UAE Federal Law No. 32 of 2021 on Commercial Companies ("New CCL") entirely replaces the previous Federal Commercial Companies Law No. 2 of 2015. The New CCL was issued toward the end of 2020 in series of legislative reforms undertaken by the UAE Government to revamp the legislative framework across a number of areas and to encourage foreign investments in to the UAE.
The New CCL aims to further ease the restrictions around UAE companies, foreign ownership restrictions have been virtually removed under the legislative revamps, permitting limited liability companies to be owned by foreign nationals in a wide variety of sectors. The New CCL has further improved the position for investors by including Special Purpose Acquisition Company ("SPAC") whose purpose will be mergers and acquisitions of other companies. The New CCL also recognises Special Purpose Vehicles ("SPV") which shall be body corporates with the purpose of separating any particular liabilities and assets which are related to a particular transaction, for example, borrowing by the SPV from a lender for special project. Both SPAC and SPVs will be regulated by the Securities and Commodities Authority and implementing legislation is expected to be issued.
There are a number of other changes brought about under the New CCL including:
- easing of procedures for company liquidation which predominantly has been an onerous process under the previous regime.
- limited liability companies and public joint stock companies may find it easier to make changes to constitution and make necessary decisions.
One of the key impacts of the New CCL is that companies will be incentivised to go public given the greater flexibility in the initial public offering process now being offered and the reduction of statutory requirements for IPO listing.
The New CCL goes into effect on 2 January 2022 and is expected to reinvigorate the UAE's offering in the capital markets. All existing body corporates will be given a 12 month period to adjust their position and update their articles and constitutional documents.
In conclusion, the New CCL is being widely lauded for bringing about changes to the commercial companies regime which will foster investment growth in the UAE and further establish the country as a destination for new and existing corporates.
Originally Published 29 December 2021
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