UAE Introduces New Law Dealing With Commercial Companies

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New legislation, introduced by UAE President Sheikh Khalifa, will move corporate regulation in the country closer to international standards in a bid to attract more foreign investments. Dealing with commercial companies, the new law clarifies various issues, including regulation of limited liability companies.

On April 1, UAE President Sheikh Khalifa Bin Zayed Al Nahyan issued Commercial Companies Law No.2 of 2015, which regulates the relations between government institutions and commercial companies in the country. It aims to ease the operations of both firms established in the country and foreign companies, opening representative offices or branches in the UAE. With the increasing business activity and economy growth in the UAE, the new law will promote better business environment and attract more foreign corporations and investments. In its 378 articles, it looks at various issues relating to corporate regulation, company founding terms, evaluation of equity stakes, and many more.

The new law allows an individual to establish and own a single-owner limited liability company. He or she will be liable for this company’s obligations only as per the capital, stated in the articles of association under the limited liability company provisions of the law. Under the same provisions, a juridical person can also set up a joint private or limited liability company.

The law also cuts the minimum “free float” of shares in company flotations on UAE stock markets to 30 percent before the initial public offering. The maximum is set to 70 percent of the capital. Companies will be able to convert cash debt into equity in order to raise their capital, but only after its board of directors presents the documentation, supporting this step before the general assembly.

Under the new federal law limited liability and joint stock firms will be much simpler to manage and more attractive to investors. According to state news agency WAM, the law defines a holding company as a firm that establishes other firms in the country or abroad and owns stakes or shares of companies, allowing it the right to manage them.

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