The Abu Dhabi Global Market (ADGM) Registration Authority has issued Final Notices imposing financial penalties on certain registered companies with them and their directors for failing to comply with statutory obligations under the Companies Regulations 2020. This enforcement action reflects ADGM's commitment to promoting corporate transparency and regulatory compliance.
Statutory Requirement
At incorporation, every ADGM private company or LLP is assigned an Accounting Reference Date (ARD), marking the end of its accounting period and setting the deadline for filing annual accounts.
- First accounts (≤ 12 months): To be filed within 9 months of the ARD.
- First accounts (> 12 months): To be filed within 9 months of the first anniversary of incorporation.
- Subsequent accounts: To be filed within 9 months of the ARD.
Case Facts
Financial Penalties against ADGM Registered company and its directors for non-submission of financial statements within prescribed time limit.
Violations Identified
- Failure to file audited financial statements within the extended statutory deadline.
- Failure to prepare and submit a Director's Report.
Penalties Imposed
- Company: USD 7,500
- Each Director: USD 10,000 (USD 7,500 for filing failure + USD 2,500 for director's report failure)
Regulatory Findings
- The contraventions were deemed reckless, not merely negligent.
- Directors breached the statutory duties by failing to file accounts and reports on time, while providing assurances were given to the Authority regarding audit progress.
- Auditor engagement was mismanaged, with last-minute resignations and replacements causing further to delays.
The Nexdigm Analysis
This case illustrates the critical importance of robust governance and timely regulatory compliance for companies operating in ADGM and comparable jurisdictions. The penalties imposed on the company and its directors reflect a pattern of repeated non-compliance, which regulators are increasingly unwilling to tolerate.
Key Concerns Identified
- Directors had prior enforcement history yet failed to implement corrective measures
- Filing delays were worsened by weak auditor management and poor documentation.
- The absence of a Director's Report, especially for a parent entity with international subsidiaries, reflects a serious lapse in governance and statutory understanding.
Preventive Measures
Entities must establish strong internal controls, compliance calendars, and professional support systems (e.g., company secretarial services) to avoid lapses. Proactive auditor engagement, clear record-keeping, and director accountability are essential.
Our Comments
For UAE-based entities, this case serves as a reminder that regulatory authorities are actively monitoring compliance and will take action where governance lapses occur. Directors must ensure that filings are not only timely but also complete and accurate.
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