UAE to allow 100% foreign business ownership: Key points to note

The UAE announced on Monday that foreign nationals will now be allowed to own 100 per cent of commercial companies within the country, eliminating the need for a UAE national to hold the majority share.

The changes made to federal law No. 2 of 2015 of the Commercial Companies Law are expected to take effect from December 1, 2020.

The move is anticipated to bring about a fundamental change in how business is conducted in the UAE and attract more foreign investors.

Read: Foreign nationals permitted 100% business ownership in the UAE

In a note, law firm BSA Ahmad bin Hezeem and Associates highlighted some of the key points relating to the development:

* There will no longer be a need to have an Emirati national as a majority shareholder (51 per cent) in onshore companies, nor will the company need to have a UAE national or local company as its registered agent.

* A major impact is expected on the liquidity of the local capital market, as companies wishing to go public can now sell up to 70 per cent of their shares in an IPO, instead of the previously applicable limit of 30 per cent.

* The changes will not be applicable to strategically important sectors, such as oil and gas exploration, utilities and transport, as well as to state-owned entities.

* Local authorities such as the Department for Economic Development will be able to regulate participation of Emiratis in companies.

* Fifty-one articles of the Commercial Companies Law are to be amended to facilitate the changes and new articles will be added. Most of the changes are expected to relate to limited liability companies (LLCs) and joint stock companies.

* Federal law by Decree No. 19 of 2018 regarding Foreign Direct Investment is expected to be superseded by these changes, hence, the FDI Law is expected to be repealed.

Authorities are expected to release further guidelines on how the new changes will be applied in practice.

“Following an announcement regarding a series of changes to the UAE’s laws on November 7, 2020, relating to personal status, cohabitation and alcohol consumption (among other related topics), the above changes to the Commercial Companies Law will hopefully enhance the UAE’s attractiveness for investment and business growth,” BSA said in a statement.

Also read: Sweeping changes to UAE laws on inheritance, alcohol consumption, cohabitation and honour crimes