After the follow-up on the “Practical Implementation of Federal Decree Law No. 26 of 2020 for Branches of Foreign Companies” of April 22, 2021, in recent days it has been announced that as of June 1, 2021 the restrictions on the Foreign investment with respect to limited liability companies (“LLCs”) will be largely eliminated. This will have a direct impact on the Emirates’ foreign direct investment (“FDI”). In this legal article, we report on change expectations and licensing requirements for LLCs in Dubai and Abu Dhabi.
As of June 1, 2021, LLCs incorporated or to be incorporated in Emirates, in most cases, will no longer need an Emirati majority shareholder. This means that foreign investors can own 100% of the shares in the mainland LLCs unless the LLC carries out certain restricted activities called “strategic importance”.
At the moment the liberalization is intended to apply to all commercial activities with the exception of certain activities, as mentioned above, of “strategic importance” for the Emirates. Federal Decree Law No. 26 of 2020 presents a committee made up of representatives of the Economic Development Departments (“DED”) of each Emirate; This will decide on the activities of strategic importance for each Emirate, in addition to the licensing requirements for the companies that participate in the so-called activities.
In the case of Dubai, although an official list of activities with strategic importance has not yet been pronounced or published, it is perceived that the following activities will probably be the ones that will not be offered for total foreign investment: oil and gas, transport, telecommunications, infrastructure , medical care. It is analyzed that this list of activities will be published in June.
For the rest of the activities, they are expected to be 100% available for foreign investment. It should be taken into account that it will be analyzed that professional activities are not offered for 100% foreign investment.
In the case of Abu Dhabi, it has already published a list of activities for which 100% foreign ownership is desired.
The published list contains mainly industrial, manufacturing and service activities, also cultural activities, as well as health services but does not include commercial activities. We remain attentive to possible updates.
In the case of new foreign investors who wish to establish a new LLC in Dubai, they may constitute an LLC as a sole shareholder.
In the case of existing companies with DED licenses such as LLC, in the case of foreign investors who own shares and consider applying the new regulation, they must take into account if their activity is not classified as of “strategic importance”, of If so, you should review the agreements with the local shareholder to see the negotiated exit conditions and update the company’s deeds or MOA for updating. In this way, the foreign investor will acquire all the shares of the LLC that will give a new structure to his company with the DED.
Everything described above are the latest updates received so far. This information is not exact or definitive, therefore we are attentive to the next official updates to keep you informed from RTD Accounting and Consultancy.