100% Foreign Ownership for LLCs and PJSCs
The UAE Government has recently announced a transformative Resolution that allows foreign investors to own 100% of Foreign Direct Investment Projects which implies that, the requirement to have an Emirati as a major stakeholder in the company, has been annulled. This change has been effected through Cabinet Resolution Number 16 of 2020 that essentially amends and updates the Federal Law Number 2 of 2015 on Commercial Companies.
As per the Resolution, foreign investors are now permitted to obtain full ownership of Limited Liability Companies (LLCs) and Private Joint Stock Companies (PJSCs). The Resolution lays down a Positive List of Economic Sectors that are eligible for Foreign Direct Investment, in the Schedule attached thereto. This includes, the agricultural sector, manufacturing sector and the service sector. The Resolution demarcates the extent of economic activities in each sector, the minimum share capital that is required to be maintained along with the restrictions and conditions that apply.
The general restrictions and capital requirements for each sector are enumerated as under;
In the agricultural sector, in order to conduct economic activities such as, seed cultivation, growing of leguminous, non-perennial crops, cultivation of flowers and fruits, conducting activities such as seed processing, post-harvest activities etc. the minimum share capital is required to be maintained at AED 7.5 million. Further, the conditional requirements imposed on such activities include, use of modern technology, contribution to research and development activities, contributing to high- value addition along with meeting any and all other requirements as may be imposed by licensing entities in the State.
The economic activities in the manufacturing sector includes, manufacture of food products, beverages, apparel, leather and other related products, woodwork and products of wood and cork, except furniture, and manufacture of straight or complex fertilizers. Further, the vast range of the manufacturing sector includes but is not limited to activities such as, manufacture of, plastics, pesticides, adhesives, textiles, photographic plates and films, aromatics, basic metals, computer and electronics etc. The minimum share capital that is to be maintained herein ranges from AED 15 to 20 million, depending on the type of economic activity being conducted.
Further, the service sector is all inclusive of services ranging from legal consultancy, legal translation, accountancy, medical, architecture, computer programming, renting and leasing of machinery, retail sale, and photography to services like landscaping, secondary and higher education, construction and so on. The capital requirements for the service sector is subject to the legislation in force. The Resolution excludes public education from the realm of economic activities herein. Further, it is also mentioned that activities related to hospitals will be subject to the approval of competent entities. Moreover, activities related to construction activities, building and demolition are restricted to large scale infrastructure projects like, airports, roads, sports facilities etc. worth more than AED 450 million.
Analysis of the aforementioned Resolution projects a major boost in the economic climate of the country, in the coming years. The decision to ease restriction on foreign ownership makes UAE an attractive investment destination further, it also makes the country more expat friendly. Barriers previously imposed regarding local ownership have now been relaxed allowing the country to open up its economy in order to reshape the vision of prosperity and growth that it aims to achieve. This therefore, opens up the country to a sea of new opportunities with the chance to become a leading competitor in the global market.