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100% Foreign ownership into UAE mainland entities:  Natural evolution or revolution?

Following a UAE Cabinet announcement earlier this week, foreign investors will soon be entitled to own 100% of the capital of companies registered in the UAE mainland. This constitutes a major breakthrough in relation to foreign investment rules.

This anticipated evolution has been carefully prepared. It is the natural continuation of Federal Decree Law No. (18) of 2017 amending Federal Law No. (2) of 2015 on Commercial Companies, which provides for possible exceptions where the mandatory 51% shareholding of LLCs by UAE national or entities may be lifted via further Cabinet resolution for specific sectors.

A number of technicalities (chief amongst which the impact on free-zones, which allow 100% foreign ownership, and the impact on distributors and registered commercial agents) are yet to be defined.

100% ownership by foreign investors in domestic entities is likely to be restricted to specific sectors and be subject to a vesting process – whereby a substantial investment is to be required as part of the constitution process of the UAE mainland entity. More visibility is expected by year end as the reform takes effect.

Despite these uncertainties, the key take-away of the loosening on domestic ownership restrictions is the UAE’s continuous commitment to diversify its economy and increase the contribution of non-oil sectors. It will inevitably spur the local economic growth and attract foreign investment outside of existing free zones.

Originally published our member M/HQ