New Updates on Legal Reforms in the UAE

The year 2021 has seen many critical changes being brought into the legal regime of the United Arab Emirates. The new changes have been critically aligned with the economic reforms initiated in the region that aim to build a flexible business environment in the UAE, one that furthers the economic prosperity. The United Arab Emirates is home to a multitude of ex-pat populations to the tune of almost ninety per cent of the total population, and inculcating the same, the new laws also aim to make the region more expat-friendly and adaptable.

The new changes have made amendments to almost forty laws in total, including some of the major changes made to the commercial company’s law, the UAE penal code, the UAE trademarks law and the personal status laws.

  • UAE Companies Law: The most important changes made to the UAE companies’ law (Federal Law No. 2 of 2015 and its amendments) now allow 100 % foreign ownership limited to commercial and industrial activities, whereas professional business activities are excluded at this stage. With this change, a new UAE mainland company (as opposed to a free zone company) can be constituted with its full ownership rights vested with foreign ownership. This is a landmark change compared to the previous position wherein it was a mandatory requirement that 51% shareholding was vested with a UAE national. Additionally, a foreign company was not allowed to establish a new branch in the UAE without having nominated a UAE national as a local service agent. Now, branches of foreign companies licensed in the country can be changed into a commercial entity in the UAE. In another landmark reform, foreign investors are allowed to establish a single shareholder LLC company. Earlier to the amendment, this provision was reserved only for UAE nationals. However, the change applies only if the activity of the company does not fall under the ‘strategic impact list’.
  • UAE commercial transaction law: The recent changes will be in force from January 2022, and the new amendments made to the UAE commercial transaction law (the UAE commercial transaction Federal law no. 18 of 1993 and its amendments) bring in narrowed criminality in matters concerning cheques. Pursuant to the new changes, only the following actions will invite criminal action, such as:
  • Intentionally falsifying of cheques;
  • Instances of fraud;
  • Providing counterfeit cheques;
  • Withdrawing the account balance before the date of the cheque encashment in order to prevent the cheque from being cleared.With the new amendments, partial payment on the cheque has also become mandatory. This applies if the amount available for payment is less than a given cheque’s value, then the drawee bank is now required to pay the amount partially.
  • Personal Laws: There are other changes that have been made, including lifting the ban on alcohol consumption in the UAE for those who are above 21 years old, as well as changes in the penal code that decriminalizes co-habitation of the unmarried couple, which was previously a crime.
  • Digitalization Law: The UAE has also incorporated a digitalization strategy for 2021-2025 with the aim to bring in an enhanced digital infrastructure and a unified digital platform to support the integration of economic data for business sector services in the UAE.
  • Trademarks Law: A new trademark law has been affected (Federal Trademarks Law No. 36 of 2021), that allow for accelerated procedures and quicker issuance of licenses. In addition, the trademarks database will now be made a public registry with open access to all. Prior to the amendment, a trademark search was a paid service, and with the new changes, free digital access will be provided.

The new legal changes effected in the UAE pave the way for a new and modern era for the country, one that proves its attractiveness to global investors and innovators. The changes are aligned with the ambitions of the country to become the leading business hub and also to establish a well-diversified economy. The new changes are a welcome move that will certainly attract more foreign direct investment in the region as well as spurt further economic growth.

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