In another historic decision, the UAE Cabinet enacted the long-anticipated Foreign Direct Investment law (FDI Law). The laws are intended to liberalize the onshore legal ownership regime and foster a favorable business climate for foreign investors. The widely discussed reforms were approved by the President, His Highness Sheikh Khalifa bin Zayed Al Nahyan.
The new FDI law amends 51 articles and added new ones with a prime focus on the regulation of provisions of forming companies with limited liability shareholding. The amendments exempt expatriate investors from the minimum percentage ownership of UAE nationals. The FDI law will allow UAE to leverage a fertile legislative environment for the establishment of businesses with an objective to improve the UAE’s competitiveness.
How Do New FDI Laws Impact the Emirati Population?
The FDI laws are positive news for the UAE population where every 8th person out of 10 is an immigrant, and they long had their ownership capped at 49% in firms outside free zones. Several other legal amendments were also passed which removed the quotas requiring Emiratis to hold the majority of board positions and serve as chairs for onshore companies. Companies interested in being publicly traded can now sell up to 70% of their shares instead of the current 30% limit. The experts believe that these amendments will diminish the appeal of 45 “free” zones across the UAE, and attract those wanting to avoid local-hiring quotas and retain full foreign ownership.
The cent percent ownership by foreign nationals of companies licensed and registered in the UAE is allowed as per Cabinet Resolution No. 16 of 2020. In the last few years, individual emirates allowed foreign national owned companies to acquire the remaining stakes on a case by case basis. The new FDI laws substantially extend the scope. However, the new laws are also considered to be a massive blow to the long-established rentier benefits for Emirati citizens as a wide majority of them made their living as figurehead company partners.
The FDI law came into effect as of December 1, 2020. The foreign ownership amendments can come into effect within six months. Possibly, the companies can also take up to a year to begin complying with the new changes.
What was the Trigger?
The primary objective behind the introduction of FDI Laws and other revolutionary measures taken by the UAE government recently is to revive the economy from the disruptions caused by Covid-19. The global pandemic has postponed high-profile events, such as the ‘World Expo’ – 2020’ to next year which has aggravated the situation for the UAE economy as the government already spent billions of dollars in organizing the event. The World Expo-2020 was supposed to be attended by 25 million visitors.
To overcome the catastrophic impacts of these disruptions, the UAE government has started offering significant relaxations to the Islamic legal code, Cohabitation laws, and restriction on alcohol consumption from the beginning of November 2020. The introduction of these measures will have a fruitful impact on the national competitiveness of the UAE.
The presidential decree which amends the corporate law will enable UAE to strengthen its position globally as one of the most attractive investment destinations in the world for global corporations. According to the new FDI regime, several categories of business licenses will no longer require Emiratis as sponsors with 51% shareholding rights as of December 1, 2020.
Impact of FDI Laws on the UAE Real Estate Sector:
The Foreign Direct Investment law will allow foreign investors 100% ownership of businesses. In simple terms, now foreign investors and entrepreneurs can establish their own companies without involving local shareholders. These reforms are expected to be a game-changer for the investment landscape. Experts believe that FDI reforms will attract substantial investments to the UAE and spur the growth of the real-estate sector. There will be an exponential rise in the investments in the real-estate sector which will bring additional revenues, result in job creation and economic growth.
The triumph of the real-estate sector also means a positive impact on the businesses of property management firms like Kaizen AMS. The company is amongst the top 20 property management firms in the UAE, providing professional, newfangled, and end-to-end solutions in Property Management, Community Management, Owner Affairs, Unit Management, and Handover Services to some of the biggest real-estate brands such as – Emirates REIT, Meraas Estates, Emaar Properties, Al Fattan, Mazaya, Tamniyat, and Constellation Holdings. Kaizen AMS is a proud winner of several prestigious industry awards including the most recent Superbrands 2018, Gulf Real Estate Awards 2018 for ‘Best Employer in Real Estate’ and ‘Best Consultancy in Real Estate’.