The 30 June 2016 deadline for compliance with the new Commercial
Companies Law (CCL) No. 2 of 2015 has been pushed to 30
The extension was granted following requests from the Securities
and Commodities Authority, the Departments of Economic Development
across all the Emirates and a number of existing UAE companies.
Many limited liability companies in the UAE were simply not
prepared for the original deadline, risking a daily penalty of AED
2,000 and dissolution. Lack of awareness and understanding was a
major reason for this oversight, with most head offices based
outside the UAE. There was also some confusion as to whom the new
law applied, with companies based in free zone locations being
In order to comply with the new law, most companies will need to
amend their Memorandum of Association and Articles of Association,
and ensure all voting rights and General Assembly procedures are
clear and in line with regulations.
What has changed
The new law has introduced a number of key changes. Firstly, the
number of company types has been reduced from seven to five, with
the removal of joint ventures and partnership limited with shares.
The five company types are:
limited liability company
private joint stock company
public joint stock company
The new law encourages companies to list and is particularly
appealing for family businesses, as families may now retain a
higher percentage (70%) of the shares.
For joint stock companies, there are significant changes to
corporate governance and the responsibilities for the board of
directors, as well as safeguarding the interests of the
shareholders and the company as a whole (e.g. the requirement to
rotate auditors every three years).
Meanwhile, a new company registrar (referenced in the law) is
being established to oversee trade name applications and avoid
duplication across the different Emirates. Other key changes
Some amendments have been made to make limited liability
companies (LLCs) simpler and more attractive to investors. LLCs
(and private joint stock companies) can now be set up by one
individual with no change to the foreign ownership rights (although
this individual must be from the Gulf Cooperation Countries) and
there is no maximum number of managers (previously capped at five).
LLCs must apply International Accounting Standards and
Quorum of the General Assembly
Voting regulations for board meetings and general assembly
meetings are also clarified within the new law. The new minimum
attendance quorum of the shareholders' assembly is 75%
attendance of shareholders holding 50% of the share capital. If the
quorum is not met in the first meeting a second meeting (with 14
days' notice) attended by shareholders holding 50% of the share
capital is valid. If the quorum is not met in the first two
meetings, a third meeting with a notice period of 30 days is valid
with no minimum quorum requirement. The Articles of Association
must be amended to reflect this change.
Steps to compliance
Reviewing compliance should be a priority for all companies
registered in the onshore market in the UAE in order to ensure
their entity types, governance structures and board governance meet
the new regulations. Most companies will have to make some changes
to their Articles of Association (AoA) since all Article numbers
pursuant to the old law were moved and changed.
The AoA must also now include the full name, nationality, date
of birth and place of residence/domicile of each
founder/shareholder. Once the company's AoA have been updated
in line with the new requirements and approved by the shareholders,
they must then be signed in front of the Notary Public in the UAE
(by not only the authorised signatory for the company but also
their local Emirati sponsor or agent (nominee shareholder).
Documents must be translated and approved by the notary before
they can be signed and stamped. Advance notice and schedule
coordination is required in order to complete this essential
From 1 July 2017, any company that has not made the required
amendments will be deemed dissolved and risk fines of AED
2,000 per day. It is therefore recommended that companies
now move as swiftly as possible within the extended grace period to
incorporate all of the new regulations within the Memorandum and
their governance structures.
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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