Amendments in Public Joint Stock Company by the New Companies Laws
New Amendments in UAE Companies Law
New Amendments in UAE Companies Law were introduced by the UAE President Sheikh Khalifa Bin Zayed Al Nahyan on September 20, 2021, regarding Commercial Companies Federal Law. Decree No.32 of 2021 was promulgated by amending the Federal Law by Decree No.26 of 2020 which was the substitution of Federal Law No. 2 of 2015. The Federal Decree-Law No. 26 of 2020 was published on 20 September 2020 in which around fifty-one postulates of the Existing Companies Law were revised. The New Companies Law was applied on 2 January 2022.
Public Joint Stock Companies under New Company Laws
The doctrine of foreign shareholding is adapted by revolutionary changes in UAE companies. This doctrine is brought -forward for a foreign shareholding of companies for the following purposes, for instance, collective management, minority protection, modifications in the Existing Law, Division in public joint-stock companies (PSCs), the introduction of special purpose acquisition companies (SPACs), special purpose vehicles (SPVs), the introduction of measures for facilitating public offerings, Competitive capacity for Economic Development, Indication for the value of its shares.
Following amendments are vividly brought in Public Joint Stock Companies under New Company Laws of UAE:-
- Proxy of a Director
Substitution or proxy of a director is the prerogative of the board of a Public Joint Stock company that is authorized to nominate and recommend a new director within thirty days of the resignation or retirement of the existing director. After the recommendation/nomination by the board, the General Assembly has the authority to elect the nominee director by its own choice. After approval, the new director will complete the remaining term of the previous director. If there is such a situation that the Board could not appoint a director during the stipulated period, the Board has to convene an election to appoint a new director in the first meeting of the General Assembly. The newly elected director shall complete the remaining term of the forerunner.
- Directors’ salary
From the total profit of an annual accounting period after the deductions (taxes, reserve deductions, etc.) ten percent is subjected to the remuneration of a director. In the end, if the company has not generated profits for that year, despite the company’s constitutional documentation and agreement of the General Assembly, a board member may be paid a lump sum and tax-free salary not more than 200,000 UAE Dirham at the end of the financial year.
- Reforms to the Requirements for Contribution by the Founders:-
Before the modification in New Companies Law, there were restrictions that initiators were required from 30% to 70% to take into consideration regarding public share offering. Under new companies’ law, the limitations have been removed as now there is no requirement of minimum and maximum percentages in the context of public share offering subject to the restrictions by the SCA. Under the old law, the requirement for approval from the UAE Council of Ministers was for a 30 percent exempted offer size.
- Reforms to the Requirements for Conversion to a PJSC
By the modulation of New Companies Law, there is no need for a total of ten percent up and running surpluses within the two accounting years preceding the application for conversion.
- Auction of the Shares of the PJSC upon its Conversion
Before the change in the new companies law, the sale of shares was restricted to the maximum limit of seventy percent while in the New Companies Law there are no such restrictions on the sales of shares that can be tendered upon its conversion from a private joint-stock company to a public joint-stock company. Now the proportion of sale shares and new shares being offered as part of an Initial Public Offering on conversion is to be determined by the SCA. Offering shares of a private company to the public in a new stock issuance is without restrictions subject to SCA approval.
- Chairpersons’ lock-up Duration in a PJSC
Restrictions have been withdrawn under The New Companies Law to trade/sale shares by the chairperson once the Public Stock Company converted to a publicly-traded organization.
- Reforms to the Offering Endorsement Duration
No minimum Statutory period is required for the public to endorse shares at Initial Public Offering. Before amendments in Companies Law, there were at least ten days required for that but in new companies law, it is restricted that this duration may not exceed 30 business days. The subscription period for the offering may be extended for an additional period by making an application to the SCA. At the expiration of the subscription period, the founders of a PJSC may subscribe to any unsubscribed shares in the offering.
- Competency to Publish Discounted Shares
A PSJC is competent to issue its shares with concession. The issuance of discounted shares may occur when the market price of the shares falls below the nominal value, the approval may be taken after passing the special resolution of SCA.
- Nominal Values of Shares
By the latest reforms in New Companies Laws, the nominal value of the PJSC’s shares commenced as discussed in the Article of Association. In Old Companies Law it was restricted between AED 1 to 100 UAE Dirham.
- Corporate Citizenship
The New Companies Law allows newly established companies to provide Corporate Citizenship and to reserve any profits for such a cause. It has restrictions on Public Joint-stock companies to contribute to corporate citizenship if they had been established for at least two financial years with an upper limit contribution of two percent of the average profits for the last two financial years. Furthermore, the New Companies Law mandates public disclosure on a company’s website even if it does not contribute to corporate citizenship, which wasn’t earlier required under the 2020 laws.
Conclusion
The New Companies Law is an appreciative move towards the embellishments of the UAE in Business, trade, financial, and Economic Development. It represents its potential to sustain pace with international best practices. It is a great initiative for existing companies towards higher and pursuing the captivated investments in the country. The PJSC under New Companies Laws functions more enchantingly. The growth of the companies arose faster with the amendments in the laws and regulations with the intent of progressive reforms.
Bibliography
Sanaul, and Huonz R, “Abu Dhabi Commercial Market Trends and Laws’’ [2020] 61 UAE Journal of Law and Management 11
Nahraan J, “Legal Authoritative Laws” [2016] 79 Journal of Finance and Economic Laws 56
Yahyaa, and Ghunhoz, “The UAE Companies under New Laws” (2015) 86 UAE Journal of Business Administration 223
Shamoon Y, “Commercial Companies Laws of UAE” [2007] 25 Journal of Commercial Policies 541
