09 Nov 2020

Foreign Direct Investment in Abu Dhabi

Authored by: Yasser Omar

In Brief:

  1. Foreign investors can own 100% of the share capital in companies engaged in the activities specified in the positive list under the Foreign Direct Investment Law.
  2. Abu Department of Economic Development identified the sub-categories of the activities specified in the positive list issued by the UAE cabinet and stipulated the requirements to enjoy 100% foreign ownership in these activities. 
  3. 1586 activities are available for foreign investors in Abu Dhabi with 100% foreign ownership provided that the requirements specified by Abu Department of Economic Development are satisfied.

The Federal Law by Decree No. 19 of 2018 on Foreign Direct Investment (“FDI Law”) provides that 100% foreign direct investment (FDI) is allowed in the sectors identified in a resolution to be issued by the UAE Cabinet. The list of those sectors where 100% foreign ownership is allowed is called the positive list. Cabinet Resolution No. 16 of 2020 identifies specific sectors that fall in the positive list and specifies the requirements in terms of capitalization, use of new technology etc. The positive list as issued by the Cabinet contains 122 economic activities with specific category headings as per the Classification of Economic Activities adopted in the UAE. In addition, the said Cabinet Resolution identifies the legal forms that foreign investment can take under the FDI Law and Commercial Companies Law. The legal forms are restricted to limited liability companies and private joint stock companies.

Furthermore, the FDI Law provides that the local competent authority shall specify the conditions and requirements for the incorporation and licensing of the FDI project. Accordingly, the Abu Department of Economic Development (“ADED”) approved and issued the positive list applicable in the Emirate of Abu Dhabi. The ADED identified 122 main activities along with the sub-activities which resulted in the number of economic activities reaching a total of 1586 activities. The requirements for licensing differ from one activity to another. Therefore, the positive list of the ADED needs to be checked for the specific activity the foreign investor wishes to undertake in order to identify the specific requirements for licensing.

Generally, the minimum share capital i.e. minimum amount of FDI ranges from AED 2 million up to AED 100 million.  In addition, specific requirements either in terms of manpower or expertise may be required depending on the nature of the activity.

It is worth noting that as per Article 2 of the FDI Law, it applies only to the FDI projects incorporated and licensed following its enactment. Hence, the allowance of 100% foreign ownership under the FDI Law does not apply to existing entities that have been incorporated prior to the enactment of the FDI Law even if the entity undertakes an activity that falls within the positive list.

Finally, it should be noted that the licensing requirements set out by the ADED do not overide any requirement set in the Cabinet Resolution referred to above. In other words, the requirements of the ADED must be complied with, in addition to the requirements set out in the Cabinet Resolution in order for the new FDI project to be licensed in the Emirate of Abu Dhabi.

For more information on foreign investment in Abu Dhabi, please contact Yasser Omar, Head of Corporate, Abu Dhabi y.omar@hadefpartners.com

 
 

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the developing jurisdiction of the UAE.