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New UAE investments rules: Proposed legislative reforms

Posted on 22-May-2018 09:36 PM
New UAE investments rules: Proposed legislative reforms

The UAE Cabinet has decided to (i) allow 100% foreign ownership by global investors in the UAE mainland; and (ii) grant 10 year residence visas for investors in the fields of medicine and engineering, as well as university students who have excelled in their area of study.

The news was released in series Twitter posts by His Highness Sheikh Mohammed bin Rashid Al Maktoum and has led to a number of media commentaries on its impacts.

The decision has been applauded as a reinforcement of the UAE Government’s stance, and desire, to remain a hub for international investors and talent, offering ‘excellent infrastructure and flexible legislation’.

This trend began with Federal Decree Law No. (18) of 2017 amending Article 10 of the Federal Law No. (2) of 2015 on Commercial Companies by allowing the Cabinet to decide on sectors in which 100% foreign ownership would be permissible. The draft proposed investment law gave investors the signal that the UAE was ready to relax its foreign investment rules in certain sectors.

While the decision is a much-awaited positive step for the UAE, information regarding the implementation and impact of the cabinet decision is as yet to be detailed and information is limited. I may be likely the following considerations will be taken into account during implementation:

1.

Agencies: Impact on distributors and registered commercial agents. If the decision allows for 100% foreign ownership in the area of retail and wholesale, large impacts on the current arrangements between large retail companies/ manufacturers and local UAE companies will be evident.

2.

Free Zones: The impact on free zones. Free zones offer other incentives for foreign investors setting up in their respective jurisdictions, the main advantage remains 100% foreign ownership. The decision relaxes the ownership restriction in all sectors and this may affect the operation of the various free zones available within the UAE.

3.

Other Laws: The implications on other laws and regulations. The implementation of the decision will require the amendment of some other laws and regulations, e.g. the Commercial Companies Law which should be amended to allow for a foreign sole shareholder company. Also, regulations governing the issuance of immigration cards and application for residency visas.

The decision is a culmination of previous discussions on relaxing foreign investment rules and steers the UAE further towards becoming an open market.

While the decision represents a significant step forward in opening the UAE market, the details of its scope and implementation technicalities remain unclear. What is clear, however, is that the UAE is ready to relax its foreign investment rules in certain sectors and for certain categories of global investors particularly now in the period leading up to Expo 2020.


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