The 2015 UAE Commercial Company Law (CCL) provided that all provisions related to joint stock companies would equally apply to LLCs, unless otherwise provided for in the CCL. This created significant uncertainty and concern among the legal and business community as a number of relevant provisions would have a significant impact upon the operation of an LLC.   

In response, the Ministry of Economy has released an unpublished resolution (No. 272 of 2016, signed on 28 April 2016) titled “the implementation of the rules governing joint stock companies to limited liability companies”. The Resolution will come into force the day after its publication in the Federal Gazette.

Helpfully the Resolution details certain provisions of the CCL that will specifically apply to LLCs and some that will be specifically excluded from applying to LLCs. Among the notable exclusions (i.e. which will not apply to LLCs) are:

  1. article 222, the prohibition of financial assistance;
  2. article 154, the limitations of the powers of the board of directors of a joint stock company; and
  3. article 152(1) and 152(2) restricting related party instructions.

The Resolution has only provided certainty in respect of a limited number of specific clauses of the CCL. Ambiguity remains in respect of a large number of other provisions of the CCL not covered by the Resolution. The Resolution also includes ambiguous general provisions stating that all provisions 'consistent with the nature of an LLC' shall apply to an LLC and all those inconsistent shall not.

The Resolution further introduces provisions in respect of management, finance and accounting and an LLC's general assembly. An entirely new concept introduced by the Resolution permits a partner in an LLC whose shareholding reaches 50% or more to make an offer to buy out the other partners in the company, who may accept or decline the offer. The purpose of such a provision is unclear, as is its practical application in the absence of a prescribed process for the offer or any value to be placed on the shares.

Of more general concern is whether a ministerial resolution can even take precedence over the CCL, being a federal law.

Despite the above, this remains a much needed development, at the right time given the impending deadline of 30 June 2016 to amend the memorandum of an LLC to comply with the CCL. However, the Resolution does not address all concerns with the CCL and raises a number of new questions.

ESCA and the Dubai Development Economic Department have invited participants to a forum next week to discuss the Resolution in which we will participate. Our expectation is that further clarity will be provided during this forum.