The United Arab Emirates has implemented new federal consumer protection laws, with a great vision and aim of enhancing responsible lending practices and reduce “name only” lending in the banking sector. More interestingly the amendments require that banks lending to individuals and sole proprietors now take sufficient security instead of relying completely on personal guarantees for the loans they provide. This shift marks a departure from the historical practice of using personal guarantees as the primary means of securing loans in the United Arab Emirates. The amendment seems to be good for the banks as they can feel more security after providing the loan.

What is the Motivation Behind these Amendments?

There are clear motivations behind these amendments. First of all, the UAE banking sector is actually aiming to emphasise responsible lending by ensuring that banks take appropriate measures to secure their loans. This move is truly intended to prevent situations in which loans are granted based completely on the borrower’s reputation or name, without adequate security. Second, the amendment seeks to address the issue of undisclosed debts and personal guarantees, which have been prevalent in the region. Therefore it is clear that the motivations behind these amendments are truly the above mentioned facts.

Let Us Know More About the UAE Investment Law:

The United Arab Emirates encourages participation of foreign investors in the economy through various initiatives. As you might have already heard, the UAE has many jurisdictions for the incorporation of companies. And more interestingly, each Emirate of the UAE has its own licensing authority. In addition to this what you need to understand is the fact that there are more than 40 free zones and each of the free zones is a separate jurisdiction for the incorporation. If a foreign investors, be it an individual or a corporate, wishing to establish their presence in the UAE, depending on the business model, has the option to either establish its presence in the mainland or in one of the freezones of the United Arab Emirates.

Can a foreign investor establish a hundred percent foreign owned company in the UAE?

Well, this must be a question that is there in the minds of many business people across the globe. And the answer is absolutely yes. Although subject to certain restrictions on limited activities, a foreign investor can establish a hundred percent foreign owned company in the UAE. The UAE cabinet has issued a list of strategic impact activities and rules for licensing companies that encage in any of the listed strategic impact activities. And these activities will surely have certain restrictions on foreign ownership. Let us have a clear look into these activities.

• Security and defense activities and activities of a military nature.
• Banking, money exchange, finance company and insurance activities.
• Printing currencies.
• Telecommunications.
• Hajj and Umrah services.
• Activities of Quran memorisation centres and fisheries related services.

For each of the strategic impact activity, depending on its nature, a specific UAE authority has been identified as the regulatory authority.

Investors and Banks in the UAE:

UAE banks, both domestic and foreign are the backbone of the financial industry, providing retail and corporate services to members of the private and public sectors. The central bank of the UAE is the country’s primary financial regulator. Overseas investment have been a crucial factor of the UAE’s economic development strategy for decades as the country has sought to diversify where and how it invests its financial assets. The UAE government regards such investment as a security net for future generations who will probably face depletion of the country’s energy resources one day.

FINAL WORDS:

We have already reached the conclusion of our discussions and sharing of the informations on this long topic, and thus let us be reminded of all what we have seen here. When discussing about these factors in the UAE, there are many more things to tell. Let us do it on some other instance.

If you have any further doubts or clarifications regarding this, kindly reach out to us in FIMKIN.