A new Foreign Direct Investment (FDI) law (‘FDI law’) allowing 100% foreign ownership of companies in the UAE has come into force after being published in the UAE Official Gazette recently.
The FDI law looks to relax the restrictions on foreign ownership in the UAE, reducing the need for companies to have at least a 51% share owned by a UAE national or UAE-owned company. It introduces the framework under which the UAE Cabinet will allow foreign ownership levels to increase and also sets out details of the process that foreign investors will need to follow should they wish to apply to own more than the existing maximum share.
The law does not explicitly state which sectors will benefit from the relaxation of the majority shareholder requirement, but it is expected that the factors taken into consideration will be focussed on the business’ ability to create employment opportunities, support technological advances and have the strategic means to boost the economy. Sectors restricted from the 100% ownership will appear on a ‘negative list’ and include:
- Oil exploration and production
- Investigation, security, military (including manufacturing of military weapons, explosives, dress, and equipment)
- Banking and financing activities
- Pilgrimage and Umrah services
- Certain recruitment activities
- Water and electricity provision
- Fishing and related services
- Post, telecommunication and other audio visual services
- Road and air transport
- Printing and publishing
- Commercial agency
- Medical retail (including pharmacies)
- Blood banks, quarantines and venom/poison banks.
A separate ‘positive list’ covers sectors which are open to greater foreign investment, but specific details are not mentioned in the law.
By relaxing the restriction on foreign ownership in specific and predefined sectors the interests of UAE investors will not be disregarded. The ultimate result will be to boost private and foreign direct investment throughout the UAE, particularly in non-oil sectors and the new rules should have a positive economic impact on the UAE as a whole.
These changes to the FDI Laws in UAE are part of an ongoing effort across the GCC to establish an environment which is friendlier to foreign investors and which we expect to evolve further over the coming months. Of course some details require further clarification but the general movement is to be welcomed. At Links Group we continue to monitor these changes and already incorporate terms in our company setup agreements to ensure that our clients have full freedom to take advantage of any applicable changes as and when they are able. Our primary focus as always is to ensure that our clients are able to operate with full benefit of ownership and control of their operations whilst remaining in compliance with the law as it evolves.
Over the coming months we will continue to publish updates on the changing foreign direct investment situation in the UAE as it develops. In the meantime if you have any questions at all about your existing UAE entity or would like to set up a new company in the region please contact Nick Edmunds on firstname.lastname@example.org or get in touch with your existing Links Group contact.