UAE Might Legislate to Woo Investors by Including 10 More Sectors to the Commercial Companies Law

This move might be good news for investors and might be instrumental to the prospects of the Industrial Strategy 'Operation 300bn'

The UAE Ministry of Economy is working on a new law which would bring 10 new sectors to the fold of Commercial Companies Law, enabling 100 per cent foreign ownership in these sectors. This might be good news to investors, as UAE yearns to expand the contribution these industries have to the GDP. These industries have been prioritised under UAE's 10 year plan to expand the manufacturing sector's contribution to the GDP by the year 2031.

Commercial Company Law and Its Impact

The Commercial Company Law which enabled 100 per cent foreign ownership pointed at the significant shift from the more restrictive previous position where mainland companies were subject to foreign ownership restrictions. The law mandated the existence of a local sponsor holding a majority share in the mainland company. However, companies worked on the formulation of their other relevant documents to slash the local sponsor's rights so that the ownership de facto vests with the foreign owner. However, this method had its own pitfalls and the construction of the provisions was debatable.

UAE onshore companies are brought under the Department of Economic Development, and were typically subject to foreign ownership restrictions, whereby a foreign party is permitted to own up to a maximum of 49 per cent of the company, while the majority had to be owned by a UAE national or a corporate entity that is wholly owned by a UAE national. Hence, drafting the provisions on the constitutional documents of the company, such that the local sponsor's rights were diluted to divert the same to the foreign party, was typically resorted to.

While the FDI Law had been relatively permissive on these matters, the law had significant issues such as, say, high capital requirements which was not a viable option for new entrepreneurs.

Details Announced At Sharjah Economic Ramadan Majlis Brings

The details of the proposed legislation which could turn out to be quite landmark, was discussed at the Sharjah Economic Ramadan Majlis, organised by the Sharjah Investment and Development Authority (Shurooq) in collaboration with the Sharjah Chamber of Commerce and Industry (SCCI) and Sharjah FDI Office (Invest in Sharjah). As indicated beforehand, the conference focussed on “Operation 300bn” - a 10-year plan to empower the industrial sector and thereby increase its contribution to the GDP from the current AED133 billion to AED300 billion by 2031. The regulations might be announced soon with the applicable list of sectors, which may include priority sectors such as petrochemical, chemical, pharma, defence and heavy industries.