New law in UAE permits full company ownership on certain conditions

Foreign companies establishing themselves on specialized economic zones, or when making major investments in sectors such as manufacturing and tourism, can hope for full equity ownership in UAE, revealed Abdullah Al Saleh, Undersecretary in the Ministry of Foreign Trade.

The draft Companies Law approved by the UAE cabinet last week, said that it permits the cabinet to issue a resolution specifying the type of businesses and sectors in which a foreign partner may hold more than 49 percent of the company's capital.

The Partner and Head of Corporate Structuring at Al Tamimi and Company said that the law will not provide for a percentage and does not mention about statutory restriction. The 51 to 49 percent limitation has not been addressed in this law, and it has been left to the investment law to cover the percentages for certain businesses.

However, some particular sectors such as tourism, healthcare and education can top the UAE agenda as major sectors for economy this year, he agreed.

Speaking about strategic businesses, he explained that if, for instance, a company is manufacturing a unique chip that would add lots of value to the UAE economy, and are bringing in talent and large capital investment into the country, the company can qualify for an exception from the Cabinet for 100 percent ownership.

The commercial companies draft law does not refer to Foreign Direct Investment at present, as the new FDI law is yet to be announced. At present, there is a maximum of 49percent ownership for listed companies, while foreigners would require a partner in the UAE to conduct business, although full ownership is permitted in free zones.

Major projects that are established in specialized economic zones across the UAE could have 100percent foreign equity share. Apart from free zones, even industrial parks that require companies to have a local partner form a part of specialized economic zone, said Jitendra Gianchandani, Chairman and Managing Partner, Business Consultancy, Jitendra Consulting Group.

Posted on 19/12/2011

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