What has changed?
The Federal Decree-Law has amended Article 10 of the CCL, and in principle changed the default requirement imposing at least 51% Emirati ownership in an LLC or joint stock company. Rather, LLCs and joint stock companies may be wholly owned by foreign nationals unless they are engaged in an activity that has a “strategic impact”.
The amended Article 10 now provides for a committee to be created that will determine those activities that have a “strategic impact” and the controls necessary for licensing companies to do business in these activities. In turn, the UAE Cabinet will issue a decision setting out these activities and the relevant licensing controls based on this committee’s proposals.
Subject to the UAE Cabinet’s decision, the competent authorities of each Emirate will determine the specific percentage of Emirati participation in the capital and/or the board of the companies to be incorporated in their jurisdictions. Further, the amended Article 10 also states that the UAE Cabinet may exempt any company whose activities are regulated by special legislation from any activity or provision relating to an Emirati’s shareholder percentage or contribution in the management of a company.
In addition to amending Article 10 of the CCL, the new Federal Decree-Law also repeals the existing FDI Law and by inference Cabinet Decision No. 16/2020, as well.
Background: As a follow-up to our previous article concerning the proposed changes to Federal Law No. 2/2015 on Commercial Companies (the “CCL”), the UAE has issued Federal Decree-Law No. 26/2020 (the “Federal Decree-Law”) setting out the much anticipated amendments to the CCL.
While this Federal Decree-Law introduces a number of important amendments affecting LLCs and joint stock companies, in this article we focus on some of the key amendments that will likely have an impact on foreign direct investment in the UAE as well as some amendments affecting the governance of LLCs since they tend to be the most common corporate structure used by foreign investors.
In recent years, the UAE has taken steps to ease foreign ownership restrictions applicable to onshore UAE companies and pass laws and regulations that are intended to incentivise foreign investment in the country. The amendments introduced by the Federal Decree-Law appear to be in line with the UAE’s intention of making the country an even more attractive destination for foreign investment. Although several questions remain with respect to the short-term practical implications concerning these amendments; in the long run, the changes introduced by the Federal Decree-Law will likely have a positive impact on the UAE economy and significantly increase the level of investment and M&A activity.
Source: Stephenson Harwood LLP article