Until now companies in the UAE had needed a certain shareholding to be held by Emirati nationals, or an Emirati agent, depending on what type of company it was.
“The amendments allow foreign entrepreneurs and investors to fully establish and own companies without any nationality requirements,” Wam said.
“The condition requiring a foreign company wishing to open a branch in the country to have an agent from among the country’s citizens has also been cancelled,” it added.
The President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued a decree overhauling foreign ownership rules of commercial companies, as part of the government’s ongoing efforts to ensure a conducive legislative environment and open up economy to all nationalities.
The decree, which introduces significant amendments to the UAE Federal Law No. 2 of 2015 on Commercial Companies, annuls the requirement for commercial companies to have a major Emirati shareholder or agent, providing full foreign ownership of onshore companies.
Under the new amendments, businesses can now be fully established by non-Emiratis of all nationalities, with companies now having a maximum of one year to comply with the amended law from the time its articles become effective. This can be extended under a decision by the cabinet as proposed by the Minister of Economy.
The decree, in addition, supersedes the UAE Federal Law No. 19 of 2018 on Foreign Direct Investment (FDI Law). It also includes certain provisions and regulations related to limited liability and joint stock companies aimed at attracting foreign capital and further boosting the local economy.
The UAE approved a new foreign investment law in 2018 that would allow foreigners to own up to 100% of some businesses and foreigners could already own up to 100% of those registered in designated business parks known as “free zones”.
As an oil and gas producer, the UAE economy has been hit by the coronavirus pandemic and low oil prices, prompting the International Monetary Fund (IMF) to forecast in October that the Gulf’s second largest economy could shrink by 6.6% this year.
The latest decree grants relevant local authorities a set of powers, including setting a specific percentage of Emiratis in the capital allocation and boards of directors of companies, approving requests to establish companies -except for joint stock companies- and identifying fees & charges according to the policies adopted by the UAE Cabinet.
Significant changes include that firms wishing to become joint stock companies can, after the approval of relevant authorities, sell no more than 70% of the company, instead of the current 30%, through IPOs.
“This was a much-awaited news and has the potential of bringing lots of positive outcome for the economy. It also shows the commitment of UAE leadership in making UAE a great leader of the 21st century,” he said.
The decree authorises the cabinet to set up a committee that includes representatives of the relevant authorities with a view to proposing activities of “strategic impact” and the measures required to licence companies that operate in such areas. Upon the recommendation of the committee, the Cabinet will stipulate what activities shall be considered of strategic impact and the required measures for licensing such companies.
Electronic voting at general assembly meetings are now permitted under the new amendments.
The decree empowers the Securities and Commodities Authority to establish the controls and procedures required for evaluating in-kind shares and the names of stakeholders attending the general assembly meetings of companies. It also allows the appointment of board members who have the expertise and are not stakeholders, without stipulating a specific percentage, as well as the dismissal of a chairman or any other board members if a judicial judgement is issued against them for committing fraud or misuse of power.
The decree enables stakeholders to sue a company in civil court over any failure of duty that results in damages.
Concerning capital increases or decreases in public companies, the decree enables the company to approve its capital increase through issuing bonds and converting them into shares.
The decree is reflective of the UAE’s forward-looking vision to open up its economy by creating a favourable legislative environment that will keep pace with the changes taking place across global economy and supporting companies operating in the country.
“Dubai and Abu Dhabi are already recognised as two of the most powerful business and financial hubs in the world by international investors who are lured by the incredible possibilities offered in terms of finance, trade and commerce, plus the famous ‘can do’ attitude and the low tax environment in these destinations,” Nigel Green, the founder and CEO of deVere Group, said.
“This appeal has just sky-rocketed further due to the reform of the business ownership law, which now permits businesses to be fully owned by foreign nationals,” he added.
He said landmark business reforms in the UAE will prompt an “unprecedented explosion” of foreign direct investment in Dubai and Abu Dhabi and will cement their growing status as major international financial centres.
“We can now expect an unprecedented explosion of foreign direct investment in Dubai and Abu Dhabi and they will further cement their growing status as major international financial centres,” Green said.
He continues: “This is especially the case after the UAE government in September changed legislation so that expatriates are now legally able to remain in the country long after they retire.”
Earlier this year, the deVere CEO said that over the next decade, the UAE will become one of the world’s top ten international financial hubs to rival and more aggressively compete with stalwarts such as London, New York and Hong Kong.”
He noted: “Dubai and Abu Dhabi are helped in this regard by having an independent regulator, an independent judicial system, a global financial exchange, a stable, pro-business government, a high proposition of high net worth individuals, a dynamic business community, world-class infrastructure and telecommunications, English as its defacto business language, and their enviable geographical location and time zone.”
During the height of the pandemic deVere announced it is to develop a major digital finance and fintech operation from its Dubai base.
Green concludes: “This reform has just significantly boosted the UAE’s already substantial competitive advantage. This is a game-changer.”