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7 June 20213 minute read

UAE to implement 100% foreign ownership

On the back of the recent announcement by the UAE government to implement the abolition of foreign ownership restrictions in onshore companies as of 1 June 2021, we have already begun to see promising and significant developments.

As had been anticipated during the early development of this change of law, some Emirates have begun to issue their own distinct list of approved activities and requirements for foreign shareholders looking to own 100% of the shares in an onshore company. To date, we have seen the official activity lists for both Abu Dhabi and Dubai. Whilst these lists may be subject to change and are largely tentative at this point in time, they can be seen as reliable indicators for which activities would allow increased foreign ownership. It is our understanding that there will be no additional requirements (eg increased paid in share capital requirements) applicable in either Emirates. Moreover, no new procedures will apply to give effect to this change, the existing process for incorporation or share transfer will apply equally to 100% foreign owned companies.

There are four main activity categories to take away from these early developments:

  1. Trading activities – those listed trading activities which can be carried out by an onshore limited liability company wholly owned by foreign shareholders.

  2. Industrial activities – those listed industrial activities which can be carried out by an onshore limited liability company wholly owned by foreign shareholders.

  3. Professional activities – these activities have been amalgamated with the activities previously classified as "commercial" activities into one category called "professional activities". In principle, professional activities may not be carried out by foreign owners through a limited liability company and must register a branch office of a foreign company, a sole proprietorship or a civil partnership, the latter being applicable in Dubai only. Any of these three registration options would necessitate the engagement of a local agent. From our discussions with the Dubai authorities, we understand that an exception to this rule would be the formation of a limited liability company for the purpose of carrying out projects that the local authority considers significant. There is little guidance at this stage as to what would constitute a significant project, however this is likely to refer to projects that entail considerable investments and value to the UAE.

  4. Strategic activities – these are excluded from 100% foreign ownership. The list we have seen indicates that this category will include activities in core sectors such as, military, banking, insurance and re-insurance, telecommunications.

These latest changes do not impact commercial agencies given that these are regulated under a separate legislation, namely the UAE Federal Law No. 18 of 1981 on commercial agencies (as amended). Commercial agencies will continue to operate as before irrespective of the changes to foreign ownership regulation.

The position concerning foreign ownership is developing quickly and we are seeing progress with each passing day. There is still more to be known about precisely how these changes will be fully implemented, however we are beginning to get a firm idea of how it will take shape.

If you have any questions regarding the new foreign ownership regime and its implications on your business in the UAE, please contact the authors or any member of our Corporate team.