To date, those seeking to conduct due diligence in relation to a UAE LLC have had to rely heavily on cooperation from the target company and its management, as publicly accessible information is very restricted. This problem is often exacerbated by a lack of reliable company accounts.
Although the Old CCL required the production of audited accounts by a LLC, in practice the authorities have not required or registered the filing of such accounts, and no particular accounting standard was imposed. While accountants in the UAE have broadly followed international accounting standards (IAS), other less stringent standards have also been adopted.
The CCL has taken some initial steps towards alleviating these problems:
New Companies' Registrar: a Companies' Registrar is to be formed, initially to supervise the Trade Names Register. More detailed regulations are to be published in due course setting out its additional activities and duties (see commentary). It is envisaged that companies will be able to file documents electronically with the Registrar. Concerned parties may request copies of particulars as set out in the records kept by the Registrar; and
Company Accounts: UAE companies are now required to prepare their accounts in accordance with IAS. The CCL also includes specific financial record keeping obligations and a requirement to keep such records at the company's head office for at least 5 years.
In terms of publicity, JSCs are now required to publish their annual accounts in two daily local newspapers and to provide copies of such accounts to the authorities. However, it is unclear whether, and if so the extent to which, equivalent publication and filing requirements will be applied in respect of LLCs by virtue of Article 104. There is no longer any separate requirement for the audited accounts of a LLC to be filed with the local DED, as was the case under the Old CCL. Of course, if and when VAT and corporate income tax are introduced in the UAE, the authorities may apply a more rigorous approach to the preparation and filing of LLC company accounts than is currently the case.
It is also unclear at this stage the extent to which the existence of a LLC share pledge will be made public. As noted above, in our experience there is no need to advertise the pledge - although it seems to be possible for the pledge to be noted on the commercial register if requested by the LLC in question.
The UAE Commercial Companies Law In Focus: Due Diligence & Accounts
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