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New foreign ownership rules take effect on 1 June 2021

The UAE announced landmark reforms to the federal companies law (Law No. 2 of 2015) in November of 2020, which most notably removed the requirement that a UAE national must own at least 51% of companies incorporated in onshore UAE. The local ownership requirement has posed a significant barrier to entry to the UAE market for many foreign investors, and its removal is hoped to bolster foreign direct investment, yet it will also likely disrupt well-established ownership structures that have developed over the years.

The reform has been long-awaited by foreign investors already in the market as well as those looking to enter, and the UAE government has now announced that the changes to the local ownership requirement will come into force on 1 June 2021. However, we are still waiting for clarity on the conditions and requirements that need to be met by foreign investors to be able to move past the 49% ownership level that they have been subject to under the previous rules.

According to an update last month, the Ministry of Economy is close to finalising new legislation that will specify ten sectors in which 100% foreign ownership will be permitted. It is expected that the UAE Cabinet will soon announce that list of sectors together with regulations that will clarify the applicable conditions.

We will continue to monitor developments and provide updates accordingly.

The UAE government confirmed that new rules allowing full foreign ownership of onshore companies will come into force from June 1.

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