ABU DHABI // Removing the provision that would allow foreigners to own the majority of a business defeats the purpose of a new Companies Law, legal experts said yesterday.
Ahead of tomorrow's final FNC debate of the law, lawyers applauded the council for its in-depth discussion on it but said they could not understand why the foreign ownership clause had been removed.
Dr Habib Al Mulla, an Emirati lawyer, said the change was much needed.
"Why was it put in there in the first place if everyone was against it?" Dr Al Mulla asked.
"You might say that it was not studied well."
The decision to remove the clause was made by Sultan Al Mansouri, Minister of Economy.
"The minister pulled the article from the law so it can be included on the upcoming new law on foreign investment, with more justifications and further enhancement," said Ali Al Nuaimi (Ajman), who is on the FNC's finance committee.
Dr Al Mulla said that without the provision the law was weak and lacked direction.
He said it was not a big enough advance on the current law, which was written in 1983, and that other nations had an advantage over the UAE by allowing foreign ownership.
"This achievement is old for some countries. Many have beaten us in this," he said.
Khaled Mustafa, a lawyer with the Abu Dhabi Judicial Department, agreed that the clause on foreign ownership was needed, particularly as many companies had already found ways around it.
"Many companies - not a lot - are owned by foreigners with more shares than locals, by having an outside contract," Mr Mustafa said.
"Why not be clearer and put an end to this? The goal of the law is to increase investment in the country by helping companies."
Dr Al Mulla said another problem with the law was that it tried to be too many things at once. It should have been split into a companies law and a financial market law, he said.
But despite criticism outside the chamber, in meetings last month many hours were spent trying to give the law teeth, and ensure close monitoring and accountability of publicly traded companies, and shareholders rights.
The new law sets clear responsibilities for boards of directors, managers and auditors to ensure they can be held to account. It also gives the Securities and Commodities Authority more power of scrutiny.
The law removes the previous minimum of Dh150,000 capital to start a limited liability company and will set up a single nationwide register of company names.
"Major changes were done by the committee and the council supported the committee on most of its decisions," Mr Al Nuaimi said.
He disputed the suggestion that removing the foreign ownership clause would hurt investment.
"I don't think it will affect investment from the Emirates' point of view, and foreign investors will still have several options to set up their business and operate it hassle-free in UAE," Mr Al Nuaimi said.
The FNC has yet to agree on four articles: the legal definition of corporate social responsibility, voting rights, definitions of kinship and types of firms covered by the law.