United Arab Emirates: Impacts of the New UAE Commercial Companies Law on Limited Liability Companies - What you should know - Part I

Last Updated: 9 June 2016
Article by Dr. Ines Anders and Dr. Anna-Luisa Lemmerz

As the deadline 30.06.2016 for complying with the new regulations is approaching, we would like to inform you about specific impacts of the new United Arab Emirates' ("UAE") Commercial Companies Law on limited liability companies ("LLC").

Federal Law No. 2 of 2015 concerning Commercial Companies ("new CCL") came into force on 01.07.2015 and replaced Federal Law No. 8 of 1984 in its entirety.

The new CCL is not only applicable to companies incorporated from 01.07.2015 onwards. Companies established before that date also need to observe the new regulations. A deadline until 30.06.2016 has been set out for such compliance. Hence, it has to be verified for each LLC whether the current memorandum and articles of association ("MoA and AoA") and any other agreements relating to the shareholders and managers of the LLC require amendments.

1. What are the key changes?

The objective of the new CCL is to align the market and business environment of the UAE with international standards. Therefore, principles pertaining to corporate governance and protection of shareholders have been introduced.

Amongst others, provisions regarding the company manager, the general assembly, the distribution of profits, pre-emption rights, accounting and auditing as well as the minimum information to be set out in the MoA and AoA concerning the company, the shareholders and the managers were updated. Furthermore, the CCL now explicitly provides for the pledging of shares of an LLC.

2. With which provisions of the new CCL does an LLC have to mandatorily comply?

From the perspective of a foreign shareholder, the following aspects of the new CCL are particularly important:


The new CCL stipulates that the provisions concerning joint stock companies are generally applicable to LLCs. Following this cross-reference, the manager of an LLC may now act on behalf of the company in a number of instances only if the MoA and AoA explicitly authorizes him to do so. This applies, for example, to discharging debtors of the company from their obligations or to agreeing to an arbitration clause.

In addition, stipulations in the MoA and AoA that exempt the manager from his liability are now invalid and must be deleted.

Further, the new CCL prohibits managers of an LLC to undertake the management of a competing company. It is advisable to include these rules and the legal consequences of a violation in the MoA and AoA in order to make the manager aware of the legal situation.

General Assembly

Provisions regarding the quorum for a general assembly have been amended as well. For the first meeting, shareholders holding at least 75% of the share capital need to be present as opposed to 50% previously. For the second meeting, at least 50% of the share capital of the LLC needs to be present whereas the old CCL did not set out any quorum. For the third meeting, no specified quorum is required by the new CCL. The company's MoA and AoA has to reflect these changes.

Consideration should also be given to the fact that the mandatory items on the agenda of the general assembly have been expanded.

Distribution of Profits

According to the new CCL, the MoA and AoA of an LLC is deemed to be void also in such cases it stipulates that a shareholder is entitled to receive a fixed fee instead of a percentage of profits. Due to this tightening of the law, any agreement on the distribution of profits should be reviewed.

Pre-Emption Right

Furthermore, attention has to be paid to new legal requirements for the exercise of the pre-emption right. Should a shareholder wish to dispose of his shares, he needs to disclose the name of the prospective purchaser to the other shareholders.

In the event of a dispute between the shareholders concerning the price of the shares, one or more experts approved by the competent authority need to be appointed. The shareholder exercising the pre-emption right has to bear any arising costs. As the new CCL does not contain rules regarding the timeframe for preparing such expert report, the shareholders should be free to include deadlines in the MoA and AoA in order to ensure efficient procedures.

Accounting and Auditing

New requirements for accounting need to be implemented as well. According to the new CCL, all companies are required to maintain accurate accounting records in accordance with international standards at any time. Accounting records must be kept by a company for five years and have to be audited every year. It remains to be seen whether at least every three years new auditors need to be appointed.

Formal Details

With respect to formal details, the MoA and AoA now has to include the address of the LLC's head office and any of its branches. Along with the name, the nationality and the domicile, the date of birth of the shareholders shall be specified. The manager's full name, nationality, domicile and authority must be given provided his name is mentioned in the MoA and AoA. Furthermore, any other persons who may sign on behalf of the company and the extent of their authority need to be stated.

Part II to follow.

Do you have any questions?

Should you have further queries, we are glad to assist you anytime, whether in a personal meeting, over the phone or by eMail correspondence.


Sama Tower, Office 806
Sheikh Zayed Road
PO Box 333 558
United Arab Emirates
Phone: +971 4 327 5888
eMail: info@anders.ae

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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