The UAE Ministry of Economy (Ministry) recently issued Resolution No. 694 of 2016 (the Resolution) in relation to limited liability companies (LLCs), general partnerships and limited partnerships.
Article 374 of the Commercial Companies Law 2015 (CCL) requires existing UAE companies to "adjust their positions" to be compliant with the CCL by 1 July 2016. This deadline was subsequently extended by a further twelve months to 1 July 2017. A company which failed to comply was at risk of fines and deemed dissolution.
The Resolution states that the Agreement for Incorporation/Memorandum of Association (Memorandum) for any LLC or partnership registered on or after 1 March 2017 (Effective Date) must comply with the provisions of the CCL. Importantly, however, the Resolution provides that in the case of a LLC or partnership registered prior to the Effective Date:
- its current Memorandum shall remain effective; and
- any provision of the Memorandum which is not in compliance with the CCL shall be deemed to have been amended and replaced with the relevant provision of the CCL with effect from the Effective Date.
Companies which comply with the deemed amendments shall be treated as having "adjusted their positions" as required under Article 374 of the CCL.
It is helpful that the Ministry has clarified the position for existing companies and, in particular, removed the threat of potential dissolution of a company which has not yet updated its Memorandum. Nevertheless, we advise that LLCs review their current Memoranda and make appropriate changes to reflect the requirements of the CCL. The default position under the CCL may not be suitable in all circumstances, for example in relation to quorum and voting at shareholder meetings or the dismissal of managers. There are also some optional changes under the CCL, such as ability to serve notices by email, of which an LLC (or partnership) may wish to take advantage. Finally, a properly updated and restated Memorandum provides clarity for the shareholders and managers and is likely to facilitate dealings with third parties such as banks, investors and auditors.