On 23 November 2020, the UAE's official press agency announced that a Federal decree law has been issued making significant amendments to the Commercial Companies Law (Federal Law No. 2/2015), which may effectively allow for 100% ownership of onshore companies by foreign nationals. In addition, this decree also includes other provisions, which primarily affect limited liability and joint stock companies, that are aimed at attracting foreign capital.
This is potentially a massively significant development that should enhance the country's attractiveness in doing business and positively impact the level of foreign direct investment in the UAE going forward. However, until such time as the decree is published in the Official Gazette, the full scope or detail of the amendments remain unclear. For example, it will be interesting to see what the position would be as regards to existing companies with UAE shareholders. As such, we will continue to monitor this development and keep you updated as more information is released.
In the meantime, we set out some of the key points below that have been announced in the press regarding the changes introduced by this decree.
- The decree will introduce amendments that will annul the requirement for commercial companies to have an Emirati national (or a company wholly owned by Emirati nationals) to own at least a majority stake (i.e. 51%) in an onshore company. In addition, there may no longer be a requirement to have a UAE national or local company as its registered agent.
- The decree will supersede the current Foreign Direct Investment Law (Federal Law No. 19/2018) that permits foreign nationals to own up to 100% of 'onshore' companies doing business in certain sectors that are listed in the 'positive list'.
- Local authorities will be granted the power to, among other things, set the level of Emirati participation in companies with respect to capital allocation and board seats of companies.
- The decree will increase the percentage of shares that a company going public may issue in an IPO from 30 per cent to 70 per cent (based on approval from the appropriate authorities).
- The UAE Cabinet will form a committee consisting of representatives from relevant government authorities which will propose activities that are of 'strategic impact' and the requirements necessary for licencing companies engaged in such activities. The UAE Cabinet will then, upon the recommendations of this committee, set forth these activities of 'strategic impact' and the required measures for licencing companies engaged in them.
- The decree will allow electronic voting at general assembly meetings to be permitted under the Commercial Companies Law.
- The UAE Securities and Commodities Authority will be authorised to establish controls and procedures required for evaluating in-kind shares. The decree will allow companies to appoint independent board members without limiting their number to a certain percentage of the board. It will also allow the dismissal of a board member based upon a judicial judgement issued against him or her for committing fraud or misuse of power.
Again, it should be noted that the points listed above are based on information made available in press reports as of the date of this alert. We expect more information with respect to this development to be available upon the publication of the decree introducing the amendments to the Commercial Companies Law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.