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Guide To The UAE’s New Commercial Company Law 2022

The United Arab Emirates (UAE) has introduced various new legislative changes on the occasion of its 50th Anniversary to strengthen the country’s position globally as a commercial hub. One of the most important amendments is Federal Law Decree No. 32 of 2021 (The New Company Law) came into force on 2nd January 2022.

Federal Law by Decree no. 32 of 2021, issued on 20th September 2021 on Commercial Companies Law which replaces the Federal Law Decree No. 2 of 2015. The New Companies Law comprises the principle of foreign ownership of companies, corporate governance, the introduction of SPVC (Special Purpose Acquisition Companies) and SPV (Special Purpose Vehicles), and many amendments to the old Company Law of 2015 that includes the introduction of a regime to allow for the division of (JSC) Joint Stock Companies, Elimination of minimum ownership in onshore companies.

Introduction Of New Provisions & Major Amendments To The Commercial Law

1. Introduction of SPAC & SPV

SPAC (Special Purpose Acquisition Company):

The New Company Law introduced the SPAC approved by the Securities and Commodities Authority (SCA), UAE.  The SPAC can be established with the sole purpose of acquiring or merging with another company.

SPV (Special Purpose Vehicle):

The New Company Law also introduced SPV, which can be established to separate the obligations and assets associated with a specific financing operation from the obligations and assets of its parent company.

SPACs and SPVs are exempted from the New Company Law and will be regulated by the SCA, upon the issuance of the relevant regulations.

2. Amendments to the provisions of PJSC & introduction of a new regime allow the division of JSCs

Amendments to the requirements for contribution by the founders:

The New Law removed the minimum and maximum percentage of capital by the founders of PSJC upon the public offering which was 30% to 70% in the Old Company Law. As per the new Law, the founders can subscribe to the shares at the percentage mentioned in the prospectus.

Amendments to the subscription period:

The subscription period of public shares has been increased from 10 days to 30 days or as per the prospectus not exceeding 30 days. The founders can subscribe for any unsubscribed shares upon the expiry of the subscription period.

Amendments to the nominal value of shares:

The New Law removes the minimum and maximum value of nominal shares from AED 1 to AED 100.

Amendments to the requirements for conversion to a PJSC:

The new Law removed one of the criteria for converting to PJSC which was, 10% of the net operating profit within the 2 financial years preceding the application for conversion.

Replacement directors’ appointment:

As per the New Law, if the director of the PJSC quits their role before the expiry of the term, the board shall appoint a director within 30 days from the date of resigned of the old director for the remaining term of the previous director.

3. Amendments to the Provisions of LLC

Membership term of Manager:

The New Law provides that if the manager has not been replaced at the end of the term of its membership, the term of the manager can be extended for up to 6 months from the date of expiry of the term.

LLC Memorandum of Association (MOA):

As per the New Law, The MOA must contain the method of settling any dispute that may arise between the company and the managers/directors or between the shareholders relating to the business of the company.

LLC Statutory Reserve:

As per the New Law, the requirement of statutory reserve made from net profits has been reduced from 10% to 5%.

4. Eliminates the section of Companies Law that requires minimum Emirati Ownership in an Onshore Company

The New Law removes the Minimum Ownership of Emirati from 51% in any onshore company and provides the mainland companies are allowed to be 100% foreign-owned.

The introduction of the New Companies Law is a significant move to enhance the competitiveness of the UAE in the field of economic development and attract foreign investment into the country.

Dr Vinay Sharma - Legal Consultant

Dr. Vinay Sharma

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