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In terms of strategic importance, the UAE Commercial Entrepreneurship Law revisions go further and deeper than in the recent past.
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Dubai: The immediate focus of the UAE’s revised Commercial Enterprises Act will be on creating new businesses in the country through 100 percent stake in local operations. The most immediate – and biggest – gains should be for tech and digital companies that want to set up on the mainland and not have to go through free zones to achieve full ownership.

While June 1st has been set as the date for the revised law to take full effect, investors and business owners will need to keep a close eye on additional developments. The UAE cabinet will set up a committee made up of representatives from each department of the Ministry of Economic Development to determine:

* A list of commercial activities believed to have a strategic impact on the UAE economy (Strategic Impact List); and

* Additional license controls for companies engaged in commercial activities in sectors included in the Strategic Impact List.

“The negative list – which the recent changes will not remove – includes key sectors such as oil and gas, telecommunications and utilities,” said Bahjat Abou Zeyd, senior associate – corporate at law firm Abdulla Alawadi & Associates. “[These sectors] will continue to be subject to foreign ownership restrictions. “

To qualify for a foreign ownership exemption, the applicant must meet several requirements, such as: B. the capital contribution, use of technology and employment of UAE nationals

– Bahjat Abou Zeyd, Senior Associate, Corporate, Abdulla Alawadi & Associates

Landmark upgrade

Even then, the changes to the UAE Commercial Entrepreneurship Act are comprehensive enough and address the need to stimulate foreign investment and new business activity. Most importantly, it is clear what potential business owners can expect.

Paras Shahdadpuri, Chairman of the Nikai Group, former head of the Indian Business Council, said: “Expatriates invested 100 percent in their businesses, but had to write 51 percent in their licenses on behalf of the partners from the Emirates. Investors always felt the threat posed by the sword of Damocles and could never invest freely again. “

Positive negative

The negative list shows those sectors in which one hundred percent foreign participation is not permitted. “We have to see that the practical implementation by the committees of the economic development department of the respective emirate would determine the foreign participation in various activities,” said Atik Munshi, managing partner at the consulting firm Enterprise House.

“It is expected that activities such as ‘trading agency’, banking, insurance, labor, etc. will be viewed as strategic activities and that foreign ownership will likely be restricted here. Given the UAE’s open FDI policy, these too could be revised in the future. “

Implementation depends on a committee under the UAE Cabinet Resolution. The committee will have representatives from the economic departments who will decide on the level of foreign participation in a company. In principle, the economic departments determine the percentage of foreign investments based on their activities and their earnings

– Atik Munshi from Enterprise House

Wait for contributions from the committees

For the time being, potential investors and business owners will have to wait for the DED committees to receive their recommendations on these holdings. Whatever their choices, they will be in line with the United Arab Emirates’ unique initiatives recently launched regarding “golden visas”, selective citizenship rights and special category visas that allow a person to enter the United Arab Emirates to live and work for any business anywhere in the world.

Shahdadpuri believes this is leading the UAE to take full advantage of the post-pandemic recovery in global business sentiment. “Entrepreneurs are looking to invest in safer countries like the UAE. It has the infrastructure and a high quality living environment – the UAE can be # 1. 1 destination for investment. “

The UAE has shown resilience during one of its toughest periods and has been a hotbed for investment. As more people seek to make the UAE their home, initiatives like UAE passport issuance, golden visas, retirement visas and full foreign ownership are only making more people think they are their long-term home.

– Ashish Panjabi, Chief Operating Officer of Jacky’s Electronics

Real estate booster

Faisal Durrani, director of Middle East Research at Knight Frank, said: “The federal and local governments in the United Arab Emirates continue to present key policy initiatives that will be critical to future residential and commercial real estate demand. The affirmation of 100 percent foreign ownership will no doubt have a significant impact on office space in Dubai and Abu Dhabi, which continue to face calmer conditions after the pandemic.

“With this landmark change, the UAE has unleashed its potential to establish itself as a major competitor to global business headquarters that were previously restricted to free zones in the country.”

At the small end of the business spectrum, new initiatives like “Dubai Next” will certainly help position Dubai as an attractive option for global startups looking for a dynamic place to start. These announcements are the perfect addition to the numerous residency options made available over the past 12 months to attract and retain talent and build business confidence

– Faisal Durrani from Knight Frank

Retrospective effect?

How will the changes affect existing businesses when it comes to 100 percent ownership is the other big question. In recent years, global companies have secured these rights for their operations in the UAE, for example through Aster in the healthcare sector, Malabar Gold & Diamonds in retail and MARS, the makers of the chocolate brand.

This will continue to be done on a case-by-case basis, sources say. There is currently “no further guidance on how to move forward and remove local partners from LLCs and what tools to use to do this,” said Abou Zeyd of Abdulla Alawadi & Associates.

The implementation of progressive decisions based on solid regulatory and legislative mechanisms is of the utmost importance to strengthen the global appeal of the country among residents, entrepreneurs and foreign investors alike

– Adeeb Ahamed from LuLu Financial Group

We anticipate a sharp increase in FDI as companies that were previously a little reluctant to partner with a local partner may now have the option to open a 100% foreign owned local company. We are eagerly awaiting the opportunity to review the final list of eligible activities and industries

– Scott Cairns, Managing Director at Creation Business Consultants

Check the reviews

Pending further updates, some of these existing businesses and their owners would be thinking about their “enterprise value” – and what they would have to pay their local partner to buy their stake.

“Valuation of real assets has long been controversial,” Munshi said. “According to the new change, responsibility for such assessments rests with the Founders Committee.

“Many companies want to take advantage of increasing overseas ownership of their LLCs. In the event of a transfer of shares from the UAE’s national partner to the foreign shareholder, the valuations of these companies will play a key role. In view of the friendly relations with the national partner of the UAE, a smooth process is expected in most cases. “

Last year the government – and individual emirates – announced measures to make the UAE more attractive to foreign capital and talent. The swift implementation of these measures bodes well for the country’s ability to benefit from a strong global economic recovery

– Scott Livermore, Chief Economist at Oxford Economics Middle East