Major business news from the United Arab Emirates.
Starting from December 1, 2020, foreign investors will be able to fully own local companies in UAE without the need for a local business partner.
Thanks to the new decree, foreign citizens or foreign companies could acquire up to 100% of the ownership of local companies.
The government of the Emirates has made it to attract new foreign direct investments in the country. In particular, industrial firms have always been quite skeptical of investing in the UAE for this reason.
Most of the sectors are now open with the exclusion of strategically important sectors (like oil and gas, or utilities).
However, there are 2 important conditions to obtain licensing requirements:
1) Companies must invest in new technologies and contribute to the Kingdom’s R&D
2) Minimum investment threshold (depending on the sectors)
How was the situation before December 1, 2020?
According to the previous decree (UAE Federal Law No. 2 of 2015 on Commercial Companies).
Foreigners could only own up to 49% of the capital of a local company.
The majority of a company (minimum 51%) had to be owned by Emirati citizens or a company owned by Emirati citizens.
There was only one option for foreigners to have 100% foreign ownership of the enterprise. They had to invest in UAE free zones, which had specific rules and were not suitable for all kinds of business sectors.
In Conclusion
These new rules are a major breakthrough for the United Arab Emirates.
We will see in the coming years if they will affect attracting new foreign investments. If so, other countries could follow the example of the UAE. Let’s not forget that in many markets there are rules that prevent foreigners from having 100% control of local companies.
Globartis Research
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