Author: afridi-angell

ADGM announces tech start-up licensing regime

The Abu Dhabi Global Market (the ADGM) recently announced the launch of a commercial license specifically catered towards tech start-ups that allows entrepreneurs to obtain an operational license in the ADGM and access to a Professional Services Support Program aimed at allowing entrepreneurs entry to a community of businesses, financial services and professional advisors.

 

The license is available to entrepreneurs of all nationalities floating technology driven start-ups with scalable innovative business concepts that can be deployed in the UAE and contribute to the development of the local economy. Demonstrable evidence of the progress of such technology (such as a prototype or market traction) will be required along with a clearly defined business plan with relevant forecasts.

 

Registering under the license offers the following benefits:

 

• a fully operational commercial license for two years;

 

• annual fee of USD700 (as opposed to the USD10,300 initial registration fee and USD8,100 annual renewal fee ordinarily  applicable);

 

• registration with a virtual office address (business centre or agent/advisor registered address) or physical working space  (micro-office);

 

• access to ADGM’s Professional Services Support Program; and

 

• the option to obtain up to four employee visas.

 

The registration process remains the same as the current online procedure used for ordinary commercial licenses (involving submission of an application form and business plan, initial screening and pre-approval, final approval and issuance of license after registration and incorporation). After two years, if the start-up is able to show progress such as revenue or a sufficient level of investments, it will either be converted to a traditional operational entity on normal license terms or a holding company.

 

The Professional Services Support Program is a unique partnership between the ADGM and leading local and international advisers, established to help entrepreneurs enhance the scalability of their ventures, build business skills and provide guidance in the fields of accounting, compliance, finance, legal and VAT.

 

These developments come on the back of a number of initiatives by the ADGM to address set-up costs, access to funding and business support for start-ups (such as the FinTech RegLab programme). They are also in line with the UAE’s National Innovation Strategy to make the UAE a more attractive base for new businesses and ultimately promote economic diversification, foster growth and stimulate the region’s innovation environment. ■

Dubai relaxes rules on filing appeals before the Court of Cassation

On 19 September 2018, H.H. Sheikh Mohammed Bin Rashid Al Maktoum, the Ruler of Dubai, issued Decree No. 28 of 2018 concerning the Acceptance of the Civil Petitions before Dubai Courts (the Decree). The Decree was issued by His Highness to address the procedures in filing appeals to the Court of Cassation. The Court of Cassation is the highest court in Dubai.

 

Article No. 173 of Federal Law No. 11 of 1992 (as amended) (the Civil Procedures Law) provides that appeals to the Court of Cassation must be filed within 60 days of the judgment of the Court of Appeal. A matter is appealable to the Court of Cassation on questions of law, and provided that the value of the dispute exceeds AED 200,000 (Article 176).

 

Prior to the Decree, appellants were required to make payment of the Court of Cassation fee of approximately AED 6,000 and file a detailed petition of appeal before the expiry of the 60 day deadline. Over the past few years, several appeals were rejected by the Dubai Court of Cassation because the payment of the Cassation Court fee was delayed beyond the 60 day deadline, even though the petition of appeal itself was filed in time.

 

The Decree seeks to address this issue by clarifying that the Cassation Court fee may be paid within three working days of the Case Management Office requiring the petitioner to pay the fee, irrespective of the 60 day limit to file the appeal. The Head of the Dubai Court is given discretion to amend this time frame. Going forward, parties wishing to appeal to the Court of Cassation are still required to file the appeal petition within the 60 day deadline, but only need to make arrangements to ensure that payment is made as soon as the Case Management Office requires it.

 

The Decree further provides that a party which had its petition dismissed for reasons of delay in payment of the Cassation Court fee after 3 May 2015 may apply to the Court of Cassation for reconsideration of the dismissed petition. Such applications must be made within 30 days of the Decree coming into effect. This option is not available where the Cassation petition itself was delayed for more than 60 days (i.e. as opposed to the payment of the fee).

 

The Decree will come into force upon being published in the Gazette, which is yet to occur. Dubai is not part of the Federal Court structure, and the Decree is applicable only with respect to proceedings before the Dubai Court of Cassation. ■

Islamic structured products: too complex for their own good? – Islamic Finance News

There is no doubt that Sukuk continue to be the star performer of the Islamic finance industry, and are regularly deployed for an array of transactions including infrastructure development, Basel III liquidity requirements and even social welfare funding. However, other Islamic structured products have simply not attracted a similar level of interest in the UAE, despite the obvious advantages these products offer to companies looking to manage risk exposure (particularly in the context of trade finance, where plain vanilla hedging instruments may not be
sufficient) and to sophisticated investors looking to customize their investment portfolio to meet specific risk return objectives. Rahat Dar asks; why haven’t these Islamic structured products found a ready market in the UAE?

Qatar sanctions – new developments

The political dispute between Qatar and its neighbors escalated on Saturday 26 May 2018 with the announcement by Qatar that it would impose a ban on goods from the four boycotting countries, the UAE, Saudi Arabia, Bahrain and Egypt.

 

As we reported earlier, these four countries imposed a trade embargo on Qatar on 5 June 2017. The measures that were introduced prohibited the direct shipment of goods and the direct transport of passengers to or from Qatar and closed the land border between Qatar and Saudi Arabia. Ships and aircraft registered in Qatar were prohibited from entering the territories of the boycotting countries, and vice versa. Qatari diplomatic personnel and most Qatari nationals were compelled to depart from the boycotting countries.

 

Financial transactions were also affected, although payments by Qatari parties denominated in foreign currencies (such as Euros and Dollars) nevertheless proceeded.

 

These measures compelled the business community to implement a series of somewhat uncomfortable adjustments. Businesses in Dubai were particularly affected, as many operations based in Dubai serve customers around the Gulf, including Qatar. None of the adjustments that businesses put in place, such as the routing of shipments through non-boycotting countries, enjoyed official approval.

 

The new measures announced by Qatar could well cast doubt on the viability of a number of these adjustments. In Saturday’s announcement, the Ministry of Economy and Commerce of Qatar stated that the sale of products imported from the UAE, Saudi Arabia, Bahrain or Egypt would be prohibited. Retailers are directed to remove such items from their shelves. The Ministry would conduct inspections to ensure compliance. The Government of Qatar also announced that dairy products imported from Saudi Arabia via third countries would be prohibited. Somewhat more modest measures were also reported – that products from the boycotting countries would not benefit from GCC Customs treatment, and that the Government of Qatar has issued a directive that buyers should find new suppliers for the products that are impacted.

 

These measures appear to be aimed at consumer and retail products manufactured in the boycotting countries. It is unclear whether they will extend to other goods from those four countries that are not shipped directly. It is also unclear whether the new measures will impact existing supply contracts or only new supply contracts with customers in Qatar.

 

We will continue to monitor developments as they are reported. For the time being, parties with ongoing supply obligations to customers in Qatar must likewise watch developments closely, as many options for serving customers in Qatar might no longer be available. ■

Cautious optimism on 100 per cent foreign ownership

Recent media reports have suggested that 100 per cent foreign ownership of companies in the UAE will now be permitted. The reports are based on a government press release regarding a UAE Federal Cabinet (Cabinet) meeting held on 20 May 2018.

 

The press release states that the Cabinet announced changes in the system of foreign ownership in the UAE allowing global investors to own 100 per cent of companies by the end of the current year. While this is welcome news, some media reports and expert analysis have jumped the gun giving the impression that 100 per cent foreign ownership is a done deal. This news is better understood as a statement of intent and is not confirmation that the relevant legislation is already in place.

 

Companies incorporated in the UAE require a minimum of 51 per cent UAE ownership. This long-standing rule is set out in Article 10 of Federal Law 2 of 2015 on Commercial Companies, as amended (the Companies Law). The previous Companies Law (Federal Law 8 of 1984) contained a similar restriction. As an exception to this rule, 100 per cent foreign ownership is permitted in free zones.

 

An amendment to Article 10 of the Companies Law adopted in September of 2017 (pursuant to Federal Decree-Law 18 of 2017) stipulates that the Cabinet may adopt resolutions permitting greater than 49 per cent foreign ownership. Under the revised Article 10, the Cabinet has discretion to determine what types of companies may be majority or wholly owned by foreigners.

 

The idea of giving the Cabinet the power to designate companies in certain sectors as being eligible for 100 per cent foreign ownership is not new. For example, in September of 2011, following announcements by the Ministry of Economy regarding a series of forthcoming new laws, media reports circulated that a new foreign investment law giving the Cabinet the power to allow 100 per cent foreign ownership of certain companies was being drafted.

 

As of this time, no foreign investment law has been enacted. Instead, the mechanism for permitting the Cabinet to designate the sectors eligible for majority and 100 per cent foreign ownership has been inserted into the Companies Law.

 

While 100 per cent foreign ownership would be a welcome development, it is not yet a reality. Some reports may give the impression that a Cabinet Resolution that would allow implementation of 100 per cent foreign ownership is already in place. Such reports are misleading. A committee is currently studying the issue with a view to making recommendations but the Cabinet has not yet issued any resolutions stipulating that specific types of companies are eligible for 100 per cent foreign ownership. Until this happens, 100 per cent foreign ownership will be a goal rather than a reality.

 

Reports about new legislation in the UAE should always be treated with caution until the actual legislation is published in the Official Gazette. In some cases, rumored legislation never materialises. In other cases it takes much longer than predicted. For example, there were many reports going back well over a decade that the new Companies Law was imminent before it was finally promulgated in 2015. In the current case, the government’s press release indicates that the Cabinet has set a goal of implementing 100 per cent foreign ownership by the end of the year. Whether or not this goal will be achieved remains to be seen.

 

Permitting 100 per cent foreign ownership in certain sectors would be a major development. Not only have the relevant sectors not yet been identified, if and when such sectors are identified the government may get resistance from existing companies operating in these sectors. Industry resistance is a potential obstacle to implementation. The relevant business sectors must be identified and then the Cabinet must agree with the recommendations and adopt a resolution.

 

The recent news is cause for optimism that 100 per cent foreign ownership will eventually be implemented in certain sectors but 100 per cent foreign ownership is not yet a reality. ■