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UAE implements full foreign ownership of companies on June 1st, 2021

June 1st, 2021 / Haroon Juma / News Updates

foreign ownership

Annual compliance and key actions

The UAE recently took another step towards establishing itself as a global leader by enacting significant amendments to the Commercial Companies Law in the UAE. The new law in the UAE allows 100% ownership of companies for foreign investors and entrepreneurs. The Ministry of Economy has announced that this 100% foreign ownership in the UAE will come into effect from 1st June 2021.

The landmark changes to the 100% UAE foreign ownership laws will help attract foreign investors and entrepreneurs and further improve the ease of doing business in the country.

With effect from 1 June 2021, foreign shareholders in the United Arab Emirates (UAE) are entitled to hold 100% of the share capital in an onshore limited liability company, unless a restriction exists (full details below).

While the UAE government is still in the process of issuing the implementation regulations, it is an opportune time for shareholders to assess their current corporate structure and consider foreign ownership of their entity in the UAE.

 

What Are The Changes?

Under the UAE commercial companies Law No.2 of 2015, all onshore companies were required to have a UAE National or Emirati-owned company as a partner or sponsor.

Foreign shareholders were allowed to own up to 49% of a limited liability company (LLC), while the local sponsor holds the 51% majority.

The new UAE company rules have removed the need for a local sponsor for companies operating as onshore UAE businesses. These amendments also supersede the Foreign Direct Investment Law (FDI Law) of 2018. The FDI Law had allowed 100% foreign ownership of businesses of certain categories, on a case-by-case basis.

Companies conducting economic activities that have a ‘strategic impact’ will not benefit from 100% foreign ownership and require a local sponsor. A Cabinet Decision will be issued setting out the scope of these ‘strategic impact’ activities.

Based on earlier announcements, it is expected the following sectors qualify for 100% foreign ownership (a provisional list with activity codes is appended to this article):

  • Administrative and support services;
  • Agriculture;
  • Art and entertainment;
  • Construction;
  • Educational activities;
  • Healthcare;
  • Hospitality and food;
  • Information and communication;
  • Manufacturing;
  • Professional, scientific, and technical activities
  • Renewable energy;
  • Space;
  • Transport and storage.

This announcement is a major step forward for the UAE to create a more favorable legislative environment to attract inward investment and talent to grow the economy.

Considerations

The change in the law provides more opportunities for foreign investors to establish a presence and conduct business in the UAE. Some immediate actions that can be undertaken include:

  1. Assessing your existing corporate structure and whether you are entitled to 100% ownership
  2. Foreign investors can explore the option of a fully owned Limited Liability Company in the onshore (mainland) in addition or as an alternative to a free zone set up

 

Affected Sectors

 

1. Agricultural Sector

Serial No ISIC4 Business Activity Minimum Capital Conditions and controls for foreign direct investment
1 01111 Grain Cultivation (wheat, corn, barley, etc)  

– Use of modern technology

– Achievement of high added value

– Contribution in the research and development field

– Satisfaction with the requirements of the licensing entities in the state.

2 01112 Cultivation of bean crops    
3 01113 Cultivation of vegetables, melons, roots, and tubers    
4 01114 Cultivation of sugar cane    
5 01116 Cultivation of fiber crops    
6 0119001 Flowers and flower buds cultivation    
7 0121 Growing of grapes    
8 0123001 Fruits and Citrus cultivation    
9 0124 Growing of pome fruits and stone fruits    
10 0125 Growing of other tree and bush fruits and nuts    

 

11

0126 Growing of oleaginous fruits    
12 0127 Growing of beverage crops    
13 01289 Growing of aromatic, drug, and pharmaceutical crops    
14 0161 Support activities for crop production 10  
15 0162 Support activities for animal production    
16 0163 Post-harvest crop activities    
17 0164 Seed processing for propagation    
18 0210 Silviculture and other forestry activities    
19 0240 Support services to forestry    

 

2. Manufacturing Sector

Serial No ISIC4 Business Activity Minimum Capital Conditions and controls for foreign direct investment
20 10

Manufacture of food products (except):

1071 – Manufacture of bakery products

105 – Manufacture of dairy products

108 – Manufacture of prepared animal feeds

 

15

– Use of modern technology

– Achievement of high added value

– Contribution in the research and development field

– Satisfaction with the requirements of the licensing entities in the state.

21 10

Manufacture of beverages (except): 1101 – Distilling, rectifying, and blending of spirits.

1102 – Manufacture of wines

1103 – Manufacture of malt liquors and malt

15  
22 14

Manufacture of wearing apparel (except): 14109 – Tailoring and sewing of wearing apparel.

1410122 – Military garments manufacturing

15  
23 15 Manufacture of leather and related products 15  
24 `16 Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials 15  
25 2012002 Straight or complex fertilizers manufacturing 15  
26 2013 Manufacture of plastics and synthetic rubber in primary forms 15  
27 2021 Manufacture of pesticides and other agrochemical products 15  

 

28

2022 Manufacture of paints, varnishes, and similar coatings, printing ink and mastics 15  
29 2023 Manufacture of soaps and detergents, cleaning and polishing preparations, perfumes, and toilet preparations 15  
30 2029006 Glues and prepared adhesives Manufacturing 15  
31 2029008 Manufacture of dyestuffs and pigments 15  
32 2029009 Textiles and leather finishing used 15  
33 2029013 Manufacture of photographic plates, films 15  
34 2029019 Gelatine and its derivatives Manufacturing 15  
35 2029021 Essential oils manufacturing (essence) 15  
36 2029022 Extracted natural aromatic products manufacturing 15  
37 2029023 Aromatic distilled waters manufacturing 15  
38 2029024 Matches manufacturing 15  
39 2029025 Welding power and pastes manufacturing 15  
40 2030 Manufacture of man-made fibers 15  
41 2100 Manufacture of pharmaceuticals, medicinal chemicals, and botanical products 15  
42 22 Manufacture of rubber and plastic products 15  
43 23 Manufacture of other non-metallic mineral products 15  
44 24

Manufacture of basic metals (except): 242 – Manufacture of basic precious and other non-ferrous metals.

2432 – Casting of non-ferrous metals

20  
45 25

Manufacture of fabricated metal products, except machinery and equipment

(except) 2529 – Manufacture of weapons and ammunition

15  
46 26 Manufacture of computer, electronic and optical products 15  
47 27 Manufacture of electrical equipment 20  
48 28 Manufacture of machines and equipment n.e.c. (except) 28259 – Tobacco Processing Machinery Manufacturing 100  
49 29 Manufacture of motor vehicles, trailers, and semi-trailers 100  
50 3011101 Building of commercial vessels 100  
51 3011103 Ships and Floating structures sections Manufacturing 100  
52 3011905 Construction of drilling platforms, floating or submersible 100  
53 3011906 Construction of floating structures 100  
54 3011907 Building of Hovercrafts 100  
55 3012 Building of pleasure and 15  
56 3020 Manufacture of railway, locomotives, and rolling stock 20  
57 3030 Manufacture of air and spacecraft and related machinery (except): 30300006 – Military Ballistic and Guided Missiles Manufacturing 100  
58 3090 Manufacture of transport equipment n.e.c 20  
59 31 Manufacture of furniture 15  
60 3220 Manufacture of musical instruments 2  
61 3230 Manufacture of sports goods 3  
62 3240 Manufacture of games and toys 3  
63 3250 Manufacture of medical and dental instruments and supplies 20  
64 3290 Other manufacturing n.e.c. 3  
65 3312001 Repair and maintenance of train engines 15  
66 3312002 Repair and maintenance of engine ships 15  
67 3315001 Repair and maintenance of ships 15  
68 3315004 Repair and maintenance of trains and railway equipment 15  
69 3315005 Maintenance and Repair of Aircraft engines 15  
70 3315006 Repair and maintenance of aircraft 15  

 

3. Service Sector

Serial No ISIC4 Business Activity Minimum Capital Conditions and controls for foreign direct investment
71 6910002 Legal Consultancy Offices As per the applicable regulations

– Not to advocate before the UAE courts

– Not to carry out any judicial procedure before courts, arbitral tribunals, and judicial and administrative committees

– Not to carry out attestation activities

– To obtain the approval of the relevant entities in charge of licensing such activities in the State

– To be a natural or legal person known for their excellence in this field

72 692 Accounting, bookkeeping, and auditing activities; tax consultancy As per the applicable regulations Only permissible for tax planning for business and consultancies, preparing and reviewing taxes on businesses
73 711 Architectural and engineering activities and related technical consultancy As per the applicable regulations To be a natural or legal person known for their excellence in this field.
74 862 Medical and dental practice activities    
75 75 Veterinary activities    
76 620 Computer programming consultancy and related activities As per the applicable regulations To provide a technical team of no less than 5 specialized programmers by the end of the first year of the company
77 72 Scientific research and development As per the applicable regulations As per the applicable regulations
78 7730-77300 Renting and leasing of other machinery, equipment, and tangible goods    
79 471 Retail sale in non-specialized stores (except Cooperative Societies 4711001)    
80 731 Advertising    
81 732 Market research and public opinion polling    
82 702 Management consultancy activities    
83 712 Technical testing and analysis    
84 331 Repair of fabricated metal products, machinery, and equipment (except ships or aircraft and other transport equipment)    
85 8121-81210 General cleaning of buildings    
86 742 Photographic activities    
87 8292-82920 Packaging Activities    
88 823 Organization of conventions and trade shows    
89 741 Specialized design activities    
90 7490005 Legal Translation services    
91 7490006 Translation services, movies, and television programs    
92 7490012 Translation publication services    
93 8299002 Translation Services    
94 41 Construction of buildings As per the applicable regulations Only permissible for large-scale infrastructure projects such as airports, highway roads, sports facilities, and projects whose value exceed AED 450,000,000
95 42 Civil Engineering    
96 432 Electrical, plumbing, and other construction installation activities    
97 433 Building completion and finishing    
98 431 Demolition and site preparation    
99 439 Other specialized construction activities    
100 7730009 Construction and Building or Demolition Machines and Equipment renting    
101 851 Pre-primary and primary education As per the applicable regulations Public education is excluded. To obtain the approval from the entities in charge of education to license such activities and to comply with such standards and controls as may be determined by them. To comply with the conditions and standards of school facilities and to ensure a high level of education quality.
102 852 Secondary Education    
103 853 Higher Education    
104 854 Other Education    
105 370 Sewerage As per the applicable regulations As per the applicable regulations in this regard
106 382 Waste treatment and disposal    
107 3900001 Pollution consequences treatment and environmental protection    
108 861 Hospital Activities 100 Subject to the approval of the relevant authorities in light of the economic need taking into account the number of hospitals, medical and health centers in a specific area. Dubai Health Care City is excluded from the above condition.
109 869 Other human health activities 70 As per the applicable regulations
110 8211001 Hotel Management As per the applicable regulations  
111 8211004 Restaurant Management    
112 90009 Creative activities and presentation of art drama (theatre) Permissible only for theatre activities and live bands. As per the applicable regulations  
113 9000104 Music Band    
114 9000110 Circus    
115 8130002 Landscape and gardening services    
116 9103 – 91030 Botanical and zoological gardens and nature reserves activities Permissible only for public garden services and specialized garden services  
117 5012 – 50120 Sea and coastal freight water transport As per the regulations applicable  
118 5022001 Internal water transportation of goods    
119 7730016 Commercial ships rental    
120 5222002 Ship piloting and towing    
121 5222007 Marine towing of boats and jet skis    
122 New Activities of holding companies in intellectual properties    

 

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