UAE President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued significant changes to the 2015 commercial companies’ law, amending 51 articles and introducing three new ones. As the Arab world’s second largest economy, this will help the UAE’s competitive advantage and attract foreign capital.
Among the amendments announced on November 23 is the scrapping of a requirement for onshore companies to have a major UAE shareholder. This will reduce overhead costs, facilitate ease of doing business for foreign investors and provide flexibility of operations for businesses.
It is not mandatory to have a UAE national or a UAE-owned company as an agent now. Neither does the company chair have to be an Emirati nor do the board of directors need an Emirati majority.
Moreover, local authorities have the power to determine the level of participation by Emiratis in any company. But companies in sectors such as oil and gas, utilities and transport and national entities are exempt from the changes.
The changes to the commercial companies’ law supersede and cancel the foreign direct investment law – number (19) of 2018. As a result, companies can now be fully established by non-Emiratis of all nationalities.
The chair or senior executives of a company can now be removed if found guilty of fraud or abuse of authority. Shareholders can also sue a company in civil court if there is any failure of duty that causes damages. Electronic voting will be permitted at annual general meetings now.
Most of the amendments will be effective from December, but the changes relating to foreign ownership, agency and boards of directors will be in effect six months after publication in the Official Gazette. Companies will have one year to comply with the amended law from the time articles become effective.
A company wishing to become a public joint stock company after the approval of the relevant authorities cannot sell more than 70 per cent of the company after necessary review, instead of the current 30 per cent, through an initial public offering.
Under provision number 10 of the new law, a committee including representatives of the relevant authorities will oversee activities that have “strategic impact” and the necessary measures required to licence companies that operate in such areas. Upon the recommendation of the committee, the Cabinet will stipulate what activities shall be considered to have strategic impact and the measures required for licensing such companies.
HH Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister and Ruler of Dubai, said the country is providing a conducive legislative environment for investment.
LuLu Group chairman welcomes move
Yusuffali MA, Chairman, Lulu Group, welcomed the move saying, “”A truly landmark decision which has come at the perfect time.”
“The UAE is already seen as one of the most pro-active countries in the region and this new initiative will further boost its global standing,” he said.
“As the entire global economy is looking for new way and means to overcome the unprecedented challenges being posed by Pandemic, I am sure this new law will help the existing as well as upcoming businesses,” Mr. Yusuffali said.
“The visionary leadership of this great country has once again set new benchmark in ease-of-doing-business that is sure to kick start next round of all round economic growth,” he said.