Until now companies in the UAE had needed certain shareholding to be held by an Emirati national or an Emirati agent, depending on what type of company. The UAE approved a new law in 2018 that would allow foreigners to own up to 100 percent of some businesses and foreigners could already own up to 100 percent of those registered in designated business parks known as free zones but on 24 August 2020, the UAE issued Cabinet Resolution 58 of 2020 on Regulating the Procedures of the Real Beneficiary (the Resolution). It will take effect on 1st of December, 2020. The Corporate Lawyers of Dubai will enlighten the readers on new rules concerning foreign ownership through this article.
These amendments get rid of the requirement for a share of minimum 51 percent of share in a company and to have a to have a UAE national or local company as its registered agent. These changes will supersede the Foreign Direct Investment Law Federal Law by Decree No. 19 of 2018 regarding FDI, which is cancelled. Decisions like capital allocation and board seats of companies among Emirati nationals will be left to the local authorities. Some details are still underway and being thought of by government authorities like requirements necessary for licencing companies engaged in such activities. Obligation of maintaining a register of real beneficiaries will not be put on listed companies in a regulated market which are subject to sufficient ultimate beneficial disclosure requirements.
The Resolution applies to registrars of companies and entities licensed or registered in the UAE. This decree brings in many developments, one of those being electronic voting at general assembly meetings to be permitted under the Commercial Companies Law. In kind shares are also a part of the discussion and will be worked on. All thanks to the decree companies can now appoint independent board members without limiting their number to a certain percentage of the board. If a judicial judgment is issued against a board member due to any misuse of power or fraud, the member will be dismissed. Sectors like oil and gas, utilities and transport do not come under purview of this decree. For accommodation of these many changes this amendment will have 3 new articles added and 51 articles amended. Entities are also to refrain from registering or documenting anything in connection with transfer of its share unless the transferee provides information confirming whether such transfer will result in the change of the real beneficiary of the entity and the nature of such change.
What this means for the UAE?
The decree will increase the percentage of shares that a company going public may issue in an IPO from 30 per cent to 70 percent and result in massive economic growth. The transformation will certainly enhance the UAE’s position in the global market. The doors are open to foreign investors and it will also improve the ease of doing business in the country. This amendment paints a new picture for the UAE and makes it a trailblazer for change in the GCC and the region.