UAE removes the need for majority Emirati shareholder

uae

The UAE has announced changes to Federal Law No. 2 of 2015 on Commercial Companies (the Commercial Companies Law), removing the need to have a majority share held by a UAE national.
This marks a fundamental change on how business is conducted in the UAE, effectively allowing expatriate investors to own 100% of an onshore company in the UAE. The changes are expected to take effect as early as 1 December 2020.

Key points relating to this development are:

  • There will no longer be a need to have an Emirati national as a majority shareholder (51%) in onshore companies, nor will they need to have a UAE national or local company as its registered agent.
  • Fifty-one articles of the Commercial Companies Law are to be amended to facilitate the changes and new articles will be added. Most of the changes are expected to relate to limited liability companies (LLCs) and joint stock companies.
  • Local authorities such as the Department for Economic Development, will be able to regulate participation of Emiratis in companies.
  • The changes will not be applicable to strategically important sectors, such as oil and gas exploration, utilities and transport, as well as to state-owned entities.
  • Federal Law by Decree No. 19 of 2018 regarding Foreign Direct Investment (the FDI Law) is expected to be superseded by these changes, hence, the FDI Law is expected to be repealed.
  • A major impact is expected on the liquidity of the local capital market, as companies wishing to go public can now sell up to 70% of their shares in an IPO, instead of the previously applicable limit of 30%.

Authorities are expected to release further guidelines in the coming days, which should shed more light on how the above changes will be applied in practice.

Following an announcement regarding a series of changes to the UAE’s laws on 7 November 2020, relating to personal status, cohabitation and alcohol consumption (amongst other related topics), the above changes to the Commercial Companies Law will hopefully enhance the UAE’s attractiveness for investment and business growth.

 

Written by: our partner firm BSA Ahmad Bin Hezeem & Associates LLP

 

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