The Federal National Council of the United Arab Emirates (the “FNC”) has approved a new draft of the Federal Law No. 8 of 1984 Concerning Commercial Companies (the “CCL Draft 2013”) which will come into force three months after publication in the United Arab Emirates’ (the “UAE”) official gazette.
The CCL Draft 2013 introduces some new concepts and approaches; however, most of the essential features of the present law are maintained.
Turning to limited liability companies (“LLCs”), the present legislation requires an LLC to have a minimum of 2 and a maximum of 50 shareholders. Further, it is a mandatory requirement that Emirati nationals or GCC nationals hold the majority of the shares in an LLC, equal to 51 % of the share capital of the LLC. While the 2011 draft of the CCL provided that foreign investors may hold the majority of the shares in the LLC, the updated CCL Draft 2013 continues to maintain the historically established and more conservative approach in relation to foreign ownership and restricts the shareholding of foreign investors to 49 %.
The CCL Draft 2013 allows, however, for sole shareholder companies, either with limited liability or as private joint stock companies. In accordance with Article 235 of the present CCL, the management of an LLC shall be assumed by one or more manager(s), whereby the maximum number of managers shall not exceed five. The CCL Draft 2013 instead does not set out the maximum number of managers.
Article 249 of the present CCL provides that resolutions passed at a General Meeting of a company’s shareholders shall be valid only if adopted by a number of votes representing at least 50 % of the capital of the company. The CCL Draft 2013 has revised this figure to 75 % of the capital. With regard to the pledges over shares, while the current law does not specifically provide for pledges over shares in an LLC, the CCL Draft 2013 enables the legal pledge of quotas in LLCs.
Pursuant to Article 128 of the present CCL, the General Meeting shall be valid only if attended by shareholders representing at least 50 % of the company’s capital. With the CCL Draft 2013, the attendance of shareholders holding at least 75 % of the shares in the company would become a mandatory requirement.
Another notable requirement included in the CCL Draft 2013 is that unless otherwise provided by the CCL Draft 2013, the provisions concerning joint stock companies shall now apply to LLCs.
Regarding Public Joint Stock Companies (each a “PJSC”), under the existing regulations, a PJSC may be established by a minimum of 10 founders. The CCL Draft 2013, however, reduces this number from 10 to 5. In addition, the maximum number of directors in a PJSC has been reduced from 12 to 11 directors. The requirement under the existing law that the majority of Board members and the Chairman of the Board of a PJSC should be UAE nationals will continue to apply under the CCL Draft 2013.
Under the CCL Draft 2013, the share capital requirement for a PJSC has been increased from AED 10 million to AED 30 million.
With regard to Private Joint Stock Companies (each a “PrJSC”) under the present law, a PrJSC company may be founded by not less than three founders. The CCL Draft 2013, however, provides for the establishment of a PrJSC with only two founding members and with an increased capital of not less than 5 million Dirhams. The CCL Draft 2013 provides that PrJSCs will be subject to corporate governance rules if such companies are composed of more than 75 shareholders. On this note, a ministerial decree setting out the applicable corporate governance rules will be issued in due course.
Further, the CCL Draft 2013 provides that any company is prohibited from making any advertisements or marketing to invite the public to subscribe to shares without first obtaining the prior approval of the UAE’s Securities and Commodities Authority.