatory landscape, the UAE has announced the substantial expansion of the scope of 100% ownership of UAE mainland businesses for foreign nationals. The decree, which updates the commercial Companies Law, comes into force on December 1, 2020.
On the tail end of 2018, the UAE introduced an FDI Law opening the door to possible exceptions where the mandatory 51% shareholding of LLCs by UAE nationals or entities wholly-owned by UAE nationals may be lifted. This constituted a major breakthrough in relation to foreign investment rules.
The present announcement goes much further, effectively allowing 100% ownership by foreign nationals of UAE companies undertaking business in all activities but those deemed of ‘strategic importance’. Full or partial Emirati shareholding will remain mandatory for so-called ‘excluded’ activities, the list of which is to be defined by a to-be-formed committee.
What We Say
The news is a fantastic boost for entrepreneurs active regionally and a testament to the robustness of the UAE’s regulatory framework and economy. It is likely to boost foreign direct investment and will avail substantial structuring and costs optimization opportunities.
The immediate impact of the law will have to be evaluated, particularly as to:
- Scope: activities to be excluded will have to be defined
- Full implementation date: regulatory changes often take time to trickle down to registrars; full implementation may be held back by the finalization of the list of ‘excluded’ activities; and
- Potential ancillary conditions: will the appointment of a local agent in lieu of local partner become mandatory? will the announcement fast-track an Emiratization within the UAE’s dynamic SME ecosystem?
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