Unamended provisions regarding Foreign Ownership under New Companies Law

The Commercial Companies Law of the United Arab Emirates (called hereafter as the new companies laws) is a revolutionary giant leap in legislative history of the country that is welcomed by the legal fraternity, investors , financial professionals, and business families. These laws were enacted on 20th September 2021 when the Federal Law Decree 32 of 2021 on the subject of CCL,UAE, assented by the President of United Arab Emirates, Sheikh Khalifa Bin Zayed Al Nahyan for the far-reaching legal streamlining in the region.

Through the announcement of the new companies Law Decree No. 32 0f 2021, the provisions of the Federal Law No. 2 of 2015 regarding Commercial Companies (“Existing Companies Law”)  have been repealed which were earlier amended by the Federal Decree-Law No. 26 of 2020 ( hereafter called amended the Existing Companies Law ).In the New Companies Law, more than 50 percent of articles of the Existing Companies Law were modified to meet up the international criteria for the easement of the business and pursuant to enhancements of business activities and protection of wealth of business families.

 Despite the fact that several amendments were introduced through these laws yet there are many constant provisions, the legislatures accepted their importance and left them intact by considering their importance.

The unchanged amendments in respect of full foreign ownership under the New Companies Law:

Exemption from the New Companies Law:- 

The provisions of the New Companies Law of the United Arab Emirates will not be applied to certain entities which are partly or wholly owned by the government in specific sectors. Exemption is available to the  companies  which are exempted by Cabinet Resolution, Federal and states owned wholly or partially owned companies, and the companies functioning  in peculiar categories i.e. oil, power, gas, or water desalination. The exempted companies having minimum twenty five percent owned by any states or Federal Government, under the Commercial Companies Law 2015.The exemption is also provided through a special provision included to this effect in the company’s constitution. No application of the Commercial Companies Law 2021 to companies incorporated in the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market (ADGM).No application of the Commercial Companies Law,2021 on the Companies incorporated in other free zones within the United Arab Emirates. Onshore operations of the companies may lose its exemption status in the United Arab Emirates.

Full Foreign Ownership of limited liability company:-

Under the consideration of “Strategic Impact” subject to approved business activities according to the published list by the UAE Cabinet, the whole issued share capital may be held by a single non-UAE national owner/shareholder under the Limited Liability Company.

Provisions related to dispute resolution:-

 The provisions addressing the dispute, their resolutions, and prescribed mechanisms whether between directors/managers or between shareholders may be included in the articles of association of the Limited Liability Company for the commencement and continuation of the business for its smooth function without confronting the law and related rules.

Shareholder right to request General Assembly:-

In a Limited Liability Company the shareholder holder of 10%  of the total capital of the business may request the General Assembly to convene, this percentage was decreased by 15% as in old law the shareholder having 25 % had the right to request a General Assembly meeting.

Notice Period:-

For the meeting of the General Assembly, the notice period has been increased by 6 days i.e. 21 days, earlier the notice period was limited to fifteen days to convene a General Assembly.

Right to seek an urgent court order:-

In any dispute regarding funds to increase capital compulsorily to avoid the liquidation of the company, the shareholder has the right to seek an urgent court order pursuant to which the other shareholders are required to fund an increase of capital. If a shareholder remained unsuccessful in paying the requisite capital amount then his share in the company would be watered down accordingly.

Confirmation from cabinet:-

The application of Provisions regarding Joint-stock companies to limited liability companies can be issued by the decision of the UAE cabinet while considering the nature of the business of Limited Liability companies.

No requirement of National Service Agent:-:-

Branches of foreign companies are no longer required to appoint a national service agent, they may enjoy full ownership or any percentage according to their own choice.

The quorum for a General Assembly meeting:-

The quorum for General Assembly is a minimum of Fifty Percent The Decree Amending the Existing Companies Law introduced an amendment as provided subject to the provisions    of “Articles of Association”, failing which a   second meeting is required to be called within five to fifteen days from the date of the first meeting; such a second meeting would be  considered to be accurate irrespective of the number of shareholders.

Second General Assembly meeting:- 

The restriction of the provision in the Articles of   Association has been removed Under the    New Companies Law, which means that the second General Assembly meeting shall be considered duly valid and accurately convened without considering the number of shareholders present thereby.

The time frame for Adjustment under the New companies Law:-

The companies, unless exempted, are required to adjust to the new law Within a year of its commencement. non-compliance results in the dissolution of the companies.

 Unchanged amendments under the new companies law concerning full foreign owners were initially introduced under the Decree Amending the Existing Companies Law of 2015.

Foreign Ownership under New Companies Law – Conclusion

 The New Companies Law addresses many of the issues regarding wealth management , protection of assets, Foreign  Ownership, the market trends , financial transactions , exemptions or waivers and different  processes and procedures for ease of business by making them more clear and the changes have streamlined the process through legislation.

Bibliography 

Liphhin P, “Landmarks in the Business Law of UAE” [ 2015] 62 UAE Journal of  Legal Studies 103

Furqan H. and Enhal F, “International Courts in the Litigation Market of UAE” [2014] 5 Journal of International Economic Law 97

Tabai K, “Commercial and Civil Companies in UAE Law” [2013] 39 Journal of National Commercial Laws and Policy 65

David, Drouk O, and Hamdani, “Independent Directors and Controlling Shareholders’’ [2018] 81 The Journal of Law and Economics 521

Feulner R, “The UAE Commercial Companies Law: Recalled to Life” (2017) 4 Arab Law Quarterly 118