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7 June 2021
100% Foreign Ownership for LLC Companies in the UAE

The United Arab Emirates (UAE) is ranked amongst the leading countries in the world when it comes to foreign direct investment with an overall ranking of 16 in the world in terms of ease of doing business.

Historically, as required under Article 10 of the Commercial Companies Law 2015 (CCL), companies incorporated within 'onshore' areas (also referred to as mainland areas) of the UAE, as licensed by the Department of Economic Development of the respective Emirate (areas other than designated 'free zones') have a mandatory minimum requirement of 51% local Emirati ownership as shareholders or appointment of a local service agent as applicable.

The Foreign Direct Investment Law (FDI Law) passed in 2018 and supplemented by Cabinet Resolution No. 16 of 2020 (Federal Decree-Law No. 26 of 2020 - amending the provisions of Federal Law No. 2 of 2015 regarding foreign companies and its amendments) relaxed foreign ownership restrictions in specific business sectors (known as the 'Positive List'). This allowed 100% foreign ownership of businesses on the Positive List. In reference to said law, the UAE Ministry of Economy has made an important announcement in May, stating that the new CCL which includes 100% Foreign Ownership will be effective from 1 June 2021, thereby abolishing the requirement to have local Emiratis as the majority partners/shareholders in the business.

The key change that the amendment will usher in will now allow non-citizens, whether natural and legal persons, to establish and own 100% of their companies in the UAE for companies already set up or being incorporated with commercial and industrial business activities without having local sponsors. The power to set conditions has been assigned to the Licensing Authority of individual Emirates, and therefore, it is expected to have differing guidelines for Dubai, Abu Dhabi, and other UAE Emirates.

The Abu Dhabi Department of Economic Development has announced 1105 registered commercial and industrial activities, in which non-citizens may own economic licenses and establish commercial companies with 100% ownership or less to practice these activities in Abu Dhabi.

The Dubai economy is allowing 100% foreign investment with effect from 1 June 2021 to all commercial and industrial activities, except for activities with a strategic impact (covered below):
  • Security, defense, and military activities
  • Services related to the fisheries field
  • Banks, exchange shops, and finance companies
  • Printing of bank notes/cash
  • Communications
  • Hajj and Umrah services
  • Centers for memorizing the Holy Quran
A clarification or update is still awaited from the Regulatory Licensing Authority if the applicant investor needs to meet any onerous requirements as stated in the Cabinet Resolution regarding share capital contributions, the use of technology, and the employment of UAE nationals. As for professional activities and the requirement to have a national service agent as stated in the Cabinet Resolution, an update on abolition, including terms and condition have not yet been announced and approved by the Licensing Authority. Therefore, branch companies and companies with professional activities are required to continue to appoint and have a national or local service agent.

There is no change to the current procedures and requirements for licensing activities except for the cancellation of the requirement for the Emirati partner for liberalized commercial and industrial activities. The percentage of the local partner can be reduced from 51% or removed, provided that all shareholders agree to the same. As for the existing requirements to have local service agents for certain activities and business licenses, the situation remains the same according to the existing establishment contract until further update from Licensing Authority.
Our Comments
These amendments are the latest in a series of measures aimed to make the UAE a more investment-friendly destination and liberalizing business activity in the UAE, where foreigners comprise more than 80% of the population. The amendment has far-reaching consequences for entrepreneurs with existing businesses in the UAE as well as those who want to register a company in the UAE. The amendment will boost the UAE's appeal as an attractive destination for both foreign investors, entrepreneurs, and talent. It will also further strengthen the country's standing as an international economic center by encouraging an investment flow to vital economic sectors.

These changes characterize a significant departure from the FDI Law's controlled sectoral approach, which is expected to be revoked once the new law takes effect from 1 June 2021. This is a significant regulatory change to attract further investment in the region and enhances investors confidence on business friendly environment in UAE to boost foreign direct investment in the next 10-20 years.
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