The UAE govt. passed the latest Federal Decree-Law Number 32 of 2021 on Commercial Companies (the New CCL), which is in force from 2nd Jan, 2022.
These changes will impact the structure of investments and transactions for all UAE ‘onshore’ companies going forward. Companies are required to mandate the amendments in line with New CCL by Jan 2nd, 2023.
The general changes are applicable to all type of companies (Limited Liability Companies, Public Joint Stock Companies and Private Joint Stock Companies).
In addition, a list of permissible activities for 100% foreign ownership is released by the Emirate of Abu Dhabi and Dubai Economic Department.
Some important amendments you should know!
1.Relaxation on foreign ownership restrictions
Expats can own 100% shares in a company now as opposed to 51% UAE national holding mandate for a business that boasts a ‘strategic impact’.
2. Provision for clear dispute resolution
Under the new decree, the Memorandum of Association (MOA) should clearly state provisions for resolutions on advent of a dispute between the company and any of its members; directors, manager, and stakeholders etc.
3. Proxy allowed in annual general meeting
A proxy who is not a manager can attend the general assembly meeting if the manager is unable to attend the general assembly meeting.
Also, the notice period to convene a general body meeting is revised to 21 days. If the general body meeting doesn’t meet the quorum requirements, a subsequent meeting will be convened and validated regardless of the number of attendees.
4. Foreign companies or their branches needn’t appoint a national service agent per the new law.
5. Introduction of the SPAC and the SPV
The UAE Securities and Commodities Authority (SCA) exempts Special Purpose Acquisition Company (SPAC), which are basically Public Joint Stock Company (PJSC) formed primarily to merge or acquire another company from the new law. The SPAC will be regulated by the SCA.
The new law also introduces the concept of a Special Purpose Vehicle (SPV), which is a subsidiary company that is formed to undertake a specific business purpose or activity.
The SPV is also exempt from the New Law and will be regulated by the SCA.
6. Subscription to shares in Public Joint Stock Company (PJSC):
The New CCL clearly specifies the minimum and maximum share limits for PJSC founders.
While the maximum period remains 30 business days, there is no minimum period in the new law for public to subscribe for shares. Instead, the prospectus should specify the minimum period.
7. Eligibility for issuance of shares at a discount:
When the market price of share falls below the nominal value, the PJSC shares are eligible for a discount under the approval of SCA.
Further the company can create a negative reserve equal to the discounted amount to be covered from future profits.
8. General assembly meetings for a PJSC:
SCA approval is mandated before convening a general assembly under the new CCL for PJSCs.
9. Provision govern the division of PJSC:
Under the new law there are provisions governing the division of join-stock assets, liabilities, rights, and obligations into two or more separate independent legal personalities. The division can happen either horizontally or vertically.
- Horizontally where the same shareholders own the shares of the resulting companies with the same ownership ratios.
- Vertically, where the assets and activities are separated into a new subsidiary company.
10. Removal of restrictions on nominal value of share
No more restrictions on minimum and maximum value of share price; can be less than 1 AED and higher than 100 AED.
The nominal value of shares in a joint-stock company shall be equal to the amount specified in the company’s articles of association.
The New Commercial Companies Law, considered a new dawn for the country, strides towards making UAE, a global investment hub. The new law foresees a surge in foreign investors and drastic change in investment pattern. While the new law boasts everything positive, it is for us to WAIT and OBSERVE!
