The previously announced commercial law allowing 100% foreign direct ownership in local UAE companies will come into effect from 1st June 2021, the UAE’s Ministry of Economy has announced.

All current and previously licensed businesses in the UAE are eligible to amend their statuses according to the new additions to the commercial companies law.

In November 2020, the UAE government announced major changes to Federal Commercial Companies Law No.2 of 2015, bringing an overhaul of foreign ownership rules applicable to commercial companies.

As per the Commercial Companies Law, Law No. 2 of 2015, foreign shareholders were limited to owning a maximum 49% in a ‘limited liability company’ (LLC) operating as an onshore UAE business. This requires an Emirati national or 100% Emirati-owned company to hold the balance 51% shares as a “local sponsor”.

In other firms, it was required for foreign businesses of certain categories to have a local service agent (an Emirati national) who would not have any shares but would be remunerated as part of the business setup agreement.

The amended law allows natural and legal persons to establish and own 100% stake in their companies, regardless of nationality. The law, however, will not apply to some companies that are excluded based on decisions by the Cabinet and those that are either wholly-owned by federal or local governments or their subsidiaries.

“The amended Commercial Companies Law aims at boosting the country’s competitive edge and is a part of UAE government efforts to facilitate doing business,” said Abdulla bin Touq Al Marri, Minister of Economy.

Whilst it is a big step to finally have a date for the implementation of the new regulations, we are still keenly waiting for further information. The UAE Cabinet will establish a committee, comprising representatives from each of the Department of Economic Development entities, which will be responsible for determining the list of commercial activities considered to have a strategic impact on the UAE’s economy (“Strategic Impact List”); and additional licensing controls to impose on companies undertaking commercial activities in sectors listed in the Strategic Impact List.

It is important to remember that not every license activity will be subject to the new laws. The “negative list” contains activities from big sectors such as oil and gas, telecommunication, insurance, and payment services.

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