Insights

The UAE Ministry of Economy announced that the amended Commercial Companies Law allowing foreign investors and entrepreneurs to establish and fully own onshore companies will come into effect on June 1, 2021. In November 2020, the UAE announced the landmark reform to the commercial company ownership laws by removing the requirement for onshore companies to have a major Emirati shareholder. The changed law also abolished a provision mandating that a UAE national or UAE-owned company was required as an agent and that a company’s board needed to be made up of a majority of UAE nationals and chaired by an Emirati.

This represents an important shift from the existing condition where mainland companies have been subject to foreign ownership restrictions under the Commercial Companies Law, and it has been mandatory for them to have a local sponsor holding 51% share in the mainland company. The amendment to the Commercial Companies Law will ‘boost country’s competitive edge and will strengthen the UAE’s appeal as a destination for both foreign investors and entrepreneurs and it will further boost the flow of investment to some key economic sectors.

As per the Commercial Companies Law, Law No. 2 of 2015, foreign shareholders were limited to owning a maximum 49 per cent in a ‘limited liability company’ (LLC) operating as an onshore UAE business. This requires an Emirati individual or 100 per cent Emirati-owned Company to hold the balance 51 per cent share as a local sponsor. In other firms, it was required for foreign businesses of certain categories to have a local service agent (Emirati national) who would not have any shares but would be remunerated as part of the business setup agreement.

The amended law allows natural and legal persons to establish and own 100 per cent stake in their companies, regardless of nationality. The law, however, will not apply to some companies that are excluded based on decisions by the Cabinet and those that are either wholly-owned by federal or local governments or their subsidiaries.

To know more about the changes and to form a new company or amend the existing license, feel free to contact our professional team.

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