Update on changes to foreign ownership in the UAE – 100% Foreign Ownership

Update on changes to foreign ownership in the UAE – 100% Foreign Ownership

Update on changes to foreign ownership in the UAE – 100% Foreign Ownership

Following the recent announcement of changes to foreign ownership restrictions on companies in the UAE, Federal Decree-Law no. (26) of 2020 amending some provisions of the Federal Law No. (2) of 2015 on Commercial Companies has been published (Amendment). While much of the detail of the changes to foreign ownership remain subject to further government announcements, the Amendment paves the way towards the gradual loosening of foreign ownership restrictions in UAE, in keeping with trends across the GCC.

Key highlights:

  1. Companies carrying on activities with a “strategic impact” will continue to be subject to foreign ownership restrictions. It is anticipated that a Cabinet Decision will be issued outlining activities deemed to have “strategic impact” and the extent of restrictions that will apply.
  2. The power to issue decisions on the contribution of UAE nationals to the capital of companies not caught under the “strategic impact” characterisation above, has been assigned to the governments of individual Emirates. This may result in different Emirates approaching foreign ownership restrictions differently.
  3. Removal of the requirement for a foreign branch office to appoint a UAE national service agent (NSA) with effect from 30 March 2021.
  4. All companies in the UAE (including limited liability companies) will be subject to corporate governance standards to be issued by the government at a future date
  5. Changes to the process of convening and holding general meetings including:
    1. Increase in the notice period to 21 days for holding a meeting;
    2. One or more shareholders holding not less than 10% of the share capital may request a general meeting to be called; and
    3. Allowing for meetings to be held and called using modern means to technology.

What does this mean for existing companies?

Until further regulations are issued, it is unclear to what extent foreign ownership restrictions will be lifted. It is also unclear from a practical perspective how the transition to remove the National Service Agent (NSA) or remove the local shareholder will be undertaken, and what practical benefit there may be in retaining the NSA or Local Partner outside of the required activities list.

According to the Amendment, existing companies are required to ‘adjust their positions’ by 2 January 2022 (one year after the entry into force of the Amendment on 2 January 2021). This may require LLCs to amend their Memorandums of Association to bring quorum, notice and meeting requirements into line with the Amendment.

We will continue to monitor the situation closely and provide on-the-ground updates for clients, as well as regular news alerts when we have a clearer picture on the practical implementation of the Amendment.

How can PRO Partner Group help?

PRO Partner Group (PPG) will ensure that companies that can transition to higher foreign ownership are able to do so smoothly and with no penalties. PPG can act as a nominee UAE shareholder or NSA to assist with transition arrangements if required, and then ensure the client can transition to 100% foreign ownership smoothly when practically possible.

In addition, PPG can assist to provide company secretarial services to assist companies with their AGM and increased corporate governance obligations. PPG can also assist to undertake share transfers and NSA termination processes as well as to review and amend companies’ MOAs to update provisions to bring into line with the Amendment

If you need assistance on this or any other related company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman or Qatar, then please do get in touch with us on +971 (0)4 456 1761 for Dubai, or +971 (0)2 448 5120 for Abu Dhabi, email us at info@ppg.ae or complete the contact form below and we will be delighted to assist you.

Source: Clyde & Co, Insights – “UAE Companies Law amended: legislation now issued”, 2 December 2020 (link to the article can be found here)

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