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.
Historically, companies incorporated in "onshore" areas of the UAE―those areas other than designated "free zones"―have required a minimum 51% local shareholder. This regime was partially relaxed by the 2018 Foreign Direct Investment Law. UAE branches of foreign companies outside of free zones currently require a local service agent.
If fully implemented, the announced changes will represent a sweeping reform to the UAE's foreign direct investment landscape and should significantly ease doing business in the UAE for many international companies. The changes come in the context of other recent liberalizing legal reforms and the government's stated intention to further open up the economy to foreign investment.
The amendments to the Commercial Companies Law and related announcements indicate that it will be at least 30 March 2021 before the relaxation of foreign ownership restrictions and removal of the requirement for a branch to have a local service agent become effective. Beyond this, implementation details and schedules will depend on further legislation, processes, and the decisions taken by individual emirates. It is therefore not yet known to what extent and when these changes will in practice take effect. There will be at least certain strategic sectors that will still require some local ownership and be subject to further conditions.
There have also been numerous other amendments made to the Commercial Companies Law, including in relation to corporate governance, capital raising, and procedures for meetings. These become effective on 2 January 2021 and may require some onshore companies to amend their memorandum of association by 2 January 2022 to ensure conformity with the updated provisions.
International companies with onshore UAE subsidiaries or branches should start reviewing their contractual arrangements with local partners now, in preparation for the opportunity to take advantage of the forthcoming changes.
