UAE President His Highness Sheikh Khalifa Bin Zayed Al Nahyan has decreed what is a big change in the investment law of his country. The new decree, aimed at the globalization of the economy, permits 100% foreign ownership of firms established in the emirate. Existing companies have been allowed one year to transfer their ownership.
This new law does away with the previous requirement that a major part of the shares had to be held by an Emirati. It also specifies that non-Emiratis of all nationalities are now permitted to invest in existing and new companies.
Powers have been allocated to local licensing authorities include setting a specific percentage of Emiratis in the capital allocation and boards of directors of companies, approving requests to establish companies -except for joint-stock companies- and identifying fees & charges according to the policies adopted by the UAE Cabinet. Joint-stock companies are now allowed to sell up to 70% of the company through IPOs, up from 30% earlier.
The decree also calls for the cabinet to supervise investments in “activities having a strategic impact” through the assignment of relevant authorities and deciding on measures to be followed in granting licences to companies for operation in such areas.
In other significant changes, it permits the appointment of experts on the company boards, even if they are not actual stakeholders, and allows dismissal of the “Chairman or any other board member”, if convicted of fraud or misuse of power. While allowing a company to approve its own capital increases through bonds etc, it very significantly also enables stakeholders to sue the company in case of failure of duty resulting in damages.
This is a big step forward encouraging foreign investment coming right in time as the future global dependence on oil will surely fall due to its effect on climate change and the drastic change in fuel usage caused by the global pandemic.
A few months ago, the only vessels navigating the high seas were oil tankers ferrying oil for a travel industry that had folded its wings. All cruise liners, railways, aircraft and even road transport vehicles had been cooped up, the hotel industry had shut down as a whole, and suddenly there was no use of the oil that was being shipped all over the world. And then, on April 26, oil prices finally went negative.
Since that day, oil is no longer a guarantee of wealth or even security – and this decree giving time for the UAE trade and industry sectors to move into a new direction is a welcome step before oil wealth dries up. The decree indicates that more changes will come as the emirate learns from its experience as these changes are implemented.
As 100 % FDI is new for Emiratis, Indians wanting to invest abroad can use this new sandbox for testing their options on a limited scale before investing in other countries with more established and aggressive market conditions. This shift by the UAE is the way things will go now on, and it is a good time for our budding entrepreneurs capture at least some of the opportunities that will determine the future.