United Arab Emirates Announces Intention to Allow Full Foreign Ownership of Companies and Amends Commercial Companies Law
Amendments and announced changes to the Commercial Companies Law promise to allow full foreign ownership of many more companies in the United Arab Emirates ( UAE ) than currently permitted, although the practical extent and timing of this derestriction is not yet fully known.
The government of the UAE has published amendments to the country s Commercial Companies Law which, it has announced, will allow 100% foreign ownership of UAE companies in the future. The amendments will also remove the requirement for branches of foreign companies to have a local service agent.
Dubai set to shine in the UAE s amended foreign ownership law
SECTIONS
Last Updated: Dec 22, 2020, 07:49 PM IST
Share
Comment
The business landscape of the United Arab Emirates and Dubai has been steadily changing with the introduction of progressive measures. The UAE last month relaxed and removed a range of limits on foreign ownership. Prior to that, the country had also announced a series of reforms to its Islamic legal code. Further to the normalization deal with Israel, the country’s leadership now expects Israelis to join the legion of other nationalities in opening new business ventures and investing in Dubai.
But what does the law mean for business owners and entrepreneurs and when will the changes come into effect? Here is all you need to know.
Hani Naja, Partner Corporate and Commercial at Baker McKenzie Habib Al Mulla, spoke to Gulf News about the new law and the changes that had already been implemented over the years, leading up to the recent announcement.
“The push for a relaxation in foreign direct investment in the UAE started a number of years ago. The first major change was in September 2018, with the issuance of the Foreign Direct Investment Law (FDI Law), which opened up the UAE market to foreign investors in certain sectors of the economy. The FDI law was then followed by the announcement on July 2019 of a Positive List of 122 business activities where foreign investors can own up to 100 per cent of the shares in an onshore company. The Positive List focused on the manufacturing, agricultural and services sectors,” he said.
Setting up and operating a joint venture
Structure
Are there any particular drivers in your jurisdiction that will determine how a joint venture is structured?
The laws of mainland United Arab Emirates (UAE) and most UAE free zones do not generally facilitate mechanisms often incorporated into joint venture (JV) agreements, unlike in other more developed jurisdictions. In particular, the enforceability of certain rights relating to share transfers, including drag, tag, call and put options, which JV partners would often view as standard and necessary contractual protections in the context of a JV, is largely untried and untested. As a result, JV partners often prefer to use offshore, Dubai International Financial Centre (DIFC) or Abu Dhabi Global Markets (ADGM) vehicles where they can be certain that those rights can be enforced.
Disputes
Choice of law and resolution methods
In your jurisdiction, are there constraints on the choice of law or the method of dispute resolution provided for in joint venture agreements?
A company’s constitutional documents may not be made subject to foreign law; however, under article 257 of the Civil Code of the United Arab Emirates (UAE), parties are free to agree and will be bound by what they have agreed to do under the contract. As such, UAE law recognises the principle of freedom of contract such that parties are free to agree upon a foreign law to govern their contracts.