Out-Law Guide | 01 Mar 2022 | 2:55 pm | 3 min. read
Historically, UAE law provided that foreign investors could only own up to 49% in a UAE mainland company, subject to limited exceptions. At least 51% of the shares in a UAE mainland company had to be owned by one or more UAE nationals, or a company which was itself wholly owned by one or more UAE nationals. In addition, the conduct of certain commercial activities (such as real estate services, commercial agencies, car rental, agriculture services, fishing, Hajj & Umra services and labour supply) had been reserved exclusively for UAE nationals and, accordingly, foreign investors had historically been restricted from investing in companies that carry out such activities. This regime was partially relaxed by the introduction of the Foreign Direct Investment Law (the FDI Law). The FDI Law was subsequently repealed pursuant to the amendments to the CCL.
The amendments to the CCL now permit 100% foreign ownership of certain onshore companies.
The change follows the publication of amendments to the CCL on 30 September 2020, which generally removed the requirement for a UAE national to own at least 51% of the shares in the capital of a UAE company. The amendments also removed the requirement for branches of foreign companies in the UAE to appoint a UAE national agent, for most activities.
The UAE government is taking foreign investment seriously and encouraging diversification in the economy
In certain emirates, Departments of Economic Development (DED) have now started issuing their lists of approved activities and requirements for foreign shareholders. The Abu Dhabi DED has issued a list of more than 1,100 activities, and the Dubai DED has listed more than 1,000 activities. Both lists are heavily focused on commercial and industrial activities.
Wholly foreign-owned companies will not be subject to higher fees or have greater guarantee or share capital requirements than would be the case for a UAE-owned or part-owned company. Subject to certain other approvals, the CCL also grants discretion to the relevant DED in each emirate to permit 100% foreign ownership in other types of activities. Applications of this nature will be considered on a case-by-case basis.
These changes to foreign ownership rules are applicable equally to both new and existing companies, as long as they are carrying out activities which fall under the ‘positive lists’ that are issued by the relevant DED in each emirate.
As mentioned above, the CCL now allows 100% ownership of onshore companies by foreign investors, unless a restriction applies. Those restrictions apply by way of either a Cabinet resolution restricting foreign ownership in companies carrying on activities with a ‘strategic impact’; or regulation at an emirate level by the DED.
The UAE Cabinet has issued Resolution No. 55 of 2021 in relation to strategic impact activities (the Strategic Impact Resolution). The Strategic Impact Resolution contains information relating to foreign ownership in companies which carry out activities with a 'strategic impact'. Those activities are:
The Strategic Impact Resolution sets out the process for foreign investors who wish to carry out one of the above ‘strategic impact’ activities apart from services in relation to fish traps, which is still subject to 100% national ownership. In general, the process is as follows:
The UAE government is taking foreign investment seriously and encouraging diversification in the economy. The amendments to the CCL is evidence of this and is a positive step towards increasing diversification across various sectors and promoting the UAE's ambition to become a global leader in attracting foreign investment.
In light of the amendments to the CCL, companies are advised to take future-proofing actions in anticipation of the changes ahead. For example, companies should consider:
Co-written by Alexandra Aikman of Pinsent Masons.