The UAE issued a Federal Decree-Law on Foreign Direct Investment (FDI) in September 2018. The law came into force in October 2018. The law has brought in a legal framework and a roadmap for enabling 100% foreign ownership of Limited Liability Company of the UAE. These are to be formed outside of free zones of UAE. Even until recently, there were restrictions on FDI in the UAE that means there were restrictions regarding the ownership of the Limited Liability Company. The individual foreign investor could get only 49% of the maximum share capital with a UAE national or a minimum share of 51% of the Limited Liability Company. Hence, the new law of FDI has done away with old restrictions, at least in some sectors. Further clarity on the new law is on the way that should lift any remnant doubts or apprehensions. Then, the FDI law can be interpreted and implemented with more clarity.
If you’re a foreign investor, you’ve to establish a legal presence for yourself for doing business in the UAE. You can do it by anyone of that follows:
- As a foreign company doing business in the UAE, one has to incorporate onshore local entity as an LLC.
- Register an onshore branch of the foreign company.
- Or you have to establish a free zone entity as a limited liability company, or by a branch office.
- Or you may enter into a commercial agency relationship for doing the trading only in the UAE.
Any foreign national who wants to establish a company in the UAE or wishes to have a corporate presence in the UAE can either conduct business in the economic free zones of the UAE where it can have 100% ownership or it can establish an LLC onshore and hold a maximum 49% holding in the share.
This law on FDI was formed by the approval of the UAE cabinet. The UAE cabinet was authorized by the Federal Decree-Law of UAE. The cabinet deliberated on the issues of a foreigner going in for direct investment in the UAE and have 100% ownership of trade or 51% ownership of the LLC Company. The objective of this new law has been to attract more foreign investment into the country to drive the country into a knowledge-based progressive economy. The priority sectors are education, renewable energy, space and technology, water resources and health. Two important bodies were formed to give shape to this new law and they are Foreign Direct Investment Committee and Foreign Direct Investment Unit.
The FDI Committee and the FDI Unit are supposed to form a process that any foreign investor is supposed to follow to own a majority stake in an onshore LLC in some select sectors in the UAE. The FDI committee is headed by the Economy Ministry. This committee, under the guidance of the cabinet, is responsible for framing FDI policies. It will also decide on the sectors on which a greater amount of investment from the foreign investors will be permitted. It means an investment amounting to more than 49% of ownership.
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