UAE permits 100% foreign ownership outside free zones

A law allowing 100% foreign ownership of companies in certain sectors of the economy is now in force in the UAE. Previously, Article 10 of the UAE Commercial Companies Law required that 51% or more of the shares in a company established in the UAE had to be owned by a UAE national shareholder.

The long-awaited change is designed to make the UAE more attractive to foreign investors but applies only to sectors of the economy that do not appear on a ‘negative list’ established by the UAE Cabinet. The new law does not apply to free economic zones where 100% foreign ownership of companies is already permitted. The initial ‘Negative List’ includes:

• Banking and financing
• Blood banks, quarantines and venom/poison banks
• Commercial agencies
• Fishing
• Insurance
• Investigation, security and military
• Medical retail (including pharmacies)
• Oil exploration and production
• Pilgrimage and Umrah services
• Postal, telecommunication and other audio visual services
• Printing and publishing
• Recruitment activities
• Road and air transport
• Water and electricity services

The Cabinet will also issue a ‘positive list’ of the sectors applicable for full foreign investment as early as the first quarter of 2019. This is expected to include activities such as technology, space, renewable energy and artificial intelligence. When a sector of the economy is added to the ‘positive list’, the UAE Cabinet can mandate that certain requirements have to be satisfied by a company or its shareholders before greater levels of foreign investment will be permitted.

The new law establishes two new government bodies – the Foreign Direct Investment Unit and the Foreign Direct Investment Committee – that will administer investment into the UAE. The new Law allows the cabinet to add or remove sectors on either list at anytime.

The new law is aimed at boosting the UAE’s attractiveness as a target for FDI and increase investment flows in priority sectors. At the same time, the Abu Dhabi Executive Council has announced that all new economic licenses issued in Abu Dhabi will be exempt from local fees for two years from the date of initial issuance.

Abu Dhabi’s Department of Economic Development (DED) has also issued a resolution to reduce costs for existing businesses in the Emirate – the renewal fee for all current Trade Licences will be fixed at AED 200 per annum for at least the next two years.

“Passing the new law at this time confirms the continued efforts of the government to increase the diversification of economic sectors and aims to establish UAE’s position as a regional and global leader in promoting and attracting foreign investments,” said Nicholas Cully, Sovereign Group Sales Director.

“Given our strategic relationship with the UAE government and our working relationships with many leading professional legal firms across the UAE, Sovereign Corporate Services (Middle East), is well placed to support clients in all structuring and market-entry requirements.“