Federal Decree-Law No.19 of 2018 on Foreign Direct Investment ("FDI Law") was issued on 23 September 2018 and came into effect on 1 October 2019. The FDI Law introduced the ability for foreign shareholders to own up to 100% of the shares of a United Arab Emirates ("UAE") mainland company ("Onshore Company") in certain sectors and in the performance of certain economic activities, with such sectors and economic activities to be recommended by the foreign investment committee to the UAE Cabinet ("Positive List").
On 17 March 2020, Cabinet Resolution No. 16 of 2020 was passed by the UAE's Council of Ministers outlining the 'Positive List of Economic Sectors and Activities in which Foreign Direct Investment is Permitted' ("Resolution").
The Positive List extends to three (3) sectors, namely:
- Agricultural Sector (detailing 19 activities, including cultivation and production of crops and animal production);
- Manufacturing Sector (detailing 51 activities, including the processing of food and beverages, manufacture of machinery, electrical and transport equipment); and
- Services Sector (detailing 52 activities, including education, healthcare and hospitality).
The Resolution stipulates the following minimum ranges of capital investment:
- Agriculture Sector: AED 7.5 - 10 million;
- Manufacturing Sector: AED 15 - 100 million; and
- Services Sector: AED 70 - 100 million.
However, there are some activities where the minimum capital investment required has not been stipulated and will instead, be subject to the applicable laws governing that particular activity.
It is worth noting that a foreign investor can apply to incorporate a single-member limited liability company. In order to take advantage of the opportunities available under the FDI Law a foreign investor must engage with the relevant licensing authorities (being the respective Department of Economic Development in each of the Emirates) as part of the application process and satisfy various additional requirements.
Companies wishing to establish under the FDI Law must generally demonstrate the following:
- generation and adding of value to the UAE economy (for example, as illustrated by way of a comprehensive business plan);
- a minimum percentage of employment of Emirati nationals (as specified by the Ministry of Human Resources & Emiratisation);
- use of modern technology;
- generation and adding to research and development; and
- satisfaction of the requirements of the licensed activities.
The introduction and implementation of the FDI Law is certainly a welcome step forward in promoting and driving forward foreign investment into the UAE and grants yet further options to foreign investors in terms of seeking and obtaining full or majority control (both of existing and future) Onshore Companies.
Contact our Corporate and Commercial team for more information.