UAE, Saudis Open Rules for Foreign Investments

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The United Arab Emirates (UAE) has issued a law to relax rules covering stock market flotations and attract more direct investments. The legislation is aimed at raising levels of competition in the economy and aligning the country's corporate regulations with international standards.

UAE Economy Minister Sultan bin Saeed Al Mansouri said the new law will support economic diversification and accelerate the move towards a knowledge-based economy using creativity and innovation. This is the UAE's national agenda contained in the "Vision 2021."

The law defines the holding company as a company that sets up companies within the UAE or abroad, owns shares or stakes in other companies that allow it to have an upper hand in management or influence its decisions. In terms of equity stakes, the law stipulates that founders in the public joint stock company should subscribe shares not less than 30% before the initial public offering.

The new law does not change foreign shareholding requirements for limited liability companies. Currently, foreigners cannot own more than 49% of a UAE company, unless it is incorporated in a special "free zone."

However, Al Mansouri said the UAE was at an advanced stage of drafting an investment law that would allow 100% foreign ownership in specified sectors. The legislation also contains numerous clauses, which make limited liability and joint stock companies simpler to manage, and more attractive to investors. It also would strengthen corporate governance including company loans to directors.

Saudi Arabia, a fellow member of the Gulf Cooperation Council (GCC) has also fine-tuned its regulations for foreign business participation. A limited liability company in Saudi Arabia may have one or more managers who are not required to be Saudi nationals. The managers have full control over the company's activities.

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