It is anticipated that the new Foreign Direct Investment (FDI) Regulations would prompt an “unprecedented explosion” of foreign investments in the UAE.
The Foreign Direct Investment Regulation was introduced in the UAE in September 2018 through Federal Decree No 19 of 2018. Subsequently, Cabinet Resolution No 16 of 2020 (‘New Regulation’) concerning the determination of Positive list of Sectors eligible for FDI and percentage of holding by foreign nationals, was released in March 2020.
The new FDI Regulation warrants amendments in certain provisions of the Commercial Companies Laws (Federal Law No. (2) of 2015), like that of a minimum number of shareholders in an LLC, Nationality of majority board members, disposal of shares by the UAE Nationals etc.
As per the reports in the newspaper, the new FDI regulations would be effective from 1 December 2020. Under the new legislation, the UAE will allow 100 per cent ownership of businesses for foreign nationals in the specified activities subject to certain stipulated criteria.
The regulation includes the Positive list of Economic Sectors and Activities Eligible for FDI (Attached herewith for your reference).
• The FDI Company may be a limited liability company or a private joint-stock company (including a single shareholder limited liability company or private joint-stock company);
• The minimum share capital of the FDI Company (which is linked to the activity that it will conduct);
• The restrictions and conditions attached to certain activities (such as the obligation to utilise modern technology); and
• That the minimum level of Emiratisation of the workforce of an FDI Company will be determined by the Ministry of Human Resources and Emiratisation.
Further, the Regulation also mentions that the relevant licensing authority would specify the conditions and procedures required to establish and licence an FDI Company.
The new regulations include 122 different economic activities related to the agricultural, industrial and services sectors, where FDI is expected to be poured in. Sectors such as energy and hydrocarbons, telecommunication and transport are exempted from the new Regulation.
It is likely that each licencing authority will issue their own regulations in this regard to the rationalize procedures for application. Also, the amendments to the Commercial Company law is to be looked out for, to get the wholistic view of the regulations and its implications in practical applicability.
Mr. Ragesh Mattummal, Partner
+971 50 3578031