Update on UAE Company Law −An overview of the most relevant recent developments

AHK Legal Network Event, Dubai 06.12.2018

Christina Mauel

ANDERS LEGAL CONSULTANCY specialises in such areas

of practice important to you as a foreign investor:

• Corporate & Commercial, incl. Business Set Up

• Commercial Agency

• Employment

• Tenancy

• Real Estate

Attorney at Law (Germany) & Legal Consultant

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ANDERS LEGAL CONSULTANCY

1. Foreign Direct Investment Law

2. Dual License

3. Instant License

4. Update Commercial Companies Law

5. JAFZA Offshore Companies Regulations 2018

6. Conclusion

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Agenda

Foreign Direct Investment Law

Part 1

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Overview

• Federal Decree-Law No. 18 of 2017 and Federal Decree-Law No. 19 of 2018

• Further step to relax rules restricting foreign ownership of UAE companies

• Framework for UAE cabinet to permit foreign shareholders to own up to 100% of shares in

mainland companies active in certain industry sectors

• Establishment of Foreign Direct Investment Register, Foreign Direct Investment Unit and

Foreign Direct Investment Committee

• Conditions and procedures for establishment and renewal of companies to be determined by

competent authorities

• Company name to include suffix for company form and expression "Foreign Direct Investment“

• Sectors eligible for foreign direct investment defined in Negative List and Positive List

• Amendments, specifications and exemptions to both lists can be made anytime

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1. Foreign Direct Investment Law

Negative List

• Non-comprehensive list of sectors where foreign direct investment is prohibited, e.g.

• Oil

• Banking and financing

• Security and military

• Public services (e.g. water, electricity, post, communication and transport)

• Printing and publishing

• Commercial agency

• Law does not indicate that sectors not included in Negative List are automatically part of

Positive List

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1. Foreign Direct Investment Law

Positive List

• Still to be issued (expected in first quarter of 2019)

• To include additional conditions apart from sectors, i.e.

• Legal form

• Ownership percentage (100% or less)

• Minimum capital

• Minimum percentage of UAE nationals to be employed

• Granted benefits

• Exemptions from Commercial Companies Law

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1. Foreign Direct Investment Law

Dual License

Part 2

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Overview

• Abu Dhabi

• Companies licensed in free zones may extend business to mainland by obtaining license

from Abu Dhabi Department of Economic Development

• No necessity to rent additional office space in Abu Dhabi (office of free zone company can

be shared)

• Approval of free zone authority, undertaking regarding non-existence of branches in

Emirate of Abu Dhabi and, if needed, external approvals required

• License issued within 20 minutes to three days, depending on activities

• Dubai

• Currently only companies licensed in Dubai Airport Freezone and Dubai International

Financial Centre can apply for dual license

• Requirements and procedure similar to those in Abu Dhabi

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2. Dual License

Considerations

• Advantages

• No need to rent additional office for mainland entity

• Disadvantages

• Additional license fees of mainland authority

• Additional fee of free zone authority for approval of dual license

(e.g. AED 5,000 annually charged by Dubai Airport Freezone Authority)

• Practical implementation unclear, in particular available legal forms, application of import

code and residence visas as well as location of provision of services

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2. Dual License

Instant License

Part 3

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Overview

• New procedure to obtain license from Dubai Economy immediately

• Available for LLCs, sole proprietorships and civil companies

• Partners must be natural persons

• Currently only available for license activities that do not require external approvals

• Regular license fees, but market fees fixed at AED 5,000

• Only one appointment needed to obtain trade name reservation, initial approval and license

and to pay all applicable fees

• No lease agreement and EJARI certificate for first year of license validity required

• No Memorandum and Articles of Association (“MoA and AoA”) required for license

issuance

• Option to use template of Dubai Economy or own MoA and AoA

• MoA and AoA and EJARI certificate must be presented for first license renewal

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3. Instant License

Considerations

• Advantages

• Time and cost-effective option to establish company in Emirate of Dubai

• Beneficial in case legal entity has to be available at short notice

• Beneficial for start-ups to test market and keep costs at minimum

• Disadvantages

• Without office, no sponsoring of residence visas for employees possible (only investor visa

available)

• Without office and MoA and AoA, opening of company bank account and, hence, receipt of

payments challenging

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3. Instant License

Update Commercial Companies Law

Part 4

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Attestation MoA and AoA and Amendments

• Art. 14 Commercial Companies Law amended by Federal Decree-Law No. 7 of 2018

• MoA and AoA and amendments thereof now to be attested by competent authority of

relevant Emirate (e.g. Dubai Economy), not Notary Public any longer

• Dubai Economy may allow attestation before Notary Public in certain instances

• MoA and AoA and amendments must be drafted in Arabic, otherwise void (bilingual

documents permitted, but Arabic prevailing language)

• Current implementation by Dubai Economy

• For MoA and AoA in case of instant license, either template of Dubai Economy or own

document can be used

• MoA and AoA and amendments can still be signed in front of Notary Public

• Mandatory usage of Dubai Economy templates of MoA and AoA and amendments in

future

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4. Update Commercial Companies Law

JAFZA Offshore Companies Regulations 2018

Part 5

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Overview

• Repealing 2003 regulations in their entirety

• Numerous changes, such as

• Clarification of permitted activities

• Possibility to assign different classes of shares if approved by registrar

• Reduction of minimum number of directors

• Possibility to have own address in Jebel Ali Free Zone (“JAFZ”) or freehold area

• No need for registered agent if own office in JAFZ

• Eligibility of shareholders and company officers to apply for residence visas

• Possibility to convert offshore company into JAFZ free zone company

• Clarifications of obligations of registered agents

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5. JAFZA Offshore Companies Regulations 2018

Considerations

• Advantages

• More flexibility for investors to organise their business structure

• Modernisation of rules

• Disadvantages

• Requirements for office rent and residence visa applications to be waited for

• Practical differences to free zone company remain to be seen

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5. JAFZA Offshore Companies Regulations 2018

Conclusion

Part 6

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ANDERS LEGAL CONSULTANCY

Sama Tower, Office 806

Sheikh Zayed Road

P.O. Box 333 558, Dubai, UAE

Tel +971 4 327 5888

info@anders.ae

www.anders.ae

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