New Law in UAE Aims to Make Emirates' Economy More Competitive

A new law announced in the United Arab Emirates will move to make the country more open to foreign investments as well as attractive for initial public offerings.

Announced by Sheikh Khalifa, president of the UAE and ruler of Abu Dhabi, the new legislation is part of the Commerical Companies Law No. 2 of 2015, which aims to regulate relations between the government and commercial companies.

In what some are thinking will make IPOs more attractive in the UAE, one of the 378 articles allows companies to now float only 30 percent of their equity before the initial public offering. This represents a move from companies having to float 55 percent of their equity. The older rule hindered IPOs as owners did not necessarily want to sell 55 percent of their company.

"The new law will bring significant improvements, particularly in the level of corporate governance expected of listed companies,” said Husam Hourani, the managing partner at the Dubai-based law firm Al Tamimi & Company, to The National .

It would also “encourage financial markets and new IPO activity on UAE markets,” he said.

The new law does not change the 49 percent cap on foreign ownership, but does aim to make it easier for Emirati entrepreneurs to establish their own companies. Previously, a person could not establish a company as an individual without being personally liable. This new law allows an individual to create their own company without a partner, and still segregate their personal and business liability.

Sultan Al Mansouri, the economy minister, said that the law was aimed at raising the level of competitiveness in the UAE's economy. The target is for the Emirates to be listed in the top ten 10 countries on the World Bank’s Ease of Doing Business Index. The country also wants to reduce its dependence on oil revenues to below 10 per cent of Gross National Product, in "the upcoming years."

Foreign direct investment increased 25 percent to $13 billion in 2014, and the country hopes for this number to increase with these new laws that some say move the country closer to the international standards of investment.

The UAE has also announced that it is moving toward allowing 100 percent foreign ownership, which is currently only allowed in free zones such as the Dubai Free Zone, in what they are calling strategic sectors.