The Advent of FDI Law in the UAE
In September 2018, the UAE Cabinet amended the UAE Commercial Companies Law to introduce the UAE Foreign Direct Investment Law (FDI Law). Prior to the introduction of the FDI Law, all onshore UAE Limited Liability Companies (LLCs) were subject to foreign ownership restrictions which implied that a foreign investor could only hold a maximum of 49% of the share capital with a UAE national or company holding a minimum 51% of the LLCs shares. The introduction of the FDI Law opened up the UAE Mainland markets to 100% foreign ownership of UAE LLCs in certain companies and sectors of the economy outside the UAE designated free zones.
In July 2019, the UAE Cabinet announced its intent to further relax foreign ownership restrictions for 122 business activities, specifically in the manufacturing, agricultural and services categories, pursuant to the FDI Law. On the 17th of March 2020, the UAE Cabinet issued a Cabinet Resolution setting out the ‘Positive List of Economic Sectors and Activities in which Foreign Direct Investment is Permitted’.
Under the FDI Law, foreign investment above 49% is not permitted in sectors of the economy which appear in a “negative list“. There are currently 13 sectors specified in the “negative list”, including, security and military related activities, oil and gas exploration and production, banking and finance services, insurance, postal, telecommunications and transport services, and commercial agency services. The UAE Cabinet has the discretion to amend the “negative list” by adding or removing sectors.
Under the FDI Law up to 100% foreign ownership by foreign investors may be permitted, subject to certain criteria being satisfied in sectors of the economy which appear in the “positive list”.
There are currently 122 sectors specified in the “positive list”. Some of the key sectors included are:
- Transport and storage
- Hospitality and food services
- Information and communications
- Science and technology
- Art and entertainment, and
The FDI Law provides that, on a case by case basis, minimum capitalization requirements may be imposed on foreign investors setting up companies under the “positive list”. Furthermore, the licensing authority in each Emirate and the industry specific regulators may impose additional conditions on such companies. The UAE Ministry of Human Resources may require a certain percentage of the workforce of such companies to comprise of Emiratis.
We at D’Andrea and Partners have a team of specialists who can advise you on the UAE Foreign Direct Investment Law. If you have any queries regarding foreign investment in the UAE, do get in touch with our team at firstname.lastname@example.org.