MEET THE DEADLINE | UAE COMMERCIAL COMPANIES LAW
The UAE continues to develop a more sophisticated corporate regulatory regime which has significant implications for government-owned companies, limited liability companies and joint stock companies.
We would like to draw your attention to meet the deadline of necessary amendments required by the New Commercial Companies Law (Federal Law No. 2 of 2015 concerning Commercial Companies) (“New CCL”) which came into effect on 1 July 2015.
The New CCL requires all companies including limited liability company (LLC) and private joint stock companies (PJSC) to amend their Memorandum and Articles of Association (MoA) by 30 June 2016.
Failure to comply can result in fines and the company being dissolved.
Article 374(2) stipulates the rather draconian provision that failing to comply with Article 374(1) will result in the company being deemed as dissolved in accordance with the provisions of the New CCL unless the grace period is extended by a cabinet resolution.
Article 357 of the new Federal Law No. 2 of 2015 CCL states that “A fine of AED 2,000 (two thousand) per day of delay shall be imposed on any company that fails to amend its Memorandum of Association and Articles of Association to be compliant with the provisions of this Law. Such fine shall be calculated from the day following the expiry date of the applicable period for such purpose”.
In addition to the severe consequences provided in Article 374(2) and Article 357, the New CCL also provides pecuniary penalties for violation of its provision, which is a fine between AED 10,000 and AED 100,000.
EXAMPLE OF CHANGES
In practice, the amendments in the MOA would need to ensure that any clauses that are in contravention of the new CCL are removed and the required clauses in compliance with the new CCL are included in the MOA. There could potentially be various clauses that could require revision / deletion based on your current MOA. Few examples of the changes required for a MoA of an LLC are following;
Therefore, to avoid the possibility of being dissolved or fined, We would highly recommend you to take the initiative to revise existing MoAs of every company set up in the UAE mainland (i.e. not free zone companies), to bring them in line with the provisions of the New CCL within the 12 months’ grace period i.e by no later than 30 June 2016.
We will be able to assist you if required, in the necessary amendment process with the authorities as per the new CCL.