June 30, 2016

Company Law

President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued a federal law on commercial companies which are considered a key element in any successful economy.

The Commercial Companies Law No. 02 for the year 2015 contains 378 articles, and the provisions of the law, its rules and regulations, and decisions issued in implementation of this law pertaining to commercial companies formed in the country, as well as special provisions which shall apply to foreign companies mentioned in this law, and the resolutions and regulations issued in implementation on foreign companies which make the country a centre for its activities, establish a branch or a representative office.

The law authorises a natural person to establish and own a single-person limited liability company whose owner shall only be liable for its obligations as per the capital stated in the articles of association under the limited liability company provisions.

The law also allows the juridical personality to set up a joint private or limited liability company whose owner shall only be liable about its obligations in view of the capital stated in the articles of association under the limited liability company provisions of the law.

The law defines the holding company as a company that sets up companies within the UAE or abroad, owns shares or stakes of other companies that allow it to have an upper hand in management or influence its decisions.

As for evaluation of equity stakes, the law stipulates that founders in the public joint stock company shall subscribe shares not less than 30 percent and not more than 870 percent of the capital before the initial public offering on the remaining shares.

On debt-to-equity conversion, the law says the company may, according to a special resolution, increase its capital through converting cash debt into equity after the Board of Directors presents a study to the General Assembly on the urgency of taking this step.

Sultan bin Saeed Al Mansouri, Minister of Economy, has said that the new Federal Law No. 02 for 2015 on commercial companies that was issued by President His Highness Sheikh Khalifa bin Zayed Al Nahyan, is a quantum leap for the national economy and will have a significant role in promoting sustainable economic development in the country and strengthening its competitiveness regionally and globally.

It will also support economic diversification and accelerate the steps the country is taking towards a knowledge-based economy based on creativity and innovation, the UAE Vision 2021, and its national agenda.

Sultan Al Mansouri said, "The law was a result of the vision of the wise leadership of President His Highness Sheikh Khalifa bin Zayed Al Nahyan, Vice President and Prime Minister and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum, His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, and Their Highnesses Supreme Council Members and Rulers of the Emirates, to raise the level of competitiveness of the national economy, and achieve one of the main objectives of the national agenda of reaching the tenth position on the Global Competitiveness Index.

The Minister added, "We are before a modern law, which will lead economic development to the set objectives in the UAE Vision2021, which is a vision keen on diversifying and strengthening the economy, using an economic and open mind, which realises that the success of the private sector is capable of raising the capacity of the national economy and ensuring the optimal use of production components of capital, administration, and employees with results that reflect on the future of the social life of citizens and residents of the UAE."

Al Mansouri also explained, "The law aims to contribute to the development of the business environment and the country's capabilities and economic status by organising companies based on global variables, especially those which relate to the rules of governance, the protection of the rights of shareholders and partners, the support of the flow of foreign investment and promotion of corporate social responsibility. It will also contribute to strengthening the role of businesses that hold high position in the UAE's development strategy, as well as its vital and active role in the process of sustainable development witnessed by the country and in support of the economic diversification policy followed." – Emirates News Agency, WAM

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