UAE President issues Decree amending Commercial Companies Law

President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued Federal Decree-Law No. 07 of 2018 amending articles within Federal Law No. 02 of 2015 on Commercial Companies.

The Decree stipulates that Article 14 of Federal Law No. 02 shall be amended to reflect that the Memorandum of Association of a company and each amendment thereto shall be made in Arabic and attested by a competent authority, failing which the Memorandum of Association or the amendment thereto shall be null and void. If the Memorandum is issued in a foreign language in addition to Arabic, the Arabic text shall be the applicable text in the State.

 The Memorandum of Association shall be attested by the competent authority in person or by electronic signature as determined by the authority. In specific cases, as deemed by the authority, a Notary Public shall attest to the Memorandum of Association.

The Decree-Law shall be effective from the day of issuance and shall be published in the Official Gazette.

UAE may soon approve new companies law: Minister

The UAE is soon expected to approve a long-awaited new law covering the operations of companies in the country, a step towards attracting fresh foreign investment, the economy minister said on Monday.

"The companies law is with the government to be ratified by the President His Highness Sheikh Khalifa bin Zayed Al Nahyan - we are expecting that soon," Sultan bin Saeed Al Mansouri, Minister of Economy, told reporters.

The new law, which has been years in the making, contains dozens of articles seeking to make limited liability and joint stock companies simpler to manage and more attractive to investors, while strengthening corporate governance in areas such as companies making loans to their directors.

The law would provide for companies’ documentation to be made publicly available, a step towards a more transparent corporate environment in the UAE.

One article, contained in a version of the law given preliminary approval last year, would reduce the minimum free float in initial public offers of shares to 30 per cent from 55 per cent, the ratio which currently applies on the UAE's two main stock exchanges.

The minimum ratio deters some corporate founders who want to maintain majority ownership, and has been criticised as one factor encouraging UAE companies to list their shares in overseas markets such as London rather than domestically. Officials have not confirmed that the article lowering the ratio will be included in the final version.

The law will certainly be less radical than some investors had hoped; last year the consultative Federal National Council rejected an article that would have eased tight controls on foreign ownership of companies, citing security fears and threats to local businesses.

The article would have given the UAE cabinet the power to let foreign parties own stakes of up to 100 per cent in companies outside free zones. Currently, foreigners can generally hold stakes of up to 49 per cent in businesses located outside free zones.

Last year, the economy minister said the article liberalising foreign ownership would be included in a draft foreign investment law. That bill has now been finalised by a ministerial legal committee and is awaiting approval of the FNC, Mansouri said on Monday.

Meanwhile, a law on small and medium-sized enterprises, which the cabinet hopes will boost the growth of SMEs and encourage UAE citizens to establish companies, is on its way, Mansouri said: "The SMEs law has been ratified by the President. That should be out soon."

The law is expected to include provisions encouraging government agencies to provide support to SMEs.

The UAE expects to attract € 8.6 billion ($11.9 billion; Dh43.67bn) in foreign direct investment into its non-oil sector in 2014, 20 per cent more than last year, Mansouri said.

The second biggest Arab economy is investing billions of dollars in industry, tourism, real estate and infrastructure to wean its economy off its reliance on oil exports.

The draft Companies Law approved by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai

Passing the new companies law, Shaikh Mohammed said move shows the government’s approach to enhance the flexibility and the strength of the national economy to keep pace with global economic changes so as to maintain a steady and balanced growth pattern in all economic sectors in the country.

The new companies’ law is passed as part of the government’s strategic approach to give greater flexibility to set up various types of companies and strengthen corporate governance of joint stock companies. It lays down a general framework for the governance of public companies to guarantee the rights of all shareholders and to ensure transparency and disclosure of financial data as well as the efficiency and integrity of the Board of Directors.

The cabinet also passed an order restructuring the National Authority for Qualifications under the chairmanship of Labour Minister Saqr bin Ghobash Saeed Ghobash and five officials representing various government departments as its members.

The cabinet also passed a law regulating the work of experts in the courts of law in the country. The cabinet also ratified a number of international agreements and budgets of some federal agencies. 

The new companies law is widely expected to  allow foreigners or foreign companies to own 100 per cent of their businesses in the UAE in some sectors. It has been under consideration for several years now

Under the prevailing law, foreign ownership of businesses in the UAE is limited to a maximum 49 per cent as nationals own 51 per cent. The current 49-51-equity law is applicable to all nationalities except those from within the GCC countries. At present, foreigners are given full business ownership rights in free zones across the UAE.

Also in the pipeline is legislation aimed at protecting foreign investments in the UAE.

Analysts believe that such bold reforms will help attract foreign direct investments and big multinationals to the UAE mainland instead of to certain free zones where they are currently confined.

The proposed law on foreign investment will address a key investor concern about protection against contract disputes and other legal issues.

It will further enhance the UAE’s position in the global competitiveness ranking by the World Economic Forum, analysts said. 

 Sultan Al Mansouri, Minister of Economy, said the new companies' law issued by the cabinet today contributes to enhance the competitiveness of the national economy at all local, regional and international levels as well as enhance the performance of the business environment and investment climate in the UAE.

The Minister pointed to the importance of being a new law that keep pace with local and global economic developments and supports the economic openness and diversification policies. He also praised the remarkable cooperation of all federal agencies, local and private sector that have had a major role in expressing opinions and observations that enhanced it content and effectiveness to comply with different needs and economic requirements of the UAE. 

The new law provisions of the law are stated as follow: Develop a general framework for corporate governance that contributes to protecting the rights of shareholders and to achieve transparency and disclosure of financial data and the efficiency and integrity of the Board of Directors.

Entrusted to the Registrar of Companies at the Ministry of Economy to the task of supervising the record of brand names for different types of companies that are registered in any emirate, in order to avoid repetition among them.

Did not identify minimum capital for the companies with limited liability.

Allow the Cabinet to issue a resolution specifying the forms of businesses, activities or groups that may increase the share of foreign partner for 49% of the capital of the company and so may not reduce the ratio after the issuance of that resolution.

Authorized the shares for public subscription on the basis of the price of the security by one of the companies specialized in this field.

Unify standards and accounting principles, which the company must comply with when preparing interim and annual accounts and when determining the distributable profits.

Authorized exception to the priority right to subscribe into new shares to shareholders in the following cases: A. Allocating a proportion of the company's shares to its employees. 

B. Entering a strategic partner in the company.

C. Capitalization of the debt.

12. Allows the co-founders of the public shareholding company to the subscription in shares of not less than (30%) and not more than (70%) of the capital of the company. The new law also reduced the length of time spent in founding companies.

If sick during annual leave, you get extra days off

Employees falling ill during their annual leave must be compensated for the duration of the sick leave given to them by authorised doctors, according to a new fatwa (Islamic ruling) in the UAE.

The Fatwa centre at the Ministry of Justice issued the new edict in response to a query by a local government department about a female employee who was given a 26-day annual leave, during which she fell ill.

The department said the employee presented a medical report showing that she had received treatment for 20 days during her annual leave and that she asked the department to compensate her for the sick leave days.

“A sick leave and a normal leave should not be linked…in case the sick leave happens during the normal leave, then it must be considered as a sick leave, which must be deducted from the normal leave.”

Companies can take dispute cases to Dubai International Financial Centre ( DIFC) courts

Dubai: Companies will now be able to choose to have dispute cases heard in English common law courts.
A new law will allow businesses from Dubai and across the Gulf to use the courts of the Dubai International Financial Centre (DIFC), meaning that they can avoid the backlog that has plagued Dubai's traditional civil courts.
The move, which has been welcomed by both lawyers and local businesses, is likely to boost the workload at the DIFC, lawyers say, as companies are drawn to the opportunity to be awarded costs — an option not available in civil cases.
Major impact
But experts also point out that it will be some time before the law, signed by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai yesterday, has a major impact on the DIFC courts.
The option to choose the jurisdiction of the DIFC will have to be written in new contracts, except in cases where the parties in existing disputes agree to have the case heard outside of the civil courts.
Nonetheless, lawyers were upbeat about the news last night.
Positive thing
"It's a positive thing and will be viewed positively by quite a lot of the international companies doing business in this region," Alec Emmerson, a consultant at Clyde and Company, told Gulf News.
Justice Sir David Steel, Associate Judge of the DIFC, said that the importance of the law was to give potential litigants the option of choosing civil or common law courts.
"It's a question of whether the initial participants in the dispute are enthusiastic about going to the Dubai courts or whether they would prefer to go the common law court," he said.
Steel added that while the ruling may eventually see an increase in cases before the DIFC, he did not anticipate a need for more resources.
"We will play it by ear," he said.

Doing a Business in UAE

Legal Structures for Business in UAE

Earlier, each emirate followed its own procedures governing the operations of foreign business interests. In practice, however, Dubai and the other emirates followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler's decree. 

Since 1984, steps have been taken to introduce a codified company’s law applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the "Commercial Companies Law" - and its by-laws have been issued. In broad terms the provisions of the Law are as follows:

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.

Ownership Requirements

51 % participation by UAE nationals is the general requirement for all UAE established companies except:

1.       Where the law requires 100% local ownership

2.       In the Jebel Ali Free Zone

3.       In activities open to 100% AGCC ownership.

4.       Where wholly owned AGCC companies enter into partnership with UAE nationals.

5.       In respect of foreign companies registering branches or a representative office in Dubai.

6.       In professional or artisan companies where 100% foreign ownership is permitted.

The basic requirement for all business activity in Dubai is one of the following three categories of licences: 

·         Commercial licences covering all kinds of trading activity.

·         Professional licences covering professions, services, craftsmen and artisans.

·         Industrial licences for establishing industrial or manufacturing activity.  

These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.

More detailed procedures apply to businesses engaged in oil or gas production and related industries.

Practising some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai. In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.

Company Formation UAE may take one of seven forms: 

1) Public Shareholding Companies

2) Private Shareholding Companies

3) Limited Liability Companies

4) General Partnerships

5) Limited Partnerships

6) Partnerships Limited by Shares

7) Shareholding Companies

Each entity must be registered and licensed with the UAE Federal Ministry of Economy and Commerce and with the appropriate authority in the Emirate in which its office will be located.

Public share holding company 

Public shareholding company formation uae is a company with a capital divided into equal negotiable shares. In such companies a shareholder’s liability is limited by the number of shares held by him.

Minimum capital required to form a public share holding company in uae is AED 10 million with a nominal face value of AED 1-100. Shares are registered in a share register and cannot be issued lower than the nominal value. All shares must have equal rights.

The Board of Directors must have a minimum of three and not more than twelve directors. The chairman, as well as a majority of the board, must be UAE nationals for public share holding company formation uae.

Private Shareholding Company

Another company formation uae is private share holding company. A private shareholding company must have a minimum of three shareholders. The minimum share capital to form a private share holding company is AED 2 million.

Shares may not be offered to the public. The Chairman and majority of the Directors in a private shareholding company must be uae nationals.

Limited Liability Company

This type of company formation uae is widely accepted way to business. Under the Commercial Companies Law or CCL (Federal Law No. 8 of 1984 Concerning Commercial Companies as amended by Federal Law No 1 of 1984 and Federal Law No 13 of 1988, Federal Law No. 15 of 1998), foreign investors are permitted to hold up to 49 per cent equity ownership in UAE companies, 51 per cent of the equity must be held at all times by one or more UAE nationals

This type of company formation uae can be formed by a minimum of two and a maximum of fifty persons. Shareholder liability is limited to the value of shares held in the company’s capital.Non UAE nationals may own up to 49 percent of an LLC. The Companies Law provides that an LLC may engage in any lawful activity except insurance, banking and investment of money for others. 

The following steps are required in establishing a limited liability company in Dubai. 

·         Select a commercial name for the company and have it approved by the Licensing Department of the Economic Department;

·         Draw up the company's Memorandum of Association and have it notarised by a Notary Public in the Dubai Courts;

·         Seek approval from the Economic Department and apply for entry in the Commercial Register;

·         Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce's Bulletin. The licence will then be issued by the Economic Department;

·         The company should then be registered with the Dubai Chamber of Commerce and Industry

General Partners

General Partnership company formation uae is a type of company where all the shareholders are jointly liable for the company liabilities to the extent of their assets. All the partners should be UAE nationals.  General partnerships are formed by two or more UAE nationals who are jointly and severally liable for its debts. Interests of a partner can be transferred as stipulated in the partnership agreement or with the approval of all partners. 

Limited Partnership

 A limited partnership is another type of company formation uae which composed of one or more general partners who are jointly and severally liable for all of its debts, and one or more limited partners who are liable for the limited partnerships debts only to the extent of his capital contribution.

A partnership limited by shares has both general partners with unlimited liability and partners whose liability is limited by their shares in the capital. The capital must be at least DH 500,000 and has to be divided into negotiable shares of equal value.

Joint Ventures

Another company formation uae is Joint Participation is a form of company consists of two or more partners for carrying out a single or multiple businesses by one of the partners in his own personal name.

This is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed.

There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who – unless the agreement is publicized – bears all liability.

A joint venture is a type of company formation uae where contract may be written or oral and not required to be notarized. Third parties can recourse only to the partners with whom they deal. 

New UAE companies law expected to lift the foreign ownership ceiling from the current 49 per cent

Abu Dhabi: A new UAE companies law that is expected to lift the foreign ownership ceiling from the current 49 per cent in certain businesses could be introduced this year, Minister of Economy Sultan Bin Saeed Al Mansouri said.

"It could be any time this year. At the ministry level, our work is done," Al Mansouri told reporters yesterday on the sidelines of the 5th Annual GCC Regulators Summit. Al Mansouri said the ministry has finalised the draft and is waiting for approval from the UAE authorities concerned.

Experts say the introduction of the new companies law will help attract more foreign investments and give a boost to the local economy and employment.

The UAE Companies Law allows foreigners a maximum stake of 49 per cent in companies outside free zones.

However, foreigners are allowed 100 per cent in companies registered within the free zones. The new law will also make it mandatory for companies to create a general corporate governance framework.

The legislation is part of a move to modernise the UAE's company, foreign investment and industrial laws to boost transparency and investor confidence.

Separately, Al Mansouri in his speech at the regulators summit said that after the financial crisis regulators are assuming increasing roles to strengthen the financial sector.

"The regulatory role is under reform in many countries to touch all bases including systemic stability, micro prudential regulations, conduct of business and consumer protection," he said.

Preparedness

"Regulators need to be proactive by being prepared for adverse outcomes, and need to be reactive to the needs of the industry. The world is still learning from past experiences and evidence shows that the regulatory process is an evolving one," he added.

He said the GCC countries have distinctive regulatory needs since the financial sector in the GCC is developing at an unprecedented pace.

"Regulators need to tackle issues like introducing new instruments besides the pure longing of stocks of listed companies, improve mechanisms like delivery versus payment (DVP), auxiliary tools like security lending and borrowing, licensing new financial services like investment management and regulate existing practices like rating agencies, auditing firms and research and financial analysis services," he said.

New company law by end of 2011, says Al Mansouri UAE Minister of Economy

Abu Dhabi: A new company law is awaiting government approval, a top official said on Wednesday.

A draft Companies Law is with the government for consideration, Sultan Bin Saeed Al Mansouri, UAE Minister of Economy, told reporters on the sidelines of a conference in Abu Dhabi.

He said, it will go through a process of scrutiny and verification and ammendments till it is passed by the government.

“It could be issued before the end of this year,” he said.

UAE’s Commercial Companies Law allows foreigners a maximum of 49 per cent stake in companies outside free zones. However foreigners are allowed 100 per cent stake in companies registered within the free zones.

The move will help the UAE to attract more foreign investment that could boost local employment and help the economy grow, analyst say.