New amendments to the UAE commercial companies law
For those looking to establish a business, different laws and processes govern the set-up of companies in each emirate. In November 2020, the UAE announced significant amendments to the country’s laws for commercial companies. The UAE took another step towards enhancing its business infrastructure. These landmark changes to the UAE commercial company ownership laws will help to attract foreign investors and entrepreneurs, and further, improve the ease of doing business in the country.
Learn all about the new amendments to the UAE commercial companies law and what it means for foreign business owners.
THE NEW UAE COMMERCIAL COMPANY OWNERSHIP LAW
In November 2020, H.H. Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, issued a decree that significantly amended the UAE Federal Law No.2 of 2015 on Commercial Companies.
As per the new commercial company ownership law, non-Emiratis can now fully establish onshore companies, allowing 100% foreign ownership of such businesses. This removes the requirement for commercial companies in the UAE to have an Emirati shareholder or agent.
Most of the amendments to the commercial company’s law came into effect on 1st December 2020.
THE CURRENT LAW ON COMMERCIAL COMPANY OWNERSHIP
Under the current UAE commercial companies law (Law No.2 of 2015) all onshore companies are required to have a UAE National or Emirati-owned company as a partner or sponsor. Foreign shareholders are also allowed to own up to 49% of a limited liability company (LLC), while the local sponsor holds the 51% majority.
The new company rules have withdrawn the need for a local sponsor for companies operating as an onshore UAE business. These amendments also supersede the Foreign Direct Investment Law (FDI Law) of 2018. The FDI Law had allowed 100% foreign ownership of businesses of certain categories, on a case-by-case basis.
THE OTHER AMENDMENTS ANNOUNCED BY THE UAE GOVERNMENT
The new decree issued by the President of the UAE amended 51 articles of the commercial companies’ law of 2015 and introduced three completely new articles. However, the new laws have removed the need for an Emirati shareholder and agent. The local authorities have the power to determine the percentage of Emiratis in capital allocation and boards of directors for companies.
Provisions for joint-stock companies and limited liability companies announced as part of the new decree. As per the new laws, firms that receive approval to become joint-stock companies from the relevant authorities can sell up to 70% of the company through IPOs (initial public offering). This is also an increase from 30% that is currently allowed for joint-stock companies.
Other amendments include
The permission to use electronic voting in general assembly meetings.
The appointment of board members who are also not stakeholders.
The chairman and board members of companies, if found guilty of fraud or misuse of power will be dismissed.
Furthermore, stakeholders can now sue a company for damages due to the latter’s failure to perform their duties.
The UAE Cabinet has also been authorized to form a new committee to determine activities of ‘strategic impact’ and specify the measures and procedures needed to license such companies.
These new UAE commercial company laws 2020 will also help to enhance the legislative environment, and encourage more foreign investment in the country. It follows a slew of other landmark changes to existing laws in recent years, such as the introduction of long-term visas in the UAE, as well as the opening of the freehold market in Abu Dhabi. Most recently, there were amendments to personal laws in the UAE as well, regarding inheritance, cohabitation, alcohol consumption and more.
Opening up the economy to more investors and entrepreneurs, there is an increased interest in the property market. More people look to make the UAE their permanent home. The emirate’s strategic location, world-class lifestyle and favorable business environment make it a desired destination.
That’s our guide to the new commercial company laws in the UAE!
You can also choose to open a business in one of the Free Zones in the country. Free zone offer 100% ownership by foreign nationals and exemption from VAT, customs and more.