Open for Business: New Laws on 100% Foreign Business Ownership in Gulf Countries
By Shabnam Sheikh
Disclaimer : The below article is not to be construed as legal advice, and is for informational purposes only. For further information or assistance, get in touch with us today at info@borderlesscounsel.com.
The economies in the Arabian Gulf continue to get back on track after the major setback the pandemic has brought upon the world. The resilience shown by the Government of the GCC countries and the spirit of the people make it an attractive investment hub . This week, we highlight some of the recent amendments to the laws of various GCC countries, which allow foreigners to own businesses with fewer restrictions.
UAE
An amendment to the UAE Commercial Companies Law in September 2020 has eliminated the requirement of having a UAE national own 51 % of the shares of the company. Also the amendment has removed the requirement for branches of foreign companies in the UAE to appoint a UAE national agent .
The Emirates have now started releasing lists of approved activities and requirements for foreign shareholders. In terms of a company’s incorporation, wholly foreign-owned companies will not be subject to higher fees or have greater guarantee or share capital requirements than would be the case for a UAE-owned or part-owned company.
A previous foreign investment law in 2018 allowed foreigners to own up to 100% of some businesses, and foreigners could already own up to 100% of those registered in designated business parks known as "free zones".
From the 1st of June , 2021 100% foreign ownership of onshore companies has been allowed in the UAE. All existing and previously licensed companies in the UAE are now allowed to amend their status as well as per the new law.
The law, however, will not apply to some companies that are excluded based on decisions by the Cabinet and those that are either wholly-owned by federal or local governments or their subsidiaries.
Bahrain
Like Saudi Arabia , Bahrain is committed to the Bahrain Economic Vision 2030. The aim is to shift Bahrain’s Economy ( which is presently oil dependent) to a globally competitive economy .
The Economic Development Board (EDB) has encouraged foreign investment in the manufacturing, logistics, information and communications technology (ICT), financial services, and tourism sectors.
Bahrain permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. In 2017, the Kingdom expanded the number of sectors in which foreigners are permitted to maintain 100 percent ownership stakes in companies to include tourism services, sporting events production, mining and quarrying, real estate activities, water distribution, water transport operations, and crop cultivation and propagation. In May 2019, the government further loosened foreign ownership restrictions in the oil and gas sector, allowing 100 percent foreign ownership in oil and gas extraction projects under certain conditions.
Recently the government has also done away with the requirement of having 51% local ownership in activities which were restricted earlier like general trade. You still need a local partner , however the percentage of share allotment is no longer restricted. The government business registration website sijilat.bh already reflects the change , however a formal announcement about the same is awaited.
Saudi Arabia
Saudi Arabia with it’s ambitious 2030 vision has opened its door to the global business world far beyond the oil sector. There has been a rise in SMEs and development plans are being implemented at top gear . Business culture in the kingdom is slowly inching towards being more open and accommodating.
The government encourages investment in nearly all economic sectors, with priority given to chemicals, industrial, and manufacturing; transport and logistics; information and communication technology; healthcare and life sciences; water and waste management; energy; education; tourism, entertainment and sports; real estate; financial services; and mining and metals.
There are certain preconditions on which 100% ownership is possible. The ownership and share capital restrictions are directly linked to the entity's intended licensed activities. For example, services-related industries can be 100% foreign-owned and on the other side, some corporate activities such as trading require a minimum of 25% local ownership. It is crucial for foreign investors to verify the latest rules before they attempt to buy or incorporate a KSA entity.
Oman
Oman’s location at the crossroads of the Arabian Peninsula , is a very attractive feature for potential foreign investors. The Duqm Freezone is one of the most promising development projects with an array of investment opportunities.
The Foreign Capital Investment Law (FCIL) allows 100 percent foreign ownership in most sectors and removes the minimum capital requirement.The key structural highlight of the FCIL is the recognition that foreign investors may wholly own investment projects in Oman.
An investment project is defined as “an economic activity established by a foreign investor, whether individually or together with an Omani partner”. The investment project must be undertaken through a company in one of the categories of permitted activities and the share capital invested into the company can be wholly owned by the foreign investor.
Qatar
The State of Qatar is the world’s largest exporter of liquefied natural gas (LNG) and has one of the highest per capita incomes in the world.
In line with the country’s National Vision 2030 plan’s goal of establishing a knowledge-based and diversified economy, the government of Qatar has recently introduced reforms to its foreign investment and foreign property ownership laws that allow up to 100 percent foreign ownership of businesses in most sectors and real estate in newly designated areas.
In 2019, the government enacted a new foreign investment law (Law 1/2019) to ease restrictions on foreign investment. The law’s executive regulations permit full foreign ownership of businesses in most sectors with the possibility of fully repatriating the foreign owner’s profits, protecting the owner from expropriation, in addition to several other benefits.Full foreign ownership is now permitted in all sectors except for banking, insurance, and commercial agencies.
Kuwait
The country possesses six percent of the world’s proven oil reserves and is a global top ten oil exporter. In an attempt to attract foreign investment to help diversify the economy and grow private sector employment, Kuwait passed a new foreign direct investment law in 2013 permitting up to 100 percent foreign ownership of a business, if approved by the Kuwait Direct Investment Promotion Authority (KDIPA). Without such approval, businesses must be at least 51 percent-owned by Kuwaiti or GCC citizens.
The Foreign Direct Investment Law of 2013 allows up to 100 percent foreign ownership in certain industries, including: infrastructure (water, power, wastewater treatment, and communications); insurance; information technology and software development; hospitals and pharmaceuticals; air, land, and sea freight; tourism, hotels, and entertainment; housing projects and urban development; and investment management.