MENA Corporate News - April 2015

MESSAGE FROM THE EDITOR

Welcome to the April edition of Clyde & Co's quarterly MENA Corporate News.

In this issue we cover:

Stop Press: Impact of the New UAE Companies Law on Foreign Investment

The UAE Government announced on 1 April 2015 that the new UAE Companies Law will come into effect three months after the date of publication in the Official Gazette. But what impact will the new law have on foreign investors? Click here for a link to the full article.

In Focus: Kingdom of Saudi Arabia

Investing in or sending employees to KSA? Then be aware of both the crackdown on breaches of the anti-concealment law and the new SAGIA fast track and impact program. Click here for a link to the full article.

In Focus: Franchising in Qatar

Franchising allows businesses to expand into the rapidly growing Qatar market although, as this article notes, it is not without risks. Click here for a link to the full article.

In Depth: Abu Dhabi Global Market - Update on the draft Legal Framework

In January the Board of ADGM published drafts of various key regulations. In this article, we examine in detail the draft Company Regulations which are based on the UK Companies Act 2006. Click here for a link to the full article.

With regards to deal flow, since our last newsletter in December, we have seen continued growth in the number of M&A deals we are working on across the region. Despite concerns in the market at the turn of the year that the dip in oil prices might affect confidence we still see a lot of movement in education, health and infrastructure along with increasing interest in the retail sector. Overall the fundamentals remain positive with a solid deal pipeline supported by strong business performance, particularly in the GCC countries.

We hope that you find MENA Corporate News a useful and informative read. In the coming weeks we expect to issue a number of specific updates on the new UAE Companies Law (once its full impact becomes apparent). In the meantime if you have any feedback or comments please do not hesitate to contact us.

STOP PRESS: IMPACT OF THE NEW UAE COMPANIES LAW ON FOREIGN INVESTMENT

The issue of the new Commercial Companies Law, Federal Law No. 2 of 2015, was announced by the UAE Government on 1 April 2015 and will come into effect three months after the date of publication in the Official Gazette. The new law introduces changes which will affect some of the structures used by foreign investors to establish businesses in the UAE. This article looks at some of the key changes and where the UAE government has left the previous position unaltered.

Foreign ownership restrictions

The nature and extent of the UAE foreign ownership restrictions has been the subject of political debate for a number of years. This is against a backdrop of increasing economic liberalisation in other GCC countries, at least on the face of the law. For example, in 2010, the Qatari government introduced the possibility of foreign investors owning more than a minority stake in Qatari companies in certain specified business sectors, such as tourism, health and education.

For now, the position in relation to the percentage capital which must be held by a UAE national, or a company wholly owned by UAE nationals, remains unchanged from the previous Commercial Companies Law (Federal Law No. 8 of 1984) (the 1984 Law). One or more UAE nationals must hold at least 51% of the share capital of any UAE company under Article 10(1) of the new law (where the company is partly owned by non-GCC nationals).

The new law reserves the power to the UAE Cabinet of Ministers to introduce additional regulations which restrict certain business activities to UAE national ownership only (such as commercial agencies and recruitment agencies which must be owned by Emiratis). There is no express provision which empowers the UAE Cabinet to relax the ownership restrictions. The UAE Minister of Economy has made clear that foreign ownership will, instead, be covered in a new Foreign Investment Law, which may allow wholly foreign owned companies in certain sectors of the economy.

Branch offices: sponsorship requirements

Under the new law, the requirement to appoint an agent who must be a UAE national, or a company which is wholly owned by UAE nationals, remains unchanged. Therefore, foreign companies wishing to do business in the UAE, without incorporating a new corporate entity, will still be required to appoint an agent and produce a notarised agency agreement as part of the branch establishment process.

Although the UAE requirements for local branch sponsors have not been relaxed, it is important to bear in mind that the option of using a branch entity to operate a services based business onshore in the UAE is not generally available in other GCC countries. For example, Kuwait does not allow non-GCC investors to operate through a branch at all and, in Qatar, the use of a branch is...