MOA Amendment as per New Law - CCL 2021

Whether the existing companies can update their MOA as per the New Law - CCL 2021?

Highlights of Federal Decree No. 32 of 2021 for Commercial Companies which amends and replaces Commercial Company Law Federal Decree No.2 of 2015.

The UAE Government published the Federal Decree No.32 of 2021 concerning Commercial Companies (CCL 2021) which came into existence on 2nd January 2022, on which date the Federal Decree-Law No. 2 of 2015 and its amendments (CCL 2020) will be repealed. 

The Commercial Company Law CCL 2021 incorporates changes that will affect the present operations of companies and investors that wish to establish a business presence in the UAE.

The New CCL came into force on 2 January 2022 and has mandated all the companies to amend their memorandum of associations in line with the New CCL before 2 January 2023. Several significant changes affirm the principle of relaxation of foreign ownership restrictions as per the New CCL.

Further, the Emirate of Abu Dhabi and Dubai Economic Departments have published a long list of permissible activities for 100% foreign ownership.

New CCL 2021 Changes affecting Limited Liability Companies (LLC) 

Board of Managers’ term

At the time of expiration Board of Managers, and if a new Board of Managers is not appointed, the existing board will continue to manage the LLC for a period of six months, and at the end of this term a new board of managers must be appointed by the LLC, and if not appointed, the Department of Economic Development (DED) can appoint a new board.

This Board’s term will not exceed more than one year, and during this period, the LLC must appoint a new Board of Managers.  Therefore, the appointment of the Board of Managers by the DED is a short-term arrangement and that will be regularised if the LLC fails to appoint the board itself.

Appointment of the Supervisory Board

As per CCL 2020, Limited Liability Companies (LLCs) appoint a Supervisory Board when the company consists of more than seven (7) shareholders. Commercial Company Law 2021 has increased the number of required shareholders to fifteen (15).

The Supervisory Board is appointed from at least three shareholders to supervise the company’s annual reports, budgets distribution of profits and to also they have to supervise the LLCs managers and submit a report in this regard to the General Assembly.

Decrease in Legal Reserve

Commercial Company Law 2021 has decreased the extent of allocating a legal reserve from 10% to 5%, and as mentioned by the CCL 2020, the CCL 2021 emphasized that shareholders can stop this allocation if the legal reserve reaches 50% of the share capital.
Notice period to Creditors for companies under Liquidation

As per Commercial Company Law 2020, a notification period of no less than 45 days is required for the submission of a creditor’s claims against a company being in liquidation. But as per the new Commercial Company Law 2021, it has reduced this period to no less than 30 days.

Other Major Changes
  • Relaxation on Foreign Ownership Restrictions:

A Foreign shareholder can hold the entire issued share capital of a Limited Liability Company (LLC) in UAE concerning the relevant activities under 'strategic impact'.

  • Dispute resolution mechanism for LLCs:

The Memorandum Of Association (MOA) of an LLC must include provisions addressing dispute resolution mechanisms between the LLC and any of its Directors/Managers or between the shareholders in connection with the LLC's business.

  • Annual General Meetings for LLCs:

A person who is not a manager may now act as a proxy for a shareholder at a general assembly meeting. The notice period to convene a general assembly is at least twenty (21) days (previously 15 days). Suppose the quorum requirements are not met at a general assembly meeting. In that case, a second meeting is to be convened, which shall be validly constituted regardless of the number of attendees at such a second meeting.

  • Branches of foreign companies are no longer required to appoint a national service agent. 

Whether the existing companies can update their MOA as per the new law?

Existing Companies incorporated until the commencement of the CCL 2021, that is, 2nd January 2022, will be permitted for a period of 12 months from that date to amend their Memorandum and Articles of Association, such that they are not inconsistent with the provisions of the Commercial Company Law 2021. Failure to do so can result in the company’s liquidation and exposure to fines that may be prescribed by Cabinet in this regard.

How can we support in MOA Amendment?

We can support you to amend the existing Memorandum of Association to ensure compliance with the new Commercial Company Law 2021.

Emirates Chartered Accountants Group houses Company Formation experts that deal with setting up businesses in the UAE by assisting the clients to set up their businesses. Our Company Formation Team handles the complete process with strategic recommendations and negotiations with local stakeholders along with documentation formalities which shall be progressed in accordance with the UAE laws and its regulations.

Mr. Viju Divakaran, Manager – Company Incorporation
+971 55 4028899
+971  4 2500 290
viju@emiratesca.com

Copyright © 2021 Emirates Chartered Accountants Group.