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1 Key Changes For Limited Liability Companies
UAE Commercial Company Law 2015Key Changes For Limited Liability Companies
Introduction
This law has significant implications for all limited liability companies (LLCs) registered in the UAE. This document highlights key changes in the regulations, with a special focus on matters affecting the SME sector.
All companies are required to amend their memorandums, starting 1st January 2016 and must comply with the new law before 30th June 2016. Any company that does not make the necessary amendments by the stated deadline will be subject to penalties and/or other disciplinary action.
Subject Description
Single Shareholding The new law permits UAE nationals and companies to incorporate a limited liability company with a single shareholder.
Details of the Shareholders Memorandum and Articles of Association should disclose the details of the shareholders, at the minimum their name, nationality, date of birth, residential address and head office address for corporate shareholding. Department of Economic Development of Dubai may also require the Shareholder’s mobile numbers to be included in the Memorandum and Articles of Association.
Executive summary
The UAE has introduced a more sophisticated corporate regulatory framework with the enactment of the UAE Federal Law No. (2) of 2015 Concerning Commercial Companies. The new companies’ law came into effect on 1 July 2015. With the introduction of this law, the old UAE Federal Law No. (8) Concerning Commercial Companies has been abrogated (repealed).
Update on Regulatory Changes
Produced by MGI member
Faiyaaz Rajkotwala
MGI Salim Rajkotwala & Associates is a
member of MGI Middle East & North Africa
based in Dubai, United Arab Emirates.
Faiyaaz is Managing Partner at the Firm
and also International Committee
Member for MGI representing the Middle
East & North Africa Area. For more
information go to www.mgisalim.com
2 Key Changes For Limited Liability Companies
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Subject Description
Share Pledges The new law allows partners in LLCs to pledge their shares. Pledges must be made in accordance with the company’s memorandum of association. The pledge must be an official notarized document and entered into a central commercial register with the authorities.
Value of non-cash consideration Shares may be allotted for non-cash consideration after obtaining an approval of the Authority. Such non-cash consideration must be valued by an approved financial consultant.
Accounting requirements Companies are required to use International Accounting Standards and keep their accounting records in their principal office for at least 5 years from the end of Financial Year.
Number of Managers A LLC can have more than one Manager; the new law does not restrict the maximum number of Managers.
Competition Managers are permitted to undertake any business that competes with the company only with consent of the general assembly.
The General Assembly The General Assembly shall be convened at least once a year by an invitation from the Manager or the Board of Directors within the four months following the end of the financial year of the company.
Notice of General Assembly The notice period for a general assembly of the LLC has decreased from 21 days to 15 days. This can be further shortened on a case-by-case basis by unanimous shareholder approval.
Matters of General Assembly The general assembly appoints the managers and members of the board of managers and also fixes their remuneration. The general assembly also appoints the auditor and fixes its remuneration.
Quorum of General Assembly A general assembly meeting can be convened only if shareholders holding at least 75% of the share capital of the LLC are present. In the event of inadequate quorum, the requirement reduces to 50% in the second meeting, which should be held within 14 days, and then to at least one member present at the third meeting.
Financial Year Every company shall have a financial year as determined in the Memorandum of Association, provided that the first financial year shall not exceed eighteen months or be less than six months. Every subsequent financial year shall consist of consecutive periods each of twelve months.
Resolutions by Simple Majority Resolutions at the general assembly require adoption by at least 50% of the shareholders of the company.
Conclusion
We believe that the introduction of this new law will further modernize the legal and regulatory system in the UAE, bringing it more in line with international standards. This law is also a significant step towards establishing a stronger system of corporate governance in the UAE, thereby making the UAE more attractive to foreign investors.
For questions regarding this document, please contact MGI Salim Rajkotwala & Associates on +971-4-2368945, or email at [email protected].
This law does not apply to offshore companies, companies operating in the Free Zones, sole establishments or partnerships in the UAE.
