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Will Your Company Expand To The UAE With Increased Foreign Ownership Levels?

24th July 2019

The United Arab Emirates is becoming increasingly attractive for Foreign Direct Investment (FDI) as it relaxes its restrictions on foreign ownership. Under the Commercial Companies Law, Law N0. 2 of 2015, foreign companies are restricted to a maximum ownership of 49% of the shares in a Limited Liability Company (LLC) in the UAE. The law requires that a local partner, either an Emirati individual or a 100% Emirati-owned company holds the majority 51% share. However, in Q4 of 2018, the long awaited Foreign Direct Investment Law, Decree Law No. 19 of 2018 was announced, enabling foreign companies to hold a greater share in onshore companies in the UAE in certain sectors.  At that time, only a Negative List had been announced, which contained a list of activities which would not be opened up to increased levels of foreign ownership, and at that time only indications were given as to which sectors were being considered for increased foreign ownership levels.  

Positive List announced - which activities will be opened up for increased foreign ownership in the UAE?

It has been announced that 122 activities across 13 sectors will be opened for increased foreign ownership.  Of these activities splits will be as follows:

  • 19 activities from the agriculture sector
  • 51 activities from the industrial sector
  • 52 activities from the services sector

Activities being opened up to increased foreign ownership include: renewable energy, space, agriculture, manufacturing, production of solar panels, power transformers, green technology, hybrid power plants, transport and storage, e-commerce transport, supply chain, logistics, and cold storage for pharmaceutical products, hospitality and food services, information and communications, as well as professional, scientific and technical activities, administrative services, support services, educational activities, healthcare, art and entertainment, and construction.

Will foreign companies be allowed to own LLCs 100%?

It has been indicated that the above activities will be opened up for up to 100% foreign ownership.  The governments of each of the Emirates will determine the foreign ownership levels for these activities for their respective Emirate.

What conditions will foreign companies need to meet in order to take advantage of the increased levels of foreign ownership?

For most of the agriculture related activities it will be necessary to have a minimum share capital of AED7.5m.

For most of the  industrial related activities it will be necessary to have a minimum share capital of between AED2m - AED100m.

For hospitals it will be necessary to have a minimum share capital of AED100m.

As anticipated, there is an Emiratisation requirement whereby the foreign companies will be required to participate in the Tawteen Partners Club which provides privileges and benefits to member companies. This means the foreign company will be required to employ a certain ratio of Emirati nationals.  There are four membership categories: Platinum, Gold, Silver & Bronze which are then sub-divided into High Priority, Medium Priority and Low Priority depending upon the percentage of the workforce which is Emirati and the skills level required and sector of the business.

Other requirements referred to include:

  • use modern technology and production processes
  • demonstrate added value
  • contribute to research and development
  • fulfil the licensing requirements.

The scope and measurement of the above has not be clarified.

In conclusion, the announcement of the Positive List is encouraging and will be welcomed by larger foreign investors. However, I think the entrepreneurs and micro businesses which have been awaiting this this announcement will be disappointed as most are unlikely to be able to meet the requirements and will therefore need to continue to comply with the current ownership levels in LLCs.

The opening up of foreign ownership levels will be particularly attractive for larger foreign companies looking to establish onshore to work with the government.  It will also be attractive to existing onshore companies who may seek to increase their foreign ownership levels.

If you are planning to expand your business to Abu Dhabi to take advantage of the increasing levels of foreign ownership, speak to Gateway about how we can help navigate the business setup formalities.

Written by Jenny Hunt, Founding Partner & CEO, Gateway Group of Companies, Abu Dhabi UAE

Related Blogs:
UAE's Foreign Direct Investment Law Aims To Boost FDI    CLICK HERE

Abu Dhabi - Where Is The Market Going?    CLICK HERE

Protect your business and profits and have an efficient business setup in Abu Dhabi by engaging the award-winning Gateway Group to deliver our customised business setup, corporate local sponsorship, and visa processing. To establish your business in the UAE, Email us: Info@GatewayToAbuDhabi.com

Gateway Group - We`re pretty good at what we do

Gateway are Best Company Formation Specialists 2019 International Lawyer

Gateway's Jenny Hunt: Winner CEO Today Magazine's CEO Middle East Awards 2019: CLICK HERE

Gateway are Best Company Formation Specialists 2019 - UAE M&A Today Global Awards 2019

Gateway are Best Onshore Company Formation Specialists - UAE MEA Markets 2019 GCC Enterprise Awards

Gateway are Recognised Leaders in Offshore Company Formation 2019 MEA Markets 2019 UAE Business Awards

Gateway ranked in the '10 Most Promising Middle East Corporate Business Service Providers 2019': CLICK HERE

Gateway CEO, Jenny Hunt, in FORBES' Top 100 Most Influential Women in the Middle East 2018: CLICK HERE

Gateway is ranked in the Top 20 Abu Dhabi blogs to follow in 2018: CLICK HERE

Gateway are winners of Best Company Formation Specialists 2018 MEA Markets 2018 UAE Business Awards

 

 

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