On 27 September 2020 the UAE enacted Federal Decree Law No. 26 of 2020 (Amendment Law) amending Federal Law No. 2 of 2015 regarding Commercial Companies (CCL). The Amendment Law came into effect on 02 January 2021, except for the provisions relating the change to foreign ownership that come into force six months later. The Amendment Law introduced changes to 51 provisions, and companies have until 01 Jan 2022 to comply. Thereafter, non-compliance will attract fines of AED 100 per day.
The most significant changes are:
- Amendment Decree, repeals the 2018 FDI Law (including the previously circulated Positive List, Negative List and indicated requirements)
- The ability to have 100% foreign ownership for onshore businesses, except for those businesses operating in sectors of strategic importance (to be determined by a committee appointed by the UAE Cabinet, and the requirements for each strategic sector will be set at an Emirate-specific level by the local authority)
- The repeal of Article 329, thereby removing the requirement for UAE local/national agent (NSA) to be appointed for Foreign Branches
- Prescribed requirements for increased corporate governance and the role of the local licensing authority in this regard
- Changes to requirements for calling General Assemblies (GA)
- 10% shareholder can now call for GA and notice for a GA is now 21 days. If the GA is not quorate then the meeting to be adjourned to a date that is not less than 5 days and not more than 15 days after the date of the first meeting.
- Inclusion of dispute resolution clause in the Memorandum of Association (MOA)
- Public Joint Stock Companies
- (a) can float 70% of share capital (increase from previous limit of 30%) and
- (b) opens up board seats previously reserved for Emirati nationals.
The list of commercial activities considered to have a strategic impact on the UAE’s economy (Strategic Impact List) and the related licensing controls to be imposed on companies undertaking commercial activities in Strategic Impact Listed sectors is not yet available.
Nevertheless, Abu Dhabi Department of Economic Development (ADED) has published a list of 1,105 commercial and industrial activities that will enable limited liability companies operating within the published sectors to have 100% foreign ownership as of 01 June 2021, the list can be accessed here. Dubai Department of Economy (DED) has also announced that 1,000 commercial and industrial activities will be available for 100% foreign ownership as of 01 June 2021 – the list of activities can be found here. To put this into context, DED offers a total 2,300 commercial and industrial activities, so approving 1,000 of these for 100% foreign ownership is significant. In both cases, DED and ADED have confirmed that the activities are not subject to additional capital requirements.
It is anticipated that once the Cabinet Resolution defining the Strategic Impact List is published, the Emirate level authorities will issue guidance on the applicable requirements imposed in each respective Emirate, for companies operating in each of the sectors. We will keep you updated on any developments in this regard.
How does this impact my business?
It may be that you have multiple activities on your business license and not all qualify for 100% foreign ownership, then, you may wish to consider whether the non-qualifying activities are expendable and we can assist with updating your MOA and license. If not, then we can assist with clarifying the position with the applicable authority to better understand what your options are.
If you wish to proceed with the application then we can assist you with the entire process from preparing and filing the documents (to include all translation and legalization requirements whether in your home jurisdiction or the UAE) to obtaining the updated licenses.
If you are a Foreign Branch, then we can assist you with the termination of the National Service Agent Agreement as well as removal of the NSA from your licenses and registrations.
All companies must update their constitutional documents to be compliant with the Amendment Law by 1 January 2021. We can assist with the amendments to your MOA, getting your corporate documents in order, filing of UBO Registers, acting as your appointed Corporate Service Provider, providing Company Secretary services to include maintaining your corporate documents to ensure continued compliance.
How can Links Group help?
- You may prefer to maintain a UAE partner or service provider to support your operations, compliance with corporate governance and/or economic substance, and provide outsourced back office services such a WPS compliant payroll, HR consultancy, visa services, license and entity maintenance and many other services specific to operating in the region. If so, we would be happy to arrange a meeting (virtual or in person) to discuss the range of ways in which we can add value and support your objectives in the UAE.
- Should you want to enquire whether your license activity is one of the 1,000 approved by DED or is included in the list published by the ADED then we can assist with making the necessary enquiries and mapping out the process to achieve 100% foreign ownership.
- If you qualify and would like to transfer away from your existing local partner, then we can assist you with obtaining the initial approvals; preparing the paperwork; attending to translating, legalisation, attestation and notarisaton (as applicable) of the documents; and thereafter processing the license and establishment card updates.
- Help with removal of the NSA from Foreign Branch licenses.
- If you need to update your MOA, file your UBO Register, or require assistance with compliance with and/or continued compliance with the Amendment Law and other applicable laws and regulations, then we can help. Links Group is a licensed and experienced corporate service provider (CSP) operating in the UAE since 2002 and can offer support with ad hoc government liaison as well as act your appointed CSP and/or company secretary to name but a few ways in which we can support you.
For more information or if you have any queries related to this update please do not hesitate to get in touch with us on firstname.lastname@example.org or +971 (0) 4 446 3900.
Disclaimer: All information provided in this article was correct at the time of publishing on 31 May 2021 .