Every state economy gives the priority to citizens especially in commercial and corporate fields. This is due to the fact that commercial companies and particularly the joint stock companies’ play a vital role in the economic cycle. Most corporate laws put some restrictions on foreigners’ shareholders, like imposing a maximum number of shares a foreigner can own, or prohibiting foreigners being elected to the board of directors.
Today legislators worldwide are trying to minimize the restrictions on foreigners in companies set up to encourage the foreign investment in their countries.
In this article we are going to share some of the main characters of corporate laws in the MENA region and how it deals with foreigner partners or shareholders.
- Saudi Arabia:
Saudi Arabia has allowed foreigner to have total ownership of a company in the Kingdom.
Saudi Arabia is transforming with a series of social and economic reforms that aim at enhancing the Kingdom’s economic potential under Vision 2030. Exceptionally there are some activities the law imposes a certain percentage of Saudi nationals’ participation in the capital. As a foreign investor you must obtain license from the Saudi Arabian General Investment Authority (SAGIA).
- United Arab Emirates:
UAE issued in 2021 a new law that regulates the commercial corporate under the number of 32/2021, the above mentioned law came into force as of 2 January 2022 and replaced the law no 2 of 2015.
The new law came with remarkable amendments regarding the foreign ownership of the companies in UAE, where by virtue of article 10 of the amended law, a foreign national or entity now allowed to have full ownership of companies in UAE. In addition, the requirement of having a majority of the directors as UAE-nationals has been canceled. However, there is an exception where according to the same article some activities with strategic impact will stay under the requirement of certain percentage of UAE nationals’ participation in the capital or boards of directors. These activities are determined by a special committee formed by a cabinet decision, based on the proposal of the Minister of Economy. The economic activities with a strategic impact are: Security and defense activities, activities that are military in nature, banking, exchange companies, financing companies, insurance activities, currency printing, telecommunications, Hajj and Umrah services, Holy Quran memorization centers and services associated with fisheries.
- Qatar:
The Foreign Investment Law (Law No. 1 of 2019) has allowed the establishment of 100% foreign owned companies, where article 2 of the said law states that “Without prejudice to legislations regulating Non-Qataris’ practices of commercial businesses and professions, and the provisions of Article (4) hereof, a Non-Qatari Investor may invest in all economic sectors even with a capital up to 100% in accordance with the Executive Regulations of this Law”.
However, article 4 of the above mentioned law prohibited foreign investors to invest in following sectors: Banks and insurance companies, unless otherwise excluded by a decision from the Council of Ministers, commercial agencies, and any other fields for which a decision from the Council of Ministers is issued.
- Bahrain:
Investors in Bahrain can benefit from 100% foreign ownership across most sectors, with no requirement for a local partner. On 19 July 2016, the Cabinet approved an amendment to the Commercial Companies Law. The new law will allow 100 per cent foreign ownership in residency, food, administrative services, arts, health and social work, information and communications, mining and quarrying, water supplying, real estate and technical activities, and manufacturing, amongst others.
- Kuwait:
The Government of Kuwait enacted the Direct Investment Promotion Law (Decree Law No. 116 for 2013). Under the new law, foreign investors are allowed to own up to 100 percent equity in a Kuwaiti company. It also allows the establishment of branches and representative offices. The new law also provides several incentives and rights and obligations of investors. The decree also establishes the Direct Investment Promotion Authority, the responsibilities of which include the promotion and facilitation of investment through a “One Stop Shop”.
- Egypt:
Under the Investment Law No. 72 of 2017 issued May 31, 2017, a foreigner investor in principle can own up to 100% shares in Egyptian companies. Where article 3 of the said law states that: “The State shall ensure to the foreign investor the same treatment given to the national investor”. However, there are some restriction on foreign investors in some fields and sectors such as: Importing for the purpose of Trade, Tour Guides, and Commercial Agents.
- Lebanon:
In principle, according to the Lebanese commercial law foreigner investors can benefit from 100% ownership of a company, with no requirement for a Lebanese partner(s). However, the Lebanese legislator has imposed some restrictions on foreign investors. Where according to the article 78 on the commercial law: One third of joint-stock company’s capital whose object is the operation of a public service shall be made up of nominal shares belonging to Lebanese shareholders. Also the commercial law imposes by the virtue of article 144 that one third at least of the board of directors must be of Lebanese nationality.
- Turkey:
In principal according to the “Foreign Direct Investment Law” numbered 4875 dated June 5, 2003, the foreign investors are subject to equal treatment with domestic investors. Therefore, a foreigner is allowed to have full ownership of a company in Turkey. Where article 3 of the mentioned law stipulates that: “Unless stipulated by international agreements and other special laws:
1- Foreign investors are free to make foreign direct investments in Turkey
2. Foreign investors shall be subject to equal treatment with domestic investors”.
However, there are restriction on foreign shareholding in a few specific sectors such as media, education, aviation, insurance and banking.
- Republic of Cyprus:
In principle, no restrictions are imposed on foreign nationals regarding the ownership of companies, where foreigners can benefit from 100% ownership of a company in Cyprus. However, some restrictions are imposed on the foreign investments in some sectors such as: banking sector, local television or radio station, private tertiary education institutions, real state.
For more information about opportunities of investors in the MENA region or if you need any assistance in your business setup please get in touch with us on +961 (3) 093260, or email us on info@lawyersmarks.com.
List of references:
- How Expats Can Now Own 100% of Their Business In Saudi Arabia, https://saudiscoop.com/business/how-expats-can-now-own-100-of-their-business-in-saudi-arabia/
- https://www.moec.gov.ae/documents/20121/376326/Commercial+Companies.pdf/12d14f53-1a3e-47b4-8e70-fac3f672c403?t=1645596097819
- https://www.moec.gov.ae/en/-/%D9%85%D8%A7-%D9%87%D9%8A-%D8%A7%D9%84%D8%A3%D9%86%D8%B4%D8%B7%D8%A9-%D8%A7%D9%84%D8%A7%D9%82%D8%AA%D8%B5%D8%A7%D8%AF%D9%8A%D8%A9-%D8%B0%D8%A7%D8%AA-%D8%A7%D9%84%D8%A3%D8%AB%D8%B1-%D8%A7%D9%84%D8%A7%D8%B3%D8%AA%D8%B1%D8%A7%D8%AA%D9%8A%D8%AC%D9%8A%D8%9F
- https://www.bahrainedb.com/business-opportunities
- https://investmentpolicy.unctad.org/investment-policy-monitor/measures/2920/bahrain-passed-a-new-law-allowing-100-foreign-ownership-in-various-sectors-#:~:text=Bahrain-,Bahrain%20passed%20a%20new%20law%20allowing,foreign%20ownership%20in%20various%20sectors.&text=On%2019%20July%202016%2C%20the,to%20the%20Commercial%20Companies%20Law .
- https://investmentpolicy.unctad.org/investment-policy-monitor/measures/2424/kuwait-enacts-the-direct-investment-promotion-law-
- https://www.gafi.gov.eg/english/startabusiness/laws-and-regulations/publishingimages/pages/businesslaws/investment%20law%20english%20ban.pdf
- http://www.lawsturkey.com/law/foreign-direct-investment-law-4875
