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New foreign ownership rules go live in the UAE

  • UAE


    Implementation of foreign ownership rules

    The UAE Ministry of Economy announced on 19 May 2021 that the new foreign ownership rules which allow 100% foreign ownership in certain UAE onshore companies would become effective from 1 June 2021. This announcement follows on from the issuance late last year of Federal Law No. 26 of 2020 Regarding the Amendment of Certain Provisions of Federal Law No. 2 of 2015 Regarding Commercial Companies (“Amendment Law”).

    As noted in our previous update on this subject, the Amendment Law overhauled the UAE foreign ownership regime by removing the requirement for onshore companies to have 51% UAE national ownership, except for certain activities of strategic impact (for which a decision is yet to be issued by the UAE cabinet) and subject to any specific foreign ownership limitations that may be imposed by the licensing authorities in each Emirate (in respect of specific licence activities undertaken by onshore companies in that Emirate).

    Steps taken by licensing authorities

    Further to the above announcement, the Departments of Economic Development in Abu Dhabi, Dubai and Sharjah have each commenced taking the necessary steps to permit the implementation of the new foreign ownership rules. We set out below a summary of these steps:

    1. Abu Dhabi

    The Abu Dhabi Department of Economic Development (“AD DED”) has published a list of licensed business activities which may be conducted by onshore companies eligible for 100% foreign ownership. The list includes circa 1100 activities covering a range of sectors including agricultural, industrial, healthcare, construction and contracting, and service sectors. Although the list does not currently include any “trading” activities, we understand that the AD DED is likely to update and expand the range of activities in the coming period to include such activities.

    2. Dubai

    The Department of Economic Development in Dubai (“Dubai DED”) has also published a list of licensed business activities which may be conducted by onshore companies eligible for 100% foreign ownership. These predominantly cover industrial and trading activities. Although “professional” activities do not appear to have been included in the Dubai DED’s list, we understand that onshore companies conducting such activities may be eligible for full foreign ownership on a case-by-case basis with Dubai DED approval. In addition to the list of permitted activities, the Dubai DED has also issued a list of restricted activities in respect of which foreign ownership limitations will continue to apply. This includes banking, investment, financial brokerage, insurance, telecommunication and broadcasting related activities.

    3. Sharjah

    Based on information released in the local press on 2 June 2021, the Department of Economic Development in Sharjah (“Sharjah DED”) seems to have taken the same approach as the Dubai DED by permitting 100% foreign ownership in companies that carry on trading in industrial activities. However, we are still awaiting official confirmation from the Sharjah DED on whether it will issue its own list of permitted activities.

    Whilst there may be differing approaches between the Emirates in relation to specific categories of activities or sectors that are open for 100% foreign ownership, the steps taken by the licensing authorities in the UAE will be welcomed by foreign investors who have been anxiously awaiting implementation of the Amendment Law. In the coming period, we expect there will be further clarity from the licensing authorities in respect to what additional areas or sectors may be included in each Emirate’s respective list of permitted activities.

    Our team is constantly monitoring these developments and we will issue further updates as appropriate. In the meantime, we look forward to assisting clients on reviewing their current structures in light of the new foreign ownership regime and how new or existing businesses may benefit from the rules.

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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