The government of the United Arab Emirates has recently embarked on a number of historic policy shifts on corporate structuring and immigration in an effort to entrench the UAE’s position as a leading Middle East economy and to attract foreign investment.
On 2 December 2020, the government published Federal Decree No. 26 of 2020 (the New Companies Law), which introduces significant changes to the existing Commercial Companies Law. The most notable changes relate to foreign ownership and investment – at its core, the New Companies Law allows for 100 per cent foreign ownership of certain UAE companies, except for business activities with “strategic impact”.
Now, the Abu Dhabi Department of Economic Development has released a comprehensive list of foreign ownership activities (the FOA List) which may be conducted in the emirate by a 100 per cent foreign-owned entity.
What has changed?
New Companies Law
Last year, the government promulgated the New Companies Law, a law which introduces provisions permitting 100 per cent foreign ownership of certain UAE ‘onshore’ companies (i.e., companies which operate outside of one of the UAE’s economic free trade zones, where 100 per cent foreign ownership is already permitted). To date, the general rule has been that UAE limited liability companies were required to have at least 51 per cent of their shares owned by a UAE national (or a company wholly-owned by a UAE national).
Similarly, branches of foreign companies operating in the ‘onshore’ areas of the UAE were historically required to appoint a local service agent, who also had to be a UAE national or a company wholly-owned by a UAE national. The requirement for branches to appoint a local service agent has also now been dispensed with.
The New Companies Law carves out from the 100 per cent foreign ownership provisions those companies which have a “strategic impact”.
The FOA List
Commentators had generally expected a list of activities having a strategic impact to be published. The Abu Dhabi Department of Economic Development has now published what may be regarded as a ‘green list’ of those activities which do not have a strategic impact.
The FOA List (which applies to entities registered with the Abu Dhabi Department of Economic Development) runs to over 1,100 activities across a range of sectors, including agriculture, manufacturing, contracting, health care and retail. Notably and predictably, activities such as the exploration and production of petroleum materials, labour supply services and certain transportation and insurance activities did not make their way on to the FOA List.
The New Companies Law devolves decision making on which activities constitute having a strategic impact to each emirate and its authorities. It remains to be seen whether Dubai and the northern emirates follow Abu Dhabi’s FOA List, or whether there may be more radical changes on the horizon.