The updated regulations to the new Federal Law 2 of 2015 concerning Commercial Companies (the new Act) are set to improve corporate governance by strengthening the legal and regulatory landscape of doing business in the region.
Corporate entities, specifically onshore limited liability companies, are required to amend their Memorandum of Association and Articles of Association (MoA) to ensure key governing constitutional documents are consistent and compliant with the new Act. Any company that fails to make the requisite amendments by 30 June 2016 will deemed to be dissolved.
The amendments are set to improve corporate governance in the UAE which will naturally contribute towards enhancing the country’s status as an attractive business environment that adheres to global market standards.
Mandatory changes under the terms of the new law include rules regarding shareholders permissibility to pledge shares, modernising changes made to shareholders general meetings – basis on which the quorum and voting rights at a general meeting is calculated, unlimited general managers, and expert valuation of shares.
In addition, the government has stated that there are now five official types of companies that can be set up in the UAE – Limited Liability Company, Partnership Company, Limited Partnership Company, Private Joint Stock Company and Public Joint Stock Company.
This move towards a robust framework is a positive step for the UAE in creating a sustainable model for private sector growth. In contrast to the old Act 8 of 1984, the new Act has been implemented to contribute to the development of the working environment by regulating companies according to international norms, protection of minority shareholders, the support of foreign investment and promotion of corporate social responsibility.
Continuing to ensure the highest level of corporate governance and overall market transparency, will prove key to the UAE’s ongoing growth and future prosperity in what remains an unpredictable global economy.