Approval of the Foreign Direct Investment Positive List – An Analysis of Cabinet Resolution No. 16 of 2020

12 April 2020

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By: Dr. Constantin Frank-Fahle, LL.M.

On 23 September 2018, Federal Decree-Law No.19 of 2018 on Foreign Direct Investment (FDI Law) was issued. Within a year of FDI Law’s issuance, the UAE Cabinet approved the highly awaited “Positive List”, outlining the details of relevant activities and sectors wherein foreign investors can invest up to 100% in mainland companies in the United Arab Emirates. This article provides an overview of Cabinet Resolution No. 16 of 2020, which includes the Positive List.

1. What happened so far?

Following its issuance on 23 September 2018, the Federal Decree-Law No.19 of 2018 on Foreign Direct Investment (FDI Law) was published in the Federal Gazette on 30 September 2018. According to Article 21 of the FDI Law, it came into effect on 1 October 2019, a day after it was published in the Federal Gazette. The FDI Law allows a mechanism under which foreign shareholders can own up to 100% shares of a United Arab Emirates (UAE) mainland company (Onshore Company). The underlying purpose of the FDI Law is to attract foreign direct investment to the UAE by providing exceptions to the provisions of the Federal Law No. 2 of 2015 on Commercial Companies which mandates that foreign shareholders can only hold up to a maximum of 49% of an Onshore Company’s shares.

Under the FDI Law, a foreign direct investment committee (Committee) was formed in order to recommend to the Council of Ministers a so-called “Positive List”, i.e. a list which includes the sectors and economic activities available to invest in by a foreign investor either 100% or any other lower percentage in accordance with the provisions of the FDI Law. The FDI Law also specifies a “Negative List” of sectors and activities that are not eligible for full foreign investment.

Keeping in consideration the recommendations made by the Committee, the UAE Council of Ministers passed a resolution approving the Positive List on 2 July 2019, following which, the list was published by the Ministry of Economy on 5 July 2019 in Arabic. The percentage of ownership was, however, not provided.

On 17 March 2020, the UAE Cabinet passed a Cabinet Resolution No. 16 of 2020 (Resolution) concerning the determination of the Positive List of economic sectors and activities eligible for foreign direct investment.


2. What are the minimum capital requirements according to the Positive List?

The activities on the Positive List span across three (3) sectors, namely:

  • Agriculture Sector (19 activities);
  • Manufacturing Sector (51 activities); and
  • Services Sector (52 activities).

The FDI Law requires a minimum capital investment between AED 7.5-10 Million for the Agriculture,  between AED 15-100 Million for the Manufacturing and between AED 70-100 million for the Services Sector. It should be noted, however, that the Resolution relies on the general minimal capital requirements for some commercial activities (e.g., general cleaning of buildings, civil engineering, education, hotel management, restaurant management, etc.)


3. Are there any shareholding restrictions for foreign shareholders?

According to Article 3 of the Resolution, a foreign investor can incorporate a single-member limited liability company (LLC). Article 4 of the Resolution goes on to clarify that all the commercial activities referred to in the Positive List are generally eligible for 100% foreign ownership. It should be noted, however, that according to Article 6 of the Resolution, conditions set by the licensing authorities (the Departments of Economic Development in the various emirates) and other statutory requirements shall be met. Finally, the Resolution gives the Ministry of Human Resources & Emiratisation the right to specify a minimum percentage of Emirati nationals to be employed by companies that are structured under the FDI Law.

In addition to the minimum capital requirements, companies established under the FDI Law must generally demonstrate the following:

  • use of modern technology;
  • adding value to the UAE economy;
  • adding to research and development; and
  • meeting the requirements of the licensed activities.


4. How can foreign investors benefit from the Positive List?

Article 8 of the FDI Law lists the benefits available to foreign investors. These include but are not limited to the fact that the companies established under the FDI Law will be treated as national companies and the shareholder(s) may repatriate its annual profits. A foreign investment company would also have the freedom to add or remove shareholders, transfer ownership, amend its articles of association and enter into mergers and acquisitions.

The licensing procedures will be specified by each emirate (Art. 10(1)(A) FDI Law).


5. Conclusion

Cabinet Resolution No. 16 of 2020 will undoubtedly change the foreign investment regulatory framework in the UAE. Investors seeking full or majority control in Onshore Companies will have more options to implement such structures. The FDI Law will thereby add to the UAE’s appeal as a regional investment hub. Given the current effects of the COVID-19 crisis, the Cabinet Resolution No. 16 of 2020 is a very welcomed signal towards new and existing investors. Interested stakeholders should, therefore:

  • consider whether they can structure a new investment under the FDI Law;
  • consider whether existing companies can be converted to foreign investment companies; and
  • understand the additional requirements in terms of minimum capital, employment of Emirati nationals, etc.



Dr. Constantin Frank-Fahle, LL.M.
Managing Partner | Attorney at Law
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