UAE -FOREIGN DIRECT INVESTMENT (FDI) LAW -ALLOWS 100% OWNERSHIP OF BUSINESSES FOR FOREIGN NATIONALS FROM DECEMBER 1,2020

The long-anticipated and widely discussed Foreign Direct Investment Law, which will have game-changing implications on the investment landscape of the nation, was approved by the President, His Highness Sheikh Khalifa bin Zayed Al Nahyan. The long-awaited 100 per cent ownership by foreign nationals of companies licensed and registered in the UAE is allowed as per Cabinet Resolution No. 16 of 2020. In recent years, individual emirates allowed foreign national owned companies to acquire the remaining stakes on a case by case basis. The latest amendment thus extends the scope of that significantly. The new law amended 51 articles and added new ones, mostly focusing on the regulation of provisions of establishing companies with limited liability shareholding. The amendments exempt expatriate investors from the minimum percentage ownership of UAE nationals. His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, announced the amendments to the law, noting that the UAE now enjoys a fertile legislative environment for the establishment of businesses in order to enhance the UAE’s competitiveness. As per the Commercial Companies Law, Law No. 2 of 2015, foreign shareholders were limited to owning a maximum 49 per cent in a ‘limited liability company’ (LLC) operating as an onshore UAE business. This requires an Emirati individual or 100 per cent Emirati-owned company to hold the balance 51 per cent share as a local sponsor. The amended law allows natural and legal persons to establish companies without the need for a specific nationality. The law, however, will not apply to some companies that are excluded based on decisions by the Cabinet and those that are either wholly-owned by federal or local governments or their subsidiaries. The said resolution names 122 economic activities in the Positive list. These activities are permitted for 100 per cent foreign ownership. Under the positive list there are 3 categories in which an investor can launch its business. They are:

• agricultural sector
• manufacturing sector
• services sector.

Scope of the law The law applies only on foreign nationals who establish investment projects on the UAE’s mainland and meet the criteria of the minimum share capital required for each FDI permitted activity. Other conditions include the ability of the investment project to:

• use modern technology
• bring high added-value
• contribute in research and development
• meet the requirements of licensing entities in the UAE.

FDI law does not apply on Emirati investors or on investment projects that are established in the financial or non-financial free zones. Share Capital Requirements Depending upon the sector and activity of the business, share capital requirements can vary between 2 and 100 million AED. Sectors, for example, related to Agriculture , will require a Share Capital of 7.5million AED. For other sectors such as Manufacturing, Share Capital requirements vary depending on the type of manufacturing activity. For example, the Manufacture of electrical equipment would require 20 million share capital, whereas Manufacture of Machineries would require 100 million AED share capital.