Posted on Nov 18, 2017
All those companies who have not amended their Memorandum of Association (MOA) before or on the deadlines given by the Ministry of Economy can take a sign of relief as in accordance with the provisions of the new Commercial Companies Law all those necessary amendments has been avoided.
According to the UAE Cabinet’s proposal of Minister of Economy, one year has been given for the amendments of positions, starting from July 1, 2016 and ending 30 June, 2017. All the companies covered by the new Commercial Companies Law are requested to make the necessary amendments in accordance with the law’s provisions as when the new CCL was also introduced on 1st July 2015 it was also declared that if any existing companies in UAE failed to implement the changes or late adjustments would attract fine of 2000 Dhirams per day (Such fine shall be calculated from the day following the expiry date of the applicable period for such purpose) and dissolution in extreme cases for non-compliance.
Essam Al Tamimi, Senior Partner, Al Tamimi & Company said that companies don’t have to panic now as there will be no more deadlines to be met by companies to amend their MOA and make the necessary modifications in accordance with the new law as they will also not be liable to pay fines and penalties.
The new Commercial Companies Law laid significance on enhancing regulatory framework within LLC's and Joint Stock Companies. As new law expect to alter the business condition by increasing or uplifting the level of competitiveness and corporate regulations to a worldwide level as for now it is concluded that MOA of companies remain valid regardless of the latest deadline given for compliance as per CCL.
The ministry said in its Ministerial Order No. 694 of 2016 that memorandum of association or articles of association of existing companies should stay substantial. "Any articulation (expression), content or article expressed in such memorandum of association or articles of association conflicting with provisions of law should be deemed altered and supplanted by text of the law from the date this order is substantial or valid, "Companies should comply with amendments and should also be consistent with Article No. 374 of the law."
As per the new commercial company’s law (CCL) all new companies who are going to apply for the consent to its formation "shall include in its memorandums of association the provisions stated in law and any provisions requested by the competent authority to be included in such memorandum of association or articles of association."
The most imperative alteration in the law is for Joint Stock Company or Limited Liability Company as they shall have one or more auditors to do the auditing of the business entity, i.e. audit of the accounts of the company every year. The company should apply the International Accounting Standards upon preparing its books and annual accounts and practices to give clear, accurate and more precise view of the profits and losses of the company. According to CCL, if proportion of partner’s profits and losses is not stipulated in MOA then his share shall be taken on pro rata to his stake in the capital where if, only share in profit is stated in MOA the losses shall be equivalent to his share in the profits and vice versa.
Tending to more than 500 visitors and individuals from the Institute of Chartered Accountants of India UAE (Dubai), Al Tamimi said the new CCL presents some incremental changes mostly maintaining the fundamental framework and features of the old provisions. At the event, Al Tamimi also answered a range of questions on the DIFC law and wills among other legal topics where he also added that “the new law also introduces new concepts such as allowing sole shareholder companies either in limited liability or private joint stock companies and addresses employees incentive share schemes."
The most valuable changes embraced in the new CCL are provisions which allow limited liability companies, sole proprietors and private joint stock companies (except government-owned companies) from the new CCL if the company includes a provision in their memorandum to that effect; enabling partners to pledge their interests in LLCs; allowing certain non-pre-emptive share issuances by joint stock companies, or JSCs; and allowing founders to list their businesses yet retain 70 per cent of the shares.