United Arab Emirates: New updates on legal reforms in the UAE
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The year 2021 brought many critical changes in the legal order of the United Arab Emirates. The new changes have been critically aligned with the region’s economic reforms aimed at creating a flexible business environment in the UAE that promotes economic prosperity. The United Arab Emirates is home to a wide variety of expat populations, making up nearly ninety percent of the total population, and the new laws are also aiming to make the region more expat-friendly and adaptable.
The new changes changed nearly forty laws in total, including some of the major changes to Commercial Company Law, the UAE Criminal Code, UAE Trademark Law, and Civil Status Laws.
- United Arab Emirates corporate law: The major changes to UAE Company Law (Federal Law No. 2 of 2015 and its amendments) now allow 100% foreign ownership restricted to commercial and industrial activities while excluding professional business activities at this time. With this change, a new business can be incorporated in the UAE mainland (as opposed to a business in a free zone) with its full property rights attached to foreign ownership. This is a landmark change from the previous position which required that 51% of the shares be transferred to a UAE national. In addition, a foreign company was not allowed to establish a new branch in the UAE without appointing a UAE national as a local service agent. Branches of foreign companies registered in the country can now be converted into a trading company in the United Arab Emirates. In another groundbreaking reform, foreign investors are allowed to set up a sole proprietorship limited company. Prior to the change, this provision was reserved for UAE nationals only. However, the change only applies if the company’s activity does not fall under the “Strategic Impact List”.
- UAE Commercial Transaction Law: The most recent amendments will come into effect from January 2022, and the new amendments to the UAE Commercial Transactions Act (UAE Commercial Transactions Act No. 18 of 1993 and its amendments) result in reduced criminal liability in check matters. According to the new changes, only the following actions will result in criminal activity, such as:
- Deliberate forging of checks;
- Cases of fraud;
- Provision of counterfeit checks;
- Withdrawal of account balance prior to the check cashing date to prevent the check from being cashed.
With the new changes, partial payment by check is also mandatory. This applies if the amount available for payment is less than the value of a particular check, the drawee’s bank is now obliged to pay part of the amount.
- Personal Laws: Other changes have been made, including the lifting of the United Arab Emirates’ ban on drinking alcohol for people over the age of 21 and changes to the penal code that decriminalize unmarried couples living together, which was previously considered a crime.
- Digitization law: The UAE has also adopted a digitization strategy for 2021-2025 with the aim of introducing an improved digital infrastructure and unified digital platform to support the integration of economic data for business sector services in the UAE.
- Trademark law: Affected is a new trademark law (Federal Trademark Law No. 36 of 2021), which enables accelerated procedures and faster issuing of licenses. In addition, the trademark database is now becoming a public register with open access for all. Before the change, trademark research was a paid service and the new changes will provide free digital access.
The recent legislative changes in the United Arab Emirates pave the way for a new and modern era for the country that proves its appeal to global investors and innovators. The changes are in line with the country’s ambitions to become the leading business location and build a well-diversified economy. The new changes are a welcome move that is sure to attract more foreign direct investment into the region and further stimulate economic growth.
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