The UAE Commercial Companies Law (the “CCL”) has been revised to allow companies incorporated in the UAE under the CCL, sometimes known as “onshore” companies (“Onshore Companies”), to have 100 percent foreign ownership. The foreign ownership change will take effect on June 1, 2021, according to the UAE Ministry of Economy.
Article 10 of the CCL has been amended to remove the requirement that one or more UAE residents, whether natural or legal persons, hold at least 51 percent of the shares in an Onshore Company. Foreign ownership limitations are a major source of worry for foreign investors, particularly private equity and venture capital funds, and they increase complexity and hurdles to Onshore Company investments. Foreign investors can now own and govern Onshore Companies without the use of nominees or similar structures, saving time, money, and legal risk.
Each Emirate’s Department of Economic Development (“DED”) will list the commercial activities that are available to 100 percent foreign ownership. The Abu Dhabi Department of Economic Development (DED) has published a list of more than 1,100 license operations that can be carried out by a foreign-owned Onshore Company across a variety of sectors. While “trading” is not now on the list, the Abu Dhabi DED may expand the list of license activities to include it in the future. The Dubai Department of Economic Development (DED) has revealed that its list would comprise over 1,000 commercial and industrial license activities.
Foreign ownership restrictions continue to apply to enterprises engaged in strategic operations, as approved by the UAE Council of Ministers. Companies engaged in such activities will be subject to UAE Council of Ministers-determined local ownership and board membership requirements.
The modified CCL is expected to improve the UAE’s reputation as a worldwide investment destination. It remains to be seen whether the UAE’s free zones will lose their appeal to foreign investors as a result of this.
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