Non-nationals permitted to own 100% of a company in the UAE
November 29, 2020
By Abdulla Ziad Galadari & Mohamed Koura
On November 23, 2020, His Highness Sheikh Khalifa bin Zayed Al Nahyan, issued a decree amending the Companies Law No. 2 of 2015.
The new decree allows for several interesting amendments to the previous law, including:
- Foreign entrepreneurs and investors are permitted to fully establish and own companies in the UAE without the need for a local partner. Additionally, it is no longer a requirement for foreign companies opening a branch within the UAE to have a local agent.
- Reorganisation of some provisions and rules of limited liability and shareholding companies and cancelling Decree-Law No. (19) of 2018 regarding foreign direct investment (FDI)
- The competent local authority will be granted authority powers that include determining a certain percentage of citizens’ participation in the capital or boards of directors of all companies that are established within the scope of their jurisdiction, and approving applications for establishing companies other than joint-stock companies and determining fees according to the controls approved by the Council of Ministers.
- Reorganising the governance of boards of directors and the general assembly in joint-stock companies, and to allow non-joint stock companies to practice fund investment activities for the account of others in the event that the laws regulating these activities or the decisions issued thereunder are approved.
- Granting the Securities and Commodities Authority the power to set controls and procedures for evaluating in-kind shares, and to register the names of shareholders to attend the company’s general assembly meeting. It is permissible to appoint experienced members of the Board of Directors who are not shareholders without specifying a specific percentage, and it is also permissible to remove the Chairman or any of the members of the Board of Directors of the company or any of its executive management from their positions in the event of a court ruling proving that they have committed acts of fraud, abuse of power, or acts by concluding deals or transactions involving conflict of interest in violation of the provisions of this law or the decisions implementing it.
- Shareholder or shareholders may collectively file a lawsuit before the competent court in their name and on behalf of the company against any party related to the company for damages caused to the company, resulting from his violation of the duties towards the company according to this law or any other law.
- In order to meet the requirements of the current stage and the changes it has witnessed, electronic voting in general assembly meetings is permitted, provided that the controls and conditions issued by the authority in this regard are adhered to. The law also permitted the issuance of share certificates, their signature and the electronic retention, in accordance with the controls issued by the authority in this regard.
- With regard to the provisions and controls for increasing or decreasing the capital of the joint-stock company, companies are now permitted to agree to increase their capital by issuing bonds or sukuk and converting them into shares in its capital.
- A person now has the right to establish and own all shares in the private joint-stock company, provided that the name of the company follows the phrase “private shareholding – one-person company”, and the provisions of the private joint-stock company shall apply to it.
- Companies wishing to convert into a public joint stock company may do so – after the approval of the Authority – to sell no more than 70% of the company’s capital after evaluation in place of the current 30% through public subscription, and to issue new shares according to a special decision to increase its capital and put it for public subscription.
- The Council of Ministers has been granted the authority to form a committee, that includes in its membership representatives of the competent authorities, to propose activities with a strategic impact, and the necessary controls to license companies that carry out any of these activities. It has also been recognised that it is impermissible to amend the articles of association or establishment contracts for any of the existing companies “since the time of its enforcement”, affecting the percentage of citizens’ participation in those companies or their boards of directors, whenever the company is carrying out an activity of strategic impact, except after approval of the competent authority.
- Existing companies may now adjust their positions in accordance with its provisions within a period not exceeding one year from the date of its implementation, and this period may be extended to other similar periods by a decision of the Council of Ministers based on the proposal of the Minister of Economy.
In light of the continuous government efforts to develop the legislative environment for the economic sectors in the UAE, this step reflects the forward-looking vision adopted by the UAE to develop the economic sector and provide it with factors of growth and progress. These amendments strengthen the UAE’s leading position regionally and globally as an attractive destination for companies and individuals. The amendments also provide new and varied means of support for companies based in the UAE to increase their competitiveness and their ability to access regional and global markets.
These amendments are to be enforced from 1st December 2020, and companies shall have a period of one year to amend their status.