Structuring Alert: 100% foreign ownership in UAE mainland – update!
On the 22nd of May, the Abu Dhabi Department of Economic Development (DED) published a list [See full list here] of 1,105 business activities permitted to be undertaken by up to 100% foreign-owned entities. This is a major step forward in clarifying the details of the new foreign ownership policy which is expected to become effective from 1 June 2021.
The list can be amended and updated by decisions of the Council of Ministers and reflect the activities deemed to be “non-strategic”. DEDs in other Emirates are expected to issue similar lists in coming days.
What we say
- No conditions (yet). No conditions attached to the foreign ownership of the activities listed have been published yet, although sources suggest that minimum share capital requirements may apply to certain categories of activities in order to avail 100% foreign ownership. It is also anticipated that project size restrictions will apply (i.e. projects with a value over a certain threshold will be eligible to engage the services of 100% foreign owned businesses carrying out approved activities, but those projects falling below a threshold value will not).
- Primary activities. Covered by the list are:
- Agricultural activities including production and manufacturing of agricultural materials such as coffee cultivation, fish and seafood products production and corn oil manufacturing;
- Manufacturing activities spanning a number of sectors and product ranges incl. manufacturing of consumer, industrial, technology, defense, chemical and medical products such as soft drinks manufacturing, quantum computing products, security and surveillance products and biomedical and human augmentation devices.
- Repair and maintenance activities similarly spanning a number of sectors including oil and gas such as oil and natural gas well equipment repairing and maintenance.
- Building and construction contracting for infrastructure projects, e.g. ports, bridges, tunnels and railways.
- Marketing and advertising activities such as advertisement agency and sports events marketing.
- Medical facilities including paediatric hospital, medical complex and veterinary hospitals.
- Notable exclusions from the list are:
- Trading activities such as wholesale and retail trade;
- Banking and finance activities including fintech activities and remittances;
- Food and beverage retail outlets and retail boutiques although restaurant management is included in the list;
- Sophisticated utilities and telecommunications activities; and
- Distribution activities currently requiring the participation of a commercial agent under the UAE Commercial Agency Law.
The exclusion of these categories of activities indicates that they are likely to fall under the list of activities having “strategic impact” to which foreign ownership and other conditions will apply. More information on this list and applicable conditions will help to provide additional clarity.
This is an exciting step toward full implementation of the new foreign ownership requirements and on track with the 1 June 2021 launch date for effective foreign ownership, announced last week.
Among the list produced by the Abu Dhabi DED are some surprising activities. A couple to watch:
- “Onshore and offshore oil and gas fields and facilities services” which is the principal activity required to be eligible for Special Petroleum Council (SPC) approval and to tender for work with ADNOC. It is unclear what the SPC’s reaction will be and whether it will impose additional conditions to a companies’ eligibility to obtain SPC approval where a 100% foreign owned company is licensed to undertake “onshore and offshore oil and gas fields and facilities services”.
- Select retail activities such as a mini market, supermarket, grocery store are on the list but notable exclusion of retail activities include food and beverage outlets and clothing boutiques.
- Management services are included by management consultancy, a common activity, is excluded.
Re/think is closely monitoring updates on activities lists and other developments associated with the roll out of the new foreign ownership policy.
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