The expected positive impact of these measures on the market, the business environment and the national economy in general were also explained
The Ministry of Economy organised a virtual media briefing Wednesday on Decree-Law No. 26 of 2020 that amended some provisions of Federal Law No. 2 of 2015 on commercial companies.
The session was attended by Abdullah bin Touq Al Marri, Cabinet Member and Minister of Economy; Dr. Ahmad Belhoul Al Falasi, Minister of State for Entrepreneurship and SMEs; Dr. Thani bin Ahmed Al Zeyoudi, Minister of State for Foreign Trade; Abdullah Bin Ahmed Al Saleh, Undersecretary of the Ministry of Economy; Dr. Obaid Saif Hamad Al Zaabi, CEO of Securities and Commodities Authority, with the participation of a number of media representatives in the country.
During the briefing, the official speakers reviewed the most important amendments to the law and the new provisions as a result of these changes, and how they change theprocedures for establishing companies and conducting business activity in the UAE. The expected positive impact of these measures on the market, the business environment and the national economy in general were also explained.
Elevation of national economy to new heights: During his opening speech, Bin Touq said that this media briefing is an important milestone in the context of the efforts undertaken by the UAE in the current stage, under the directives and support of its wise leadership. Designed to drive the development of the national economy and to elevate it to new levels of excellence and entrepreneurship, these measures contribute to rapid economic recovery and growth in the country in the immediate term, as well as the transition to new models of economic development that are compatible with the UAE's vision for the future in the coming years and decades.
Enhancing the economy's ability to meet challenges & continuously generate opportunities: He added: "This transformation is a continuous and collective process, but it will be rapid and will have a tangible positive impact in the immediate future, especially in enhancing the economy's resilience, ability to adapt to changes and benefit from them, and continuously generate new opportunities. In light of the recent economic changes and challenges that were witnessed globally as a result of the COVID-19 pandemic, the realization of this vision and this transformation has become even more necessary and urgent." He emphasized that during the past months and weeks, many initiatives and projects have been launched to serve as enablers for sustainable economic development. The most notable among them is the 33 flexible initiatives package to support economic sectors and revive businesses, including amendments to the Commercial Transactions Law related to the decriminalization of cheques without balance, bankruptcy law, and laws and other initiatives that will be announced during the next phase.
Amendments to the Companies Law to promote open business climate & attract valuable investments: Bin Touq explained that the amendments to the Commercial Companies Law is a step in the same direction and aim to enhance the openness of the country’s business climate, while also increasing its ability to attract foreign investments to the new economic sectors, diversify the economic base and develop non-oil income. He also pointed out that these amendments would enable it to contribute to the creation of new job opportunities, development of market movement, localization oftechnology, development of skills and human capabilities. In addition, they will increase the confidence of foreign investors and will provide a greater opportunity for establishing productive partnerships between citizen and foreign investors.
The Minister of Economy indicated that the UAE today houses around 300,000 companies in the form of public and private joint stock companies and companies with limited liability, solidarity and simple recommendation. National companies represent 99.3 percent of this figure, and the new amendments are designed to increase the number of companies operating in the country to one million within the next ten years, he added.
Increasing productivity & competitiveness of national companies: He elaborated on the desired impact of the amendments on the country’s business environment, most notably increasing the productivity and competitiveness of national companies in the local and global markets and the preservation of opportunities and advantages for SMEsowned by citizens in the government procurement system. In addition, accelerating the rate of transformation of SMEsin general into joint stock companies listed in the financial markets to secure public financing, risk-based capital financing activities market development is also expected to be an outcome.
Encouraging Emiratis to establish their businesses in the private sector: He concluded that the Ministry of Economy, with the support of and following the directives of the wise leadership, and in cooperation with all public and private sector partners, will continue its efforts to ensure more empowerment and development for Emiratis. They will be encouraged to join the private sector and establish their businesses by providing financing support, training, awareness and preference in government procurements.Programs that support SMEs will be launched at the federal and local levels and efficiency of education outputs will be raised so that UAE nationals are able to compete in the management of projects and private sector companies, he said.
New policies to enhance economic capacity and develop future sectors: Dr. Ahmad Belhoul Al Falasi, Minister of State for Entrepreneurship and SMEs, affirmed that the efforts that are being undertaken today in partnership with various concerned government entities lay sound foundations for the desired transformation towards a more flexible economic model. These include updating the regulations and legislation governing economic, commercial and investment activities in the country, in addition to launching and implementing new initiatives and policies that would enhance the national economy’s ability to adapt to the changes in the current global economic landscape, develop future sectors and generate opportunities.
Safeguarding the interests of both Emirati & foreign investors by revitalizing the market and increasing opportunities:He pointed out that these amendments would achieve the interests of both the UAE investor and the foreign investor at the same time by reviving the market movements, increasing the number and size of companies and projects in the country, and diversifying the foreign investment base. These would positively reflect on the country's economic environment and enhance the business opportunities offered and the possibility of fruitful partnerships on a wider scale and openness to international markets.
Al Falasi explained that the abolition of the provision that stipulates UAE nationals’ participation in companies operating in the country is a real opportunity to encourage Emiratis to directly engage in business and invest in the local market. By doing so, they can also benefit from the accumulated commercial experiences in the country's markets in a way that contributes to the development and strengthening of national entrepreneurship, which is a target and a major priority on the governmental agenda in the next stage.
Leading national assets and competencies to manage and operate best projects: He added: "We want the Emirati nationals to be a creative and innovative entrepreneur. Thanks to the support of the wise leadership, Emirati citizens today possess all the resources and competencies to develop, manage and operate the best successful commercial and investment projects and establish competitive national companies capable of achieving market leadership. We, as a government, will support this trend in every way. We will provide a stimulating environment for national small and medium enterprises to continue their growth and prosperity within a competitive environment full of new opportunities. "
Ongoing strategies and initiatives to support Emirati business owners and entrepreneurs: Al Falasi added that these efforts to relax commercial and investment activities go in parallel to the strategies and initiatives to support Emirati business owners and SMEs, which is a top priority in line with the UAE’s vision. He explained that the efforts to launch new initiatives to encourage the national entrepreneurship sector is an ongoing process, ensuring the provision of all supporting programs and tools that promote the growth of small and medium national companies.
100% preference in government procurement initiatives for projects owned and managed by Emiratis: He said that these programs include financing, training and consulting facilities, increasing experience, supporting purchases and connecting them with investment and commercial partners from inside and outside the country. Their participation in exhibitions and economic events will also be supported to enhance the market share of national companies and expand their access to valuable commercial and investment opportunities offered locally, regionally and globally. He indicated that SMEs owned and managed100% by Emiratis are guaranteed privacy and preference in many initiatives to support national entrepreneurship, especially those related to government procurement.
Attracting startups, innovative and technology-based companies: He explained that the new amendments add much value to the country’s efforts to enhance its ability to attract startups, innovative companies, and SMEs focusing on advanced technology, and that the prospects to attract such companies have further increased in light of the launch of full foreign ownership. In addition, there is a greater opportunity for national entrepreneurs to enter direct partnerships with these companies to benefit the national economy and enhance the contribution of innovation to the GDP.
A significant transformation of the economic model according to the principles of knowledge, competitiveness, and future foresight: Dr. Thani bin Ahmed Al Zeyoudi, underlined that the efforts of the UAE, under the guidance of its wise leadership, continue to bring about a qualitative transformation to the existing economic model. These efforts are in accordance with the principles of knowledge, innovation, sustainability, competitiveness and future foresight, and the amendments to the Commercial Companies Law represent a valuable addition to those efforts, he said.
He clarified that the new amendments will enhance the transparency and integration of the country's economic legislation, especially the investment climate, the regulations for establishing companies and the ease of doing business. He added that this will serve our national efforts to raise the UAE's position as a regional and global center for doing business, trade and investment.
New steps to facilitate procedures for foreign investors & enhance their confidence in the country’s markets: He added: "Through introducing the amendments to the law, we have taken new and major steps in facilitating procedures for foreign investors, thereby enhancing theirconfidence in the country's markets, encouraging them to develop sustainable plans to expand investments, and increasing the demand of foreign capital to invest in projects and vital sectors in the country. They will also be able to benefit from various opportunities offered by the local markets. This will undoubtedly lead to an increase in the number of companies operating in the country, raising the gross domestic product, generating more job opportunities, and contributing to the transfer of knowledge and technology, enhancing competitiveness, innovation and productivity, and supporting national exports. "
Accelerating the liberalisation of economic sectors: The Minister of State for Foreign Trade indicated that the new amendments to the law will replace the Foreign Direct Investment Law, and that this advanced step is aimed at speeding up procedures and stages of the liberalization ofeconomic sectors before foreign investments. "Through the amendments, the concept of establishing companies will change from the idea of a positive list, which allows full foreign ownership in specific sectors and activities, to a broader concept in attracting foreign direct investment. It now provides more options and freedom for the foreign investor, as all sectors and activities are available for foreign ownership, with the exception of some activities with a strategic dimension in which the presence of an Emirati partner is required. These strategic activities and their terms will be determined later by a specialized committee."
Additional facility for establishing branches of foreign companies: He added that, according to the amendments, foreign companies can now open branches or representative offices in the country without an Emirati services agent, and this further simplifies the procedures for establishing those branches and the ease of their ability to carry out their activities. These amendments will also facilitate administrative and commercial transactions for companies operating in the country and will allow them greater freedom to make investment decisions and reinvest in the country, which will serve the country’s business environment and investment climate in the long term.
Amendments include establishment companies and their branches by the foreign investor, and the establishment of joint stock companies: Meanwhile, Abdullah Bin Ahmed Al Saleh, Undersecretary of the Ministry of Economy, reviewed the most prominent amendments that have been made to the Commercial Companies Law under the decree of the new law, indicating that article 51 have been amended and the amendments are based on two main parts: (1) Addition of new articles related to the entry of the foreign investor and the non-national investor into the country's markets, whether to establish companies or to open a branch of a foreign company, (2) Amendments to the articles relating to the establishment of public joint-stock companies and private joint-stock companies, in addition to other general articles related to the time period for the enforcement and enforcement of the law.
Abdulla Al Saleh continued: "With the introduction of new amendments, the Foreign Direct Investment Law stands canceled and Article 10 of the Commercial Companies Law, which came under the name (Activities with a Strategic Impact), and has several articles about the Cabinet's formation of a committee upon the proposal of the Minister of Economy. The committee’s role is to determine the regulations and conditions for conducting businesses that have a strategic impact, according to the controls and requirements that it will determine. Except this, the Law does not differentiate based on the nationality of the founders or owners. It is within the competence of the local authorities concerned with licenses to set the regulations and requirements for the ownership of citizens as they deem appropriate to apply it within the framework of each emirate."
Abolishing the need for Local Service Agent for branches of foreign companies and their representative offices: Regarding the need for a local agent, H.E explained that when establishing the branch of foreign companies and its representative offices, Article 329 of the Commercial Companies Law before the amendment, mandated a Local Service Agent for them, which was canceled in the last amendment.
Consequently, foreign companies can now open a branch in the country without a Local Agent, indicating that the role of the Local Service Agent previously was limited to providing facilities and extracting workers' licenses and was not involved in the company's management or profits.
Opening the establishment of solo companies as a private contribution to the foreign investor: Saleh also explained that among the main amendments is the one concerning the establishment of Solo company as a private joint stock company. This was previously limited to the citizens of the country, and according to the new amendments, foreign investors can now establish a company owned by just one person as a private joint stock company, according to the aforementioned regulations and provisions mentioned in the law.
Encouraging initial public offerings and listings in financial markets: Dr. Obaid Saif Hamad Al Zaabi, CEO of the Securities and Commodities Authority (SCA) said that the new amendments to the Commercial Companies Law would encourage local and foreign investments. It will encourage initial public offerings and listings in the country’s capital markets and will increase the rate of transactions and attract foreign capital, which in turn will increase the depth and size of capital market capitalisation.
Accelerating the transformation of small, medium, and family businesses into a joint stock business: He added: "The amendments will accelerate the transformation of small, medium and family companies into joint stock companies listed in the financial markets to obtain public financing. They will also help develop the market for risk-based capital financing activities. We expect that it will contribute to raising the country's ranking on the global competitiveness indicators, especially on the World Bank's ease of business index. Also, it includes new provisions to protect the rights of minority investors and corporate governance."
Several powers to the Securities and Commodities Authority to develop financial markets: He further explained that the amendments grant the Securities and Commodities Authority many powers, including the power to set regulatory controls for issuing shares, regulate the process and procedures for issuing bonds and shares, and regulate the issue of publishing financial statements. In addition, it enables the Authority to regulate and set controls for conversions to public joint stock company and gives it the power to regulate aspects related to the acquisition of public joint-stock companies, create legal cover for mandatory acquisitions, and set other detailed controls such as the conditions that must be met by the strategic partner.