UAE President Khalifa bin Zayed Al Nahyan issued a Federal Decree-Law No (26) of 2020 amending the provisions of Federal Law No. (2) of 2015 on commercial companies. The new law included the amendment of 51 articles and the addition of new articles.
The provisions of Article (10) have been cancelled which was containing the following;
- It was titled “Ownership Percentage”, and stated “Every company established in the state must have one or more citizen partners or shareholders whose share is not less than (51%) of the company's capital.”
- The legal position under the new amendment is as follows: the new amendment has cancelled and removed the stipulation of the 51% UAE-owned share for onshore companies as of 30 March 2021. Enable foreign investors to have full ownership over all economic sectors except ‘strategic impact activates’. However, the Cabinet Resolution determines which activates will have a ‘strategic impact’ on the UAE economy.
The amendment focused on reorganizing the provisions for establishing limited liability companies and joint-stock companies, thus exempt them from the minimum ownership rate for citizens and allow foreigners to establish and own 100% of the company.
The decree-law permits a contributor or shareholders collectively to file a lawsuit before the competent court on their names and on behalf of the company against any party related to the company whenever they sustained damage that may be resulted from violating the duties towards the company according to this law or any other law.
With regard to the provisions and controls of increasing or decreasing the capital of the joint-stock company,The Decree-Law allows the company to approve any increase of its capital by issuing bonds or instruments, converting them into shares in its capital.
The UAE adopted new amendments to the "Companies Law", allowing foreign entrepreneurs and investors the possibility to establish and own companies without the need for a specific nationality. The decree excluded some companies that are exempted by a decision by the Council of Ministers and those wholly owned by the federal or local government or entities affiliated with any of them, and which are treated in accordance with their founding agreements or statutes.
The new amendments also excluded from the provisions of the law the companies in which the government, subsidiary, or owned by the government shares no less than 25% and working in the field of oil exploration, extraction, refining, processing, marketing and transportation or in the field of energy of all kinds and which are treated according to what is stated in their founding agreements or regulations.
As for the Existing companies to which the provisions of Federal Act No. 2 of 2015 shall be applied , It must regularize their positions in accordance with its provisions within a period not exceeding one year from the effective date of this decree-law
Also the Federal Decree-Law No.(19) of 2018 regarding foreign direct investment has been cancelled. Whereas,the amendments to the Companies Law supersede the requirement that the foreign company shall have an agent who is a citizen of the state.
To conclude, by allowing 100% foreign ownership of UAE companies the amendment made a big leap in the UAE economy and it would have a great impact on attracting foreign investors, especially those who may have been reluctant to enter the UAE market as a result of these ownership restrictions.
