The positive list provided for in the UAE FDI Law has now been issued by the UAE Cabinet and has come into effect. This is a significant development for foreign investors that are interested in investing in, or already invested in, companies in the UAE.
In September 2017, the Government of the UAE amended the UAE Commercial Companies Law¹ to allow the UAE Cabinet of Ministers the flexibility to permit increased levels of foreign ownership by non-AGCC nationals (Foreign Investors) in certain companies and sectors of the economy². The UAE Foreign Direct Investment Law (the FDI Law)³ introduced a framework under which foreign investors may apply to own more than 49% of the shares in the capital of companies incorporated 'onshore' in the UAE.
Under the FDI Law, foreign investment above a 49% will not be permitted in sectors of the economy which appear in a "negative list". The UAE Cabinet has discretion to amend the "negative list" by adding or removing sectors. There are currently 13 sectors specified in the "negative list", including banking, insurance, and commercial agencies.
The FDI Law provides for a "positive list" of activities in which up to 100% foreign ownership by Foreign Investors may be permitted, subject to certain criteria being satisfied. The FDI Law stated that the UAE Cabinet had the discretion to issue and amend the "positive list" by way of resolution. Reports emerged in mid-2019 that the UAE Cabinet had approved the "positive list" but that list was not formally adopted or published in the UAE Official Gazette. On 17 March 2020, the UAE Cabinet issued a Cabinet Resolution setting out the 'Positive List of Economic Sectors and Activities in which Foreign Direct Investment is Permitted' (the Positive List Resolution)⁴. The Positive List Resolution is expressed to become effective from the day on which it is published in the Official Gazette. The Positive List Resolution has been published in the Official Gazette dated 31 March 2020 so is now in effect.
122 economic activities are specified in the "positive list" that is attached to the Positive List Resolution, including (amongst others) activities in the following sectors:
The Positive List Resolution also provides, on a case by case basis, minimum share capital requirements which will need to be met for companies that are or become owned 100% by Foreign Investors and are licensed to carry on activities contained in the "positive list", and imposes other requirements that will need to be satisfied by Foreign Investors in relation to certain activities. It also allows the competent licensing authority in each Emirate and industry specific regulators to impose additional conditions on such companies and provides that Emiratisation requirements may be imposed by the UAE Ministry of Human Resources and Emiratisation on companies that are owned 100% by Foreign Investors.
Clyde & Co has a dedicated, specialist Foreign Direct Investment team, with extensive experience of advising Foreign Investors on corporate structuring and related issues in the UAE. If you have any questions concerning the Positive List Resolution or its potential impact on your business, please contact the authors or your usual Clyde & Co contact.
¹ Federal Law No. 2 of 2015
² Federal Decree-Law No. 18 of 2017
³ Federal Decree-Law No. 19 of 2018
⁴ Cabinet Resolution No. 16 of 2020