The long-awaited changes to the UAE Federal Law no.2 of 2015, commonly known as the Companies Law (the “Law”), have been finally published in the Official Gazette on the 2nd of January 2021. The UAE Federal Degree No. 26 of 2020 on the amendment of certain provision of the UAE Federal Law no.2 of 2015 concerning Commercial Companies approved on 27 September 2020 (the “New Regulations”) goes to replace and amend certain provisions of the Law and repels the UAE Federal Decree 19 of 2018 regarding Foreign Direct Investment.
The major amendments brought by the New Regulations are:
(a) the abolishing of the requirement for certain types of companies to have a national service agent;
(b) the possibility of 100% foreign ownership for companies conducting “activities of strategic effect”;
(c) the introduction of specific governance requirements for all companies, not only for regulated entities such as public or private joint stock companies; and
(d) the requirement for all companies to have dispute resolution provision clauses added to their memorandum and/or articles of association.
Among the amendments made by the New Regulations we find:
(i) amendments in respect of the organization, incorporation, and public subscription of shares for public and private joint stock companies and certain changes have been made to the quorums required for calling, attendance and resolutions passed at a General Assembly Meeting.
(a)All shareholders owning 10% or more of the share capital of a company must be now invited to a General Assembly Meeting as opposed to 25% as required by the Law; and (b) Quorum of a General Assembly Meeting is deemed to be 50% of the shareholders compared to 75% required by the Law).
(ii) a requirement to submit the invitation to the General Assembly Meeting to the shareholders and the Competent Authority 21 days prior to the date of the meeting (as opposed to 15 days) and specific provisions regarding the contents of the invitation have been introduced. In an effort to ensure continuity of business the New Regulations provide for acceptance of General Assembly Meetings to be “held via modern technology methods” thus making it possible for meetings to be held via videoconferencing; and
(iii) several provisions regarding applicable fines, such as: (a) where the fine for late adjustment of a company’s status has been diminished from AED 2000 to AED 100/ day; and (b) a new fine has been introduced in instances of violation of the rules and procedures applicable to acquisitions in addition to the existing penalties listed in art 293 of the Law.
How Do The New Regulations Impact You?
- If your company has a branch opened under any of the Department of Economic Development authorities in the UAE (“DED”) or if you have a civil company registered under DED, you will no longer be required to have a national service agent (Art. 329). You will be able to change your company’s registration within 6 months after the publication of the New Regulations in the Official Gazette.
- In accordance with the provisions related to “activities of strategic effect” (Art.10) and pending approval from the relevant Committee established to review such applications, a foreign investor may be allowed to incorporate or register companies under DED without the requirement to partner up with an UAE national. The New Regulations state that the Committee may approve the waiver of the requirement for a UAE national shareholder in whole or in part. The provision for the requirement to have a specific percentage of UAE nationals extends to Boards of Directors of companies (Art. 151). The Competent Authority will decide on the percentage of UAE Nationals mandatory upon formation of the Board of Directors of a company. Depending on your company, its activity, legal structure and legal requirements associated with the legal structure, you may be able to request for such waivers in relation to the shareholding structure and Board composition.
- The Competent Authority is due to publish certain governance regulations (Art.6) to include rules, controls and provisions that companies (with the exception of Public Joint Stock Companies) will be required to incorporate in their day-to-day operations. These will have to be included in your company’s existing internal policies.
- You will also have to amend your existing memorandum and/or articles of association to include dispute resolution provisions providing “for the means of settling the disputes that arise between the company and any of its directors or that arise among the shareholders as a result of the company’s businesses” (Art. 73).
The New Regulations are a step forward towards attracting more foreign investors to the UAE providing easier access to the market and fewer registration restrictions.
Please contact us at Anamaria.firstname.lastname@example.org for any questions you may have regarding the New Regulations and their implementation.