Dubai: The UAE is allowing expatriate investors 100 per cent ownership with effect from December 1, 2020. The move was in line with a federal law issued by President His Highness Sheikh Khalifa Bin Zayed Al Nahyan on November 23, 2020.
But what does the law mean for business owners and entrepreneurs and when will the changes come into effect? Here is all you need to know.
Hani Naja, Partner Corporate and Commercial at Baker McKenzie Habib Al Mulla, spoke to Gulf News about the new law and the changes that had already been implemented over the years, leading up to the recent announcement.
“The push for a relaxation in foreign direct investment in the UAE started a number of years ago. The first major change was in September 2018, with the issuance of the Foreign Direct Investment Law (FDI Law), which opened up the UAE market to foreign investors in certain sectors of the economy. The FDI law was then followed by the announcement on July 2019 of a Positive List of 122 business activities where foreign investors can own up to 100 per cent of the shares in an onshore company. The Positive List focused on the manufacturing, agricultural and services sectors,” he said.
“The second major change came in November 2020 with the amendment of the Commercial Companies Law (CCL), which was the main law limiting foreign ownership to 49 per cent. The amendment of the CCL rendered the FDI Law obsolete as the UAE moved from a principle of continued restriction but with a Positive List (under the FDI regime), to a complete liberalisation across all sectors and activities and emirates with a soon-to-be-announced list of strategic sectors where limited restrictions may apply. The amendments were put into effect on December 2, 2020, and the list of strategic sectors under the new Article 10 of the CCL should be issued and brought into effect six months after,” he added.
The amendments were put into effect on December 2, 2020, and the list of strategic sectors under the new Article 10 of the CCL should be issued and brought into effect six months after.
Key takeaways
According to Naja, the key takeaway of the revised Commercial Companies Law is that foreign shareholders (including single shareholders) can own up to 100 per cent of any company in the UAE, except special-status companies with government ownership and companies operating the strategic sectors referred to above.
“Also, branches of foreign companies do not need a UAE national as the local service agent anymore,” he added.
James Swallow, Commercial Director of PROPartner Group, a company formation and support services provider in the UAE, also spoke about it.
“[The amendment] now paves the way towards the gradual loosening of foreign ownership restrictions in UAE and potentially allows expats and foreign companies to own 100 per cent of the shares in a mainland Limited Liability Company,” he said.
[The amendment] now paves the way towards the gradual loosening of foreign ownership restrictions in UAE and potentially allows expats and foreign companies to own 100 per cent of the shares in a mainland Limited Liability Company.
He also added that the detailed law, which has been published in the official gazette, included details of the changes that will affect limited liabilities companies (LLCs). Some of the important changes, according to Swallow, include:
1. Removal of the requirement for a foreign branch office to appoint a UAE national service agent (NSA) with effect from March 30, 2021.
2. All companies in the UAE (including limited liability companies) will be subject to corporate governance standards to be issued by the government at a future date.
3. Changes to the process of convening and holding general meetings including:
a. Increase in the notice period to 21 days for holding a meeting;
b. One or more shareholders holding not less than 10 per cent of the share capital may request a general meeting to be called; and
c. Allowing for meetings to be held and called using modern means to technology.
Positive list of economic activities
Another change that business owners need to be aware of is the ‘positive list of economic activities’, which are eligible for the 100 per cent ownership. Saraa Gheewala, Head of Operations at Virtuzone, a company formation specialist, spoke about how the list of economic activities focused on industrial and manufacturing sectors, with a specific requirement for the paid-up share capital to be within a certain bracket.
“I believe it will help the UAE production economy self-sustain by not only potentially reducing the reliance on imports but, also for the UAE to act as a springboard for wider global exports. The positive list of economic sectors and activities eligible for the 100 per cent ownership are specific. This resolution pertains to 122 business activities out of over 3,000 activities available with Dubai Economy and these activities carry specific paid-up share capital requirements, ranging from Dh7.5million to Dh100million,” Gheewala said.
“The majority of the listed activities are food and agriculture as well as infrastructure and healthcare sectors with few activities in the hospitality management and consultancy realm,” she added.
The majority of the listed activities are food and agriculture as well as infrastructure and healthcare sectors with few activities in the hospitality management and consultancy realm
Positive List of Economic Sectors and Activities
This is the Positive List of Economic Sectors and Activities eligible for Foreign Direct Investment annexed to the Cabinet Resolution No. (16) of 2020
Agriculture sector
1. Seeds Cultivation (Wheat, Corn, Barley, etc.)
2. Growing of leguminous crops
3. Growing of vegetables and melons, roots and tubers
4. Growing of sugarcane
5. Growing of other non-perennial crops
6. Flowers and buds Cultivation
7. Growing of grapes
8. Fruits and Citrus Cultivation
9. Growing of pome fruits and stone fruits
10. Growing of other tree and bush fruits and nuts
11. Growing of oleaginous fruits
12. Growing of beverage crops
13. Growing of aromatic, drug and pharmaceutical crops
14. Support activities for crop production
15. Support activities for animal production
16. Post-harvest crop activities
17. Seed processing for propagation
18. Silviculture and other forestry
19. Support services to forestry
Manufacturing sector
20. Manufacture of food products (except): Manufacture of bakery products, Manufacture of dairy products, Manufacture of prepared animal feeds
21. Manufacture of beverages (except): Distilling, rectifying and blending of Spirits, Manufacture of wines, Manufacture of malt liquors
22. Manufacture of wearing apparel (except:) Tailoring and Sewing of Wearing Apparel, Military Garments Manufacturing
23. Manufacture of leather and related Products
24. Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials
25. Straight or Complex Fertilisers Manufacturing
26. Manufacture of plastics and synthetic rubber in primary forms.
27. Manufacture of pesticides and other agrochemical products
28. Manufacture of paints, varnishes and similar coatings, printing ink and mastics
29. Manufacture of soap and detergents, cleaning and polishing preparations, perfumes and toilet preparations
30. Glues and Prepared Adhesives Manufacturing
31. Manufacture of dyestuffs and pigments
32. Textiles and Leather Finishing Used Chemical Materials Manufacturing
33. Manufacture of photographic plates, films
34. Gelatine and Its Derivatives Manufacturing
35. Essential Oils Manufacturing (Essence)
36. Extracted Natural Aromatic Products Manufacturing
37. Aromatic Distilled Waters Manufacturing
38. Matches Manufacturing
39. Welding Powders and Pastes Manufacturing
40. Manufacture of man-made fibres
41. Manufacture of pharmaceuticals, medicinal chemical and botanical products
42. Manufacture of rubber and plastics products
43. Manufacture of other nonmetallic mineral products
44. Manufacture of basic metals (except:) Manufacture of basic precious and other non-ferrous metals, Casting of non-ferrous metals
45. Manufacture of fabricated metal products, except machinery and equipment except: Manufacture of weapons and ammunition
46. Manufacture of computer, electronic and optical products
47. Manufacture of electrical equipment
48. Manufacture of machinery and equipment n.e.c. except: Tobacco Processing Machinery manufacturing
49. Manufacture of motor vehicles, trailers and semi-trailers
50. Building of Commercial Vessels
51. Ships and Floating Structures Sections Manufacturing
52. Construction of Drilling Platforms, Floating or Submersible
53. Construction of Floating Structures
54. Building of Hovercraft
55. Building of pleasure and sporting boats
56. Manufacture of railway locomotives and rolling stock
57. Manufacture of air and spacecraft and related machinery except: Military Ballistic and Guided Missiles Manufacturing
58. Manufacture of transport equipment n.e.c.
59. Manufacture of furniture
60. Manufacture of musical instruments
61. Manufacture of sports goods
62. Manufacture of games and toys
63. Manufacture of medical and dental instruments and supplies
64. Other manufacturing n.e.c.
65. Repair and maintenance of trains engines
66. Repair and maintenance of ship engines
67. Repair and maintenance of ships
68. Repair and maintenance of trains and railway equipment
69. Maintenance and Repair of Aircraft engines
70. Maintenance and Repair of Aircrafts
Services sector
71. Legal consultancy offices
72. Accounting, bookkeeping and auditing activities; tax consultancy
73. Architectural and engineering activities and related technical consultancy
74. Medical and dental practice activities
75. Veterinary activities
76. Computer programming, consultancy and related activities
77. Scientific research and development
78. Renting and leasing of other machinery, equipment and tangible goods
79. Retail l sale in nonspecialized stores (except cooperative societies)
80. Advertising
81. Market research and opinion polling
82. Management consultancy activities
83. Technical testing and analysis
84. Repair of fabricated metal products, machinery and equipment (except ships, aircrafts and other transport equipment)
85. General cleaning of buildings
86. Photography activities
87. Packaging activities
88. Organisation of conventions and trade shows
89. Specialised design activities
90. Legal Translation Services
91. Translation services, movies and television programmes
92. Publications Translation Services
93. Simultaneous translation services
94. Construction of buildings
95. Civil engineering
96. Electrical, plumbing and other construction installation activities
97. Building completion and finishing
98. Demolition and site preparation
99. Other specialized construction activities
100. Construction and Building or Demolition Machines and Equipment Renting
101. Pre-primary and primary education
102. Secondary education
103. Higher education
104. Other education
105. Sewerage
106. Waste treatment and disposal
107. Pollution Treatment and Environment Protection
108. Hospital activities
109. Other human health activities
110. Hotel Management
111. Restaurant management
112. Creative activities and presentation of arts drama (theater)
113. Music Band
114. Circus
115. Landscape and gardening services
116. Botanical and zoological gardens and nature reserves activities
117. Sea and coastal freight water transport
118. Internal Water Transportation of Goods
119. Commercial Ships Rental
120. Ship Piloting and Towing
121. Marine towing of boats and jet sky
122. Activities of holding companies in intellectual property
What are the 100 per cent ownership options already available to businesses?
While the recent amendment was related to the Commercial Companies Law (CCL), there are other options already available to companies. James Swallow listed the following options:
1. Currently an expat or a foreign company can own a company 100 per cent in a Freezone.
2. In the mainland an expat can set up a Sole Establishment or Civil Business and own this 100 per cent.
3. A foreign company can set up a Foreign Branch Office and this will be 100 per cent owned by the Foreign Company.
4. In addition, there are Freelancer permits that allow expats to own 100 per cent of their business onshore.