LOCAL SPONSOR NO LONGER REQUIRED FOR SOME LOCAL BUSINESSES IN UNITED ARAB EMIRATES
As per United Arab Emirates Cabinet Resolution No. 16 of 2020, it has been resolved that hundred percent (100%) ownership for foreign investors are now allowed for some classes of business.
Formerly under the law , if you want to set up business outside free zone it requires an Emirati individual or hundred percent (100%) Emirati-owned company to hold the balance fifty-one (51 %) shares as a local sponsor, and foreign investors were restricted to owning up to forty nine percent (49 %) shares only.
The amended law allows natural and legal person to establish companies without the need for a for local sponsors, however such pronouncement is subject for certain restrictions.
Among the Parameters set forth under the Cabinet Resolution No.16 of 2020 allowing hundred percent (100%) ownership for foreign investors of Foreign Direct Investment project in the economic activities are:
- Approved list (“called the positive list”) of economic sectors and activities under which a foreign investor may engaged in;
- Allowed legal forms required for the economic activities;
- A limited liability Companies, including one person ( single owner) companies;
- Private joint Stock companies, including one person ( single owner) companies.
- Minimum Share Capital in the economic activities depends on the specific activities;
- Restrictions and Conditions of Foreign Investment;
- Minimum percentage of Nationals;
- shall be according to the relevant Regulation applicable in the Ministry of Human Resource & Emiratization.
- Exceptions and among others.
- Provisions of Article (71), (151) and (209) of the Federal Law No. (2) of 2015 on the Commercial Companies and its amendments shall not apply to Foreign Direct Investment Project in economic activities referred to in the as the ‘Positive list’ approved list.
Primarily, the amended law set forth more emphasis for the investors who desires to have local business a limited liability shareholding which is distinct from the free zone business set up wherein the latter hundred percent ownership is acquired since each free zone govern by its own authorities.
Expectedly with the inviting business provisions in establishing companies with limited liability shareholdings, various investors will be more willing to set up business under such forms.
On the other hand, the amended law will not generally apply to all kind of business license the determination will depends particularly on the business activity to be undertaken by the foreign investor. Hence, in order to be entitled to the duly promulgated resolution foreign investor has to take into considerations all the consequential provisions of the law.
Foreign Investor has been defined Under Article 1 of the Cabinet Resolution No. 16 of 2020 “means a natural or moral person who has not the UAE national nationality and invests in the State in accordance with the Federal Law No. ( 19 ) of 2018 on Foreign Direct Investment".
