New UAE Commercial Companies Law – Applicable for LLCs also
Federal Law No. 2 of 2015 (the New Commercial Companies Law, (NCCL)) was issued and contained in Federal Gazette No. 577 with the publication date of 31 March 2015. As such the new law comes into effect three months from the date of the publication in the Official Gazette i.e. 1 July 2015.While the NCCL replaces the previous Commercial Companies Law (UAE Federal Law No. 8 of 1984, as amended, (CCL)), it mostly maintains the same framework and features of the CCL. The NCCL anticipates and relies on later publication of various regulations to implement and/or expand upon many of its operative provisions. These further regulations are imperative to fully and comprehensively assess the NCCL.
The main new concepts introduced by the NCCL are:
- Sole-shareholder companies either in limited liability or private joint stock companies;
- Employees’ incentive share schemes;
- Quorum for general assemblies has been raised from shareholders representing 50% to 75% of the share capital for LLCs;
- Share pledges in limited liability companies;
- Prohibition of financial assistance and loans to directors;
- The requirement to rotate auditors (for Public Joint Stock Companies) every three years.
- Enabling shareholders in public joint stock companies to sell their pre-emption rights;
- Introduction of “holding companies”, “companies registrar”, “strategic partner”, “authorised capital” and “takeover rules”;
- A new article which provides that all the provisions of the New CCL concerning Joint Stock Companies shall apply to LLCs (art. 104);
- A director / manager is a person authorised to manage the company and must preserve the rights and works of the company with care of a precise person (article 22 of the New CCL). In addition, any provision in the company’s memorandum and articles of association exempting any director / manager from personal liability (that he / she bears in his / her capacity as an officer) is voidable (article 24 of the New CCL);
- All companies required to keep accounting records for five years (art. 26), new offence for failure to keep accounting records for the company to explain transactions — triggering fine up to AED 100,000 (art. 349) ;
- Introduction of “corporate social responsibility” ; and
- If a company fails to amend its memorandum to comply with the new CCL within one year of July 1, 2015 the company shall be deemed dissolved (art.374).