13 January 2021
The UAE Federal Decree-Law No. 26/2020 entered into force on 2 January 2021. The Decree-Law was originally published in the Official Gazette on 30 September 2020 and provides for the amendment of the 2015 Commercial Company Law (Federal Law No. 2 of 2015), with a focus on increasing flexibility and promoting foreign investment. Existing companies have until 2 January 2022 to make required adjustments as per the amended law. Although in force, certain important changes do not apply until 6 months after the effective publication (i.e., 30 March 2021), including changes in company ownership and management requirements.
One of the most important changes concerning foreign ownership is the repeal of the general requirement that a UAE national or company wholly owned by a UAE national must own at least 51% of the capital of a UAE company (the 49/51 rule). As such, foreign investors are allowed to own up to 100% of a UAE company, including a single-shareholder company. However, foreign ownership restrictions are still allowed in relation to certain activities with so-called strategic impact, with a list of these activities being finalized along with minimum UAE participation and licensing requirements.
In relation to the repeal of the general ownership requirement, Federal Decree-Law No. 19/2018 (the FDI Law) is also repealed by Federal Decree-Law No. 26/2020. The FDI Law had introduced the possibility of 100% ownership in certain sectors and activities but is no longer needed given the repeal of the general ownership requirement.
Other important changes include that the requirement for a UAE national to act as a service agent of a branch office in the UAE is repealed. Further, it will no longer be required that UAE nationals must serve as the chairman and the majority of the board members of public and private joint-stock companies. However, specific requirements may be introduced for activities with strategic impact.
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