Introduction

On 25 March 2015, UAE Federal Law No 2 of 2015, the new UAE Commercial Companies Law was issued (the "New CCL") and was published in the Official Gazette on 31 March 2015.  The New CCL replaced the existing commercial companies law (UAE Federal Law No 8 of 1984) and provides that all companies must comply with the New CCL by 30 June 2016.

What needs to be done and by when?

We have been advising clients on the implications of the New CCL.  One of the key requirements is that all existing companies must make certain amendments to their constitutional documents so that they are in compliance with the New CCL.  Any companies that fail to do so by 30 June 2016 will be automatically dissolved.  With an ever growing number of business houses setting up in the UAE, leading to an increase in the number of incorporated entities, it is advisable that companies make these amendments at the earliest opportunity, rather than leaving it until the last minute.

Salient Features

The New CCL:

  • allows the establishment of an LLC by a sole legal person;
  • applies to companies established in a free-zone, which carry out business outside the free-zone;
  • allows shareholders of a company to enter into share pledge agreements, either with other shareholders or with third parties;
  • requires all contracts, documents, correspondence and forms of applications issued by the company to bear its name, legal form, registration number and address;
  • removes the previous limit (five) on the number of managers that a limited liability company may appoint;
  • reduces the notice period for general assemblies from 21 days to 15 days;
  • raises the quorum for general assembly to 75% of shareholders.

Our Advice

The changes that have been brought forth by the New CCL are numerous, and the extent to which these apply to your company and its respective constitutional documents will differ on a case by case basis.  We reflect below on some of the essential conditions that must be borne in mind when carrying out these amendments:

  • For Public Joint Stock Companies, the Circular on Application of Federal Law No 2 of 2015 Concerning Commercial Companies published on 11 February 2016 by the Securities & Commodities Authority (SCA) provided clarification on some of the important articles stipulated in the New CCL, which PJSCs should take into consideration.  The SCA also provided an Articles of Association template, which companies must adopt when updating their Articles of Association.  Once the Articles of Association are approved by the company's general assembly by virtue of a special resolution, they should be sent to the SCA and other authorities for final approval post which it can be published in the Official Gazette.
  • Appointments of members of the Board of Managers, Control Council, and the Internal Sharia Control Committee and Controller are matters reserved for the general assembly and the Articles should mirror this.  The remuneration of auditors is also now a matter for the general assembly, the appointment of which remains a decision for the assembly.
  • From our practical experience, we understand that a Notary Public registering the constitutional documents will generally want companies to specify, in the introductory section, if a shareholder is being represented by another individual at the time of signing.  Details of such individual, including his/her phone number and details of the power of attorney based on which he/she is representing that entity, must be specified in the constitutional documents.  This is especially important for all companies that have other companies as their shareholders.
  • Articles need to list all the details of the shareholders of an LLC, including their date of birth and mobile numbers.  The Notary Public insists that such details should be included in the introduction to the document and not just in the later sections.

Who does this apply to?

The requirement that constitutional documents (such as the Memorandum of Association and Articles of Association) be amended applies to your company if it falls in any of the following categories:

  • limited liability company per Federal Law No 8 of 1984; or
  • partnership company per Federal Law No 8 of 1984; or
  • private joint stock company per Federal Law No 8 of 1984; or
  • public joint stock company per Federal law No 8 of 1984; or
  • any entity registered per Federal Law No 8 of 1984, which does not fall within the exempted category such as government companies or excluded under a resolution by the cabinet.

How to ensure compliance with the New CCL?

Private companies must ensure that the Memorandum of Association have been amended and properly notarised, and public companies must ensure that their Articles of Association have been amended and properly notarised, by 30 June 2016.  If you have any questions or require any further advice in relation to making the necessary amendments to your constitutional documents, please contact either Anand Singh on +971 4 350 3612 and by email on anand.singh@kennedyslaw.com or Simon Isgar on +971 4 350 3609 and by email on simon.isgar@kennedyslaw.com.

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.