In 2019 we reported on how the UAE has enacted new laws (the “FDI Law”) to allow up to 100% foreign ownership of “onshore” companies in the UAE, whereas previously foreign investors were restricted to 49% shareholding (click here).
Pursuant to the FDI Law, the Government set out a ‘Negative List’, i.e. activities where foreign ownership in whole or part will continue to be prohibited, and a ‘Positive List’ which set out 122 activities across 13 sectors which will be eligible for up to 100% ownership. However, the Negative List and the Positive List did not clearly define the activities that are permitted or prohibited. The listed activities did not correspond to the activity names and descriptions under the activities list of the Federal commercial regulators (i.e., the Department of Economic Development for the relevant Emirate of the UAE (the “DED”)). As a result, applicants did not have sufficient clarity on whether to pursue applications, and the authorities were unsure about which applications should be approved or not. So while the laws were in place to facilitate 100% ownership applications, only a few applications were approved before the authorities ceased processing applications pending further instruction.
Based on recent announcements and our enquiries made with the DED of Dubai, we understand that this moratorium has been lifted, and applications are now being actively welcomed and processed again. While we expect this will evolve quite significantly over time, at the moment, where activities are not included on the Negative List and are generally within the trading sector, those applications are now being welcomed by the DED of Dubai. We anticipate that different Emirates may take a different focus depending on their respective priorities.
In Dubai, the DED places a great focus in its application review on the value of the foreign entity’s operations in the UAE and whether the foreign entity represented an international brand that would be committed to the UAE. The foreign investor must be able to prove that it holds assets/capital or revenue in the UAE which exceeds AED 150 million or AED 200 million depending on the specified activity; so this is as much a commercial assessment as much as legal process. Every application will be reviewed on a discretionary and case by case basis, with all applications being reviewed in periods not exceeding five (5) business days from the date of final submission.
This is of course a very welcome move and one we hope will continue and expand into other areas, and for smaller businesses too, promoting the UAE as a reliable and welcoming location for inbound investment and continuing to foster a welcoming environment for starting new businesses. If you would like to explore options for your business, please feel free to get in touch.