Under recently enacted legislation, restrictions on foreign ownership in onshore companies in the UAE have been largely liberalized. If you are considering registering a company in Dubai and want know more about regulations governing foreign investment in the UAE, this article is exactly what you need.
Updated FDI Regulations in the UAE
The FDI Act establishes new requirements for foreign ownership and allows foreigners to own up to 100% of stocks in companies registered in the UAE. The sectors covered by the new regime will be defined in by-laws that have not yet been published.
Existing restrictions on foreign ownership will continue to apply to sectors not covered by the new regime.
If you are interested in registering a company in the UAE, you should keep in mind that the FDI Act isn’t applicable to free zones or any special agreements on foreign ownership concluded with state-owned entities.
Specifics of New FDI Regulations in the UAE
The main objective of the FDI Act is to encourage FDI in the UAE, especially in sectors contributing to the country's sustainable economic development. The law applies to any foreign investment in legal entities created as per federal legislation enacted in 2015, such as:
- Public JSCs
- Private JSCs
It is worth noting that the FDI Act violates the so-called ‘Rule 51/49’ whereby a majority stake in companies established in the UAE must belong to UAE residents. Under UAE legislation, residents of GSC countries are considered UAE citizens as far as investment in the UAE is concerned. Therefore, it is expected that regulators are likely to adopt a similar approach with respect to the FDI Act.
Licensing FDI in the UAE
A foreign investor seeking to invest in a Dubai-based company which operates in a sector included in the list of permitted activities must apply for a license authorizing foreign investment in the UAE.
The FDI Act establishes streamlined procedure for obtaining a foreign investment license in the UAE. Under the law, a competent authority is to approve an application within five business days. If it fails to do so within the prescribed deadline, an application is considered rejected.
Companies that succeeded in obtaining a license authorizing FDI in the UAE will be included in the new registry maintained by an FDI unit. It is worth noting that such enterprises also need to apply for a license authorizing commercial activities in the Emirates.
Benefits of Obtaining a License
UAE companies licensed to engage in FDI are considered national companies to the extent permitted by law. However, it is important to understand that any changes in the share capital, amendments to the memorandum or articles of association, and M&A in the UAE require securing the consent of respective regulators.
The new regime offers greater opportunities for international organizations wishing to invest in the UAE.
Planning on investing in the UAE? IQ Decision UK can provide you with detailed information on the regulatory specifics in this jurisdiction.