The UAE government is currently introducing material changes to some of the country’s most fundamental laws. These changes in the cultural, social and economic spheres will certainly help stirring up foreign investor and expatriate confidence in the UAE’s economy.
In the field of corporate law, a number of legislative developments enacted by Federal Decree Law N°26 of 2020 (the « Decree »), amending Federal Law N° 2 of 2015 on Commercial Companies (CCL), focus on encouraging foreign direct investment into the UAE. In particular, a major amendment brought about by the Decree is the capacity granted to foreign investors to own 100 per cent of mainland (as opposed to free-zone) limited liability companies (LLCs).
Originally, the foreign ownership regime required for commercial companies incorporated in the mainland of the UAE to have a national as majority shareholder. A previous major change introduced by the Foreign Direct Investment Law (« FDI Law ») in September 2018 had introduced the possibility of 100 percent foreign ownership in certain identified sectors of the economy, while in other fields key to the UAE government, companies continued operating on the basis of strict mandatory restrictions, imposing over 51 up to 100 percent ownership to be held by a UAE national (notably in banking, insurance, transports, commercial telecom agencies, etc.).
Now, under the Decree, the context of a continued restriction is replaced by a principle of liberalisation across all sectors and emirates, subject to a list of strategic activities where limited restrictions shall apply. Foreign ownership restrictions have not been abolished completely. Rather, the foreign ownership regime now relies on the default position that mainland companies may be wholly owned by non-UAE nationals, unless they conduct activities listed by the UAE Cabinet as “Strategic Impact Activities”. The Cabinet is expected to issue its decision by April 1st, 2021, delineating the scope of Strategic Impact Activities. These activities should be subject to minimum UAE ownership and / or UAE board representation requirements.
As such, the notion of “Strategic Impact Activity” will play a decisive influence on how much foreign ownership will actually be liberalized in the near future. Clearly, some sectors are of material importance to the UAE government, and are likely to remain under some kind of restrictions (oil, banking and finance, insurance, water and electricity, postal and telecom services, road and air transports, environment, pharmaceuticals). Another factor of influence on how liberalization shall play out in practice, lies in the respective policies which individual emirates will chose to promote while implementing the amended CCL. Indeed, according to the Decree, the extent to which UAE nationals will have to be involved into Strategic Impact Activity companies shall be decided and ruled upon by the government of each respective emirate.
As a result, a complete understanding of the envisaged changes remains subject to (i) publication by the Cabinet of the scope of “Strategic Impact Activities” and (ii) the individual policies which will be conducted by the respective emirate in that respect. The reform is planned to come into force force six months from the date of publication of the Decree on 30 September 2020. Therefore, incumbent foreign shareholders and new foreign investors may consider acting upon of these changes as from early April 2021, subject of course to timely issuance of the expected Cabinet decision, allowing for an accurate assessment to be conducted and for reasoned decisions to be made.
We are available at all times to discuss this new regime and explore any option you may wish to consider. Do not hesitate to reach out and contact Mrs Marie Didierlaurent:

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