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Newsletter 05/2015

Legal updates | Nutshell of the new UAE Company Law


The long awaited new UAE Company Law No. 2 of 2015 has been issued and will come into force on July 1, 2015. However, there is a grace period of one year for compliance that can be extended by resolution of the Cabinet. This short article provides the main features of this law and cannot, and should not be viewed as a detailed analysis of the law or advice in any form.

Main Features
- The 2015 Law shall apply to all entities operating in the UAE, save for companies that are 100% owned by the Federal or Local Governments, and their wholly owned subsidiaries, as well as companies engaged in the sector of oil & gas, power, and water where the government holds a 25% stake.

- In a bid to achieve greater efficiency, and oversight in the licensing and operations of private and public joint stock companies, the Emirates Securities & Commodities Authority (“ESCA”) has now been given a major role to play along with the Ministry of Economy (“MOE”).

- Stringent provisions aimed at securing better corporate governance and accountability to shareholders and the general public in line with best practices as applied internationally have been introduced, for instance:

*More strict procedures and notice periods for calling general assembly meetings, and recording minutes.
*The allocation/issuance of shares in kind, as well as a change in the legal status of the company can be challenged by shareholders and creditors of the company alike.
*Board meetings for LLCs.
*More rigorous procedures for the resignation of director of an LLC.
*Directors of an LLC may not engage in business in competition with the company without securing the approval of the shareholders.
*Directors of PJSCs are under strict requirement to disclose any conflict of interests, the assets held by them, their participation in other entities whether by way of shareholding, or participation in the management, and in each case, whether directly or indirectly.

- Decisions taken by ESCA and MOE relating to joint stock companies can now be formally challenged by filing a grievance before them. If the complainant is not satisfied with such decision a challenge can be filed against the same before the local Courts.

- The Law has introduced provisions allowing greater protection to minority shareholders of PJSCs who may challenge resolutions of the majority shareholder if they are against their interests by following the procedure prescribed in the Law.

- Several punitive provisions are set out for certain violations committed by shareholders and directors that comprise of fine and/or imprisonment. For instance:

*A fine will be imposed on the director of a joint stock company for refusing to call for a general meeting as provided under the new Law, which could be increased if not called even after the issuance of ESCA’s decision in this respect.
*Manipulating the price of listed shares attracts a minimum fine of AED 1 million and/or imprisonment.
*Auditors are now subject to payment of fines if they commit negligence in the accounts of the company.

- It is now possible for a single UAE national, whether individual or corporate, to have status of LLC. Similarly, a single shareholder national corporate may set up a Pvt. JSC.

- The concept of holding companies and investment funds has been introduced.

- Although it was anticipated that the current restriction on the maximum shareholding that may be held by a foreign partner would be eased, the 2015 Law maintains such restriction. However, the Law allows a free zone company to carry out certain activities outside the bounds of the free zones and in the UAE pursuant to further directions to be issued.

- Detailed provisions relating to mergers and acquisitions have been set out.

- The concept of “Strategic Investor” has been introduced in public joint stock companies to whom shares may be sold by existing shareholders without offering right of first refusal to the remaining shareholders.

- The law has introduced certain concepts terms such as “de facto manager”, “related party”, “subsidiary”, “controlled”, etc. that enhance corporate governance, and transparency.

- Pursuant to this law, the Emirates Investment Authority can now participate in any public joint stock company up to 5% thereby promoting greater participation and backing of the government in such entities.


While the new Law has certainly laid the foundation for many progressive legal concepts and corporate practices, the ultimate implementation of the same would still rest on the bylaws to be issued by the Cabinet, ESCA and the MOA, which are expected to be issued shortly. In the interim, the MOE’s bylaws currently in place will apply to the extent there is no conflict between such bylaws and the 2015 Law.

By the Managing Attorney of Ali Al Aidarous International Legal Practice, who are members of the ABCD UAE

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