Salient Features of the UAE’s new companies law
In a Historical moment, the United Arab Emirates lengthened the Golden visa scheme by comforting the citizenship regulations and extended to a larger group of qualified, as well as introduced restructuring and improvements to the Commercial Companies’ law that consented to full foreign ownership.
Categories of businesses:-
UAE provided a long list of different categories of businesses in which foreign depositors/financers may contribute to or establish a company without the involvement of UAE national participation owned fully or partially by foreign investors.
Certain limitations/Restrictions:-
The foreign-owned activities can be carried out subject to certain limitations and restrictions i.e. capital requirements and other conditions.
Amendments in new companies law:–
The UAE went a step ahead by escalating the alleviation of doing business in the country pioneering innovative UAE company law exceptionally distinctive and unique in the constituency by modifying the Commercial Companies’ law No 2 of 2015, to magnetize and persuade investors globally for full foreign ownership of businesses in the United Arab Emirates. The followings are the amendments included in the new companies law i.e. Federal Decree-Law no. (32) of 2021 :-
Full foreign ownership:-
Previously a branch of a foreign company could not be operated in the UAE without a UAE National agent. Local service agent was not a partner but was to be named in the license so the branches of foreign companies could function subject to some exceptions. It was mandatory for most foreign businesses previously. The companies established in free zones were not required to have local agent to enable the business activities.
Revocation of Article 329 of the Commercial Companies’ law:-
Through the latest amendments to the Commercial Companies’ law, Article 329 has been revoked and there are no requirements for a foreign-owned company to have a local agent . The Foreign owned companies that wishes to establish a branch or a representative office in the UAE can do business activities without a local service agent.
No requirement of 51 percent of Local ownership:-
Through the latest amendments The requirement of at least Fifty one percent (51%) UAE local ownership in the majority of the businesses in the Emirates has been reversed, being unnecessary to meet up the world standard in business norms.
Limitations and Restrictions:-
Subject to certain exceptions, limitations and restrictions, some businesses under the direction of the UAE cabinet due to their strategic importance,at present, all businesses in the United Arab Emirates are open for 100 percent foreign ownership. For instance, some companies may require National UAE contributions i.e. a joint venture.
Preference for Onshore companies:-
Due to the latest amendments now, most of the businesses in the UAE do not need to be established in free zones as all restrictions are abolished. The companies may want to be operated in free zones for other benefits i.e. VAT purposes, customs, or other business requirements or concerns.
Regulations:-
As all Emirates are autonomous, having their own laws, certain requirements and restrictions/limitations to be enforced regarding applicability of the law concerning regulating certain businesses activities.
Relaxed the requirements of the UAE National Board of Directors:-
According to the latest amendments, the conditions regarding Local national board of directors of joint stock companies have been relaxed by providing flexibility and diversified expertise.
Directors’ liabilities provisions:-
The provision regarding Directors’ liability has been included in the Senior Management of the Joint Stock companies with the purpose to enhance Directors Responsibilities/ accountability.
Rights of shareholders under the new law:-
The new companies law allows shareholders to file a case against the company in a competent court of jurisdiction over any default of performance/duty by its management /directors that results in any kind of damages or loss.
Proper Corporate Process and Governance:-
By ensuring the appropriate corporate governance and proper process ,the New regulations have solved the issues of the requirements of joint-stock companies within the company to ensure transparency and required adequate levels .
Non-shareholders Professionals:-
The new law furnishes them with the right to bring in non-shareholder professionals to the board of directors of the company, who are independent of the shareholders.
Selling of shares up to 70%:-
Under the new Company Law, the UAE increased the percentage of shares that companies can sell through initial public offerings to 70 percent from 30 percent. This is one way of encouraging more firms to list on the UAE stock market and attracting more foreign investment.
It is important to note that this change shall be subject to approval from relevant authorities like the Securities and Commodities Authority(SCA).
Number of Shareholders:
Under the new company law, a Private Joint Stock Company is a company where the number of shareholders is not less than two. The definition under the new company law has removed the maximum limit on the number of shareholders. This provides more flexibility for companies in terms of ownership structure..
Unique and robust approach:-
The UAE’s new company law is extremely unique and distinctive in the region. It is opening the doors of the UAE for foreign investment by encouraging the listing of international companies/investors to invest in the local stock market. It is also boosting the manufacturing industries by encouraging greater transparency and appropriate corporate governance in companies.
Corporate Governance and Transparency:-
It will also encourage greater transparency and proper corporate governance in companies.
Commencement Date:-
The amendments in commercial companies law came into force on 2nd January 2021. The commencement date of the laws related to “the removal of the local agent for foreign branches” and “the Full Foreign ownership of companies without a UAE national partner” will be different, which will be effective six months after the publication of the law in the official gazette.
Some other attractive amendments Parallel to the amendment to the companies’ law:-
Parallel to the amendment to the companies’ law, the UAE also has eased the criminalization of bounced cheques (financial transaction instruments) and also tranquility the laws about alcohol consumption and concerning unmarried couples living together to promote tourism and individual investment purpose.
Salient Features of the UAE’s new companies law – Conclusion
The above-cited amendments have been made to relax and encourage the investors to be attracted and contribute to the UAE business activities. It is also a giant step to encourage investors/tourists to visit who sought an investment opportunity. These amendments indicate that the initiatives will be likely to be continued by relaxations of similar laws to give confidence to the investor both local and foreign for the investment and its preservation soon in the future.
Bibliography
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- Yahyaa, and Ghunhoz, “The UAE Companies under New Laws” (2015) 86 UAE Journal of Business Administration 223
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