Key Points
- The Foreign Direct Investment Law will take effect on December 1, 2020
- The law will allow eligible foreign investors to own local businesses
- An Emirati sponsor will no longer be required for foreign investors
- The law applies to 122 permitted business activities
- Investors must have at least 51 percent shareholder rights to qualify
- The law replaces the current Commercial Companies Law No. 2
Overview
Effective December 1, 2020, the Government of the United Arab Emirates (UAE) will allow certain foreign investors to fully own local companies without an Emirati sponsor. The rule applies to foreign investors with 51 percent shareholder rights.
Background
The changes will be implemented through the Foreign Direct Investment Law, which was adopted through the Federal Legislative Decree No. 19 of 2018 and Resolution No. 16 passed by the UAE Council of Ministers in March 2020. The Foreign Direct Investment Law amends the Commercial Companies Law (CCL) No. 2 which was passed in 2015.
What are the Changes?
Under the current CCL, foreign shareholders can only own up to 49 percent in an LLC operating as an onshore UAE business. The law requires a 100 percent Emirati-owned company or an Emirati citizen to hold the remaining (51 percent) majority share and act as the local sponsor.
The Foreign Direct Investment Law has amended the CCL by adding new articles and updating 51 existing ones. Its amendments primarily address establishing companies with a limited liability shareholder arrangement.
What Should Employers and Applicants Know?
In March 2020, the Department of Economic Development (DED) issued Cabinet Resolution No. 16 of 2020 that contains a “Positive List” and requirements for 122 business activities that qualify for the relaxed requirements. Individuals should consult the Resolution for additional details and requirements.
