UAE Companies Law update
from PwC Legal Middle East
UAE Companies Law: Compulsory
changes required to memoranda
and articles by June 2016
November 2015
In brief
Following the adoption of the new Commercial Companies Law (“New CCL”) on 1 July 2015, all UAE
companies are required to amend their existing memoranda and articles of association (“Articles”) to
mirror and comply with the changes introduced in the New CCL.
Companies that fail to make the amendments by 30 June 2016 will be “deemed as
dissolved”. There are also financial penalties in the New CCL for non-compliance,
ranging from AED 10,000 to 100,000.
Important changes applying to a limited liability company (“LLC”) in the New CCL include, but are
not limited to, new rules concerning pre-emption rights, expert valuation of shares, and the general
meeting procedures.
Given that all LLCs must review their Articles to ensure compliance with the New CCL the PwC Legal
view is that they may also want to consider additional changes which, although not mandatory, may
be commercially beneficial to the operation of the company. Other changes are mandatory to the
extent the current Articles conflict with the provisions in the New CCL. References in the Articles to
the now-redundant old Commercial Companies Law (“Old CCL”) should also be revised.
The Departments of Economic Development (“DED”) throughout the Federation have issued various
required additions to the evidential detail within a LLC’s Articles that companies should include when
changing the Articles.
The New CCL was introduced in July as Federal Law No. 2 of 2015 concerning Commercial
Companies and replaced the old Federal Law No. 8 of 1984 concerning Commercial Companies. As
usual, the Arabic text of the New CCL will prevail over the English version so a proper assessment of
the updated clauses is necessary.
Note – In this briefing we use the term ‘shareholders’ to refer to members of the LLC. The text of the
New CCL uses the term ‘partners’.
www.pwc.com
UAE Companies Law update
Changes to make
Change
PwC Legal view
Details of the Shareholders
The New CCL specifies that the Articles should list with the details of the shareholders
of a LLC their date of birth. In Dubai, the DED also requires shareholder’s mobile
numbers. When making changes to the Articles, it is important to update these details
at the same time.
References to the Old CCL
Any part of the LLC’s Articles which refers to a provision the Old CCL should be
updated to ensure clarity.
Accounting standards
The New CCL requires LLCs to use the International Accounting Standards. A
company should amend its Articles in the event that they contradict this requirement.
The Old CCL was silent on this point; allowing any standards to be used in the past.
Valuation of shares for noncash consideration
Shares allotted for non-cash consideration must be valued by the UAE’s Securities and
Commodities Authority, subject then to the DED’s approval.
Pre-emption rights
The notice period for shareholders wishing to exercise pre-emption rights remains at
30 days and the manager(s) of the LLC must notify the other shareholders
immediately when a shareholder wishes to sell.
The contents of the notice are amended slightly to ensure the selling shareholder
notifies the other shareholders of the name of the purchaser and the terms of the share
transfer.
Valuation of pre-empted
shares
Pre-empted shares will be evaluated by an expert appointed by the Dubai DED. The
pre-empting shareholder(s) will cover this cost.
Increase in the number of
managers/directors in the
LLC
LLCs now have the flexibility to appoint more than 5 managers/directors. LLCs
considering increasing their governance positions should alter the Articles
accordingly.
Notice of a general assembly
Matters for the general
assembly
Quorum of the general
assembly
Ordinary resolutions of the
company (simple majority
resolutions)
PwC
The notice period for a general assembly of the LLC has decreased from 21 days to 15
days. This can be further shortened on a case-by-case basis by unanimous shareholder
approval.
Specifying the Old CCL period of 21 days in the LLC’s Articles will not be a breach of
the New CCL, but the shorter notice period may be commercially advantageous to
companies so a change should be considered.
The New CCL specifies that appointments of members of the Board of Managers (if
any), Control Council (if any), and the Internal Shari’a Control Committee and
Controller (if applicable) are matters reserved for the general assembly and the
Articles should mirror this. The remuneration of auditors is also now a matter for the
general assembly, the appointment of which remains a decision for the assembly.
A general assembly requires shareholders holding at least 75% of the share capital of
the LLC to be present. The Old CCL required a general assembly with the aim of all
shareholders attending.
In the event of an inquorate adjournment this figure decreases to 50%, then further to
at least one member present at the third meeting.
Under the Old CCL, resolutions could be passed with only 50% of the votes at that
meeting. Shareholders resolutions now require a simple majority (i.e. more than 50%)
of the shareholders present at the general assembly to be passed.
2
UAE Companies Law update
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact:
Middle East Tax and Legal Services
Alan Wood
Middle East Corporate Legal
Leader
+971 (0) 4 304 3739
alan.wood@pwclegal.co.ae
Jonathan Gibson
Middle East Legal Managing
Partner
+971 (0) 4 304 3079
jonathan.s.gibson@pwclegal.co.ae
Stephanie Samuell
+971 (0) 4 304 3079
Corporate Lawyer
stephanie.samuell@pwclegal.co.ae
David Pang
+971 (0) 4 304 3229
Corporate Lawyer
david.pang@pwclegal.co.ae
Dean Kern
Middle East Tax and Legal Services
Leader
+971 (0) 4 304 33575
dean.kern@ae.pwc.com
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice.
You should not act upon the information contained in this publication without obtaining specific professional advice. No
representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this
publication, and, to the extent permitted by law, PricewaterhouseCoopers Legal ME LLP, its members, employees and agents do not
accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act,
in reliance on the information contained in this publication or for any decision based on it.
© 2015 PricewaterhouseCoopers Legal LLP. All rights reserved. PricewaterhouseCoopers Legal ME LLP is a member of
PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.