If you are a UAE-based business owner seeking information regarding the UAE commercial companies law amendments, then you are on the right page. Here, we discuss the essential information about the UAE commercial law changes you need to understand.
The government developed the new UAE companies law, also known as the commercial companies law, to change the way businesses work in the country. The law applies to all businesses that execute operations on the UAE mainland, including those in the manufacturing, commercial, banking, construction, and other sectors.
The UAE’s goal is to attract more foreign investment, elevate the business sector to global standards, and improve management in the business community. The new commercial law is part of this plan.
Primary Modifications Introduced by the UAE Commercial Companies Law
If you are an investment firm or an entrepreneur in the UAE, you need to continue keeping up with the latest news to adhere to the updated regulations. The commercial companies’ law in the UAE applies to all businesses on the mainland that work in the commercial, monetary, property, or industrial sectors. Also, the management needs to look for ways to increase the business by utilizing the advantages of the most recent changes.
SPACs & SPVs Company Structures
SPACs are publicly traded businesses that are set up to purchase or merge with another company. SPVs are legal structures that keep the assets, debts, and activities of a single project separate from each other.
Full Overseas Ownership on the Mainland
The commercial companies law’s most important change is that it lifted the 49 percent foreign ownership limit for mainland enterprises. Overseas investors can now own all of their firms in multiple economic activities. However, vital industries, including armed forces, oil, and gas, still have ownership rules that require Emirati participation or special clearances.
New Reforms for Limited Liability Companies (LLCs)
Here are the most important changes for LLCs in the UAE commercial companies law:
- If a manager’s term ends and they are not replaced, their term can be prolonged for up to six months from the date it ends while a new manager is being hired.
- A person who is not a manager can now fill in for someone else at a general assembly meeting.
- The time it takes to call a general assembly is now no longer than twenty-one days.
- If the initial meeting fails to include enough people to go ahead, they can convene a second meeting without needing a certain number of participants.
- Several businesses will be satisfied that the statutory reserves, which are comprised of net earnings, have been decreased from ten percent to five percent.
Enhancements for Public Joint Stock Companies
- The new commercial company law has brought about changes for PJSCs, notably in how they operate and how their capital is organized.
- The law finally got rid of the need for shares to have a minimum nominal value. Now, the PJSCs can define their own nominal value. It further got rid of the need for authorized share capital.
- Companies that are already in business must change their status within a year of the regulation going into effect. If they don’t, they will be declared liquidated.
Strengthened Corporate Governance & Shareholder Rights
- The UAE commercial companies law stresses strong governance to ensure that processes are clear and accountable. Important prerequisites are:
- A PJSC must have between three and eleven directors, while an LLC must have a manager or board.
- Shareholders must meet once a year to approve dividends and financial reports.
- Companies with more than twenty shareholders or yearly sales of more than AED fifty million must hire auditors.
- Security for minority shareholders, such as the right to see corporate records.
- These rules update UAE business legislation to align with international standards. It helps investors feel more confident.
Convenient Capital Requirements
The new UAE commercial companies law eliminated the necessity of minimum capital requirements for LLCs, which made it simpler to start a firm in the UAE. However, PJSCs and PRJSCs still have to meet certain capital requirements. In Dubai commercial law, the DED may require businesses to have a specified amount of capital for some activities.
UAE Tax & VAT Regulations Amendments
The UAE’s new Corporate Tax (CT) rates are as follows:
- Zero tax on income up to AED three lacs seventy-five thousand.
- If your income is more than a certain amount, you have to pay nine percent tax.
- If your business makes more than AED 375,000, you have to pay VAT on most goods and services.
Licensing Rules for New Commercial Laws
- In Dubai, the DED provides mainland licenses.
- The Free Zone Authorities provide Free Zone licenses.
- There are different types of licenses, such as commercial, professional, manufacturing, and legal translation services.
The UAE Commercial Companies Law: The Company Types
The commercial firm’s legislation regulates legal requirements for different sorts of businesses, how they can be owned, and how they should be run. The commercial company legislation in the UAE recognizes several different types of businesses:
Limited Liability Company (LLC) Structure
It is the most typical structure that needs a minimum of one shareholder and no initial capital. However, in Dubai, it used to be AED three lacs.
Single Ownership Structure
It is suitable for enterprises with only one owner, like professionals and small firms.
Private Joint Stock Company Structure
This type of business structure works for companies that aren’t listed and have at least AED five million in capital.
Civil Company Structure
Civil corporations are ideal for professionals. In most circumstances, they need professional licenses and can be owned by expats entirely most of the time.
Holding Company
A holding company is a business that is set up to hold and manage shares or ownership interests in other businesses. It fails to conduct business directly.
Branch of a Foreign Company
A company branch office is not an independent legal entity, although it can do business onshore.
Representative Office
Foreign enterprises that intend to conduct business in the UAE can set up representative offices there.
How KPM PRO Can Help
The commercial company law in the UAE made significant modifications, such as allowing most mainland enterprises to be owned by foreigners completely. They changed the rules for governance and capital requirements. KPM PRO assists firms in easily getting through this complicated situation. They assist companies in following the updated regulations by helping them set up their businesses. They help them with license changes and update their paperwork.
KPM PRO offers a full range of professional services in Dubai, handling all government interactions, from getting the essential approvals from the DED to renewing commercial licenses. This cooperation lets firms take advantage of the UAE’s improved business climate by focusing on growth. KPM PRO takes care of the complicated rules and regulations correctly, which saves time and lowers risk.
Conclusion
The newly enacted UAE commercial companies law is a crucial move toward transforming the UAE into a worldwide business center. Its main benefits are that most sectors can be fully owned by foreigners. Corporate regulation and minority protection are better, and new investment vehicles are also available. These progressive changes give people more freedom and openness than ever before.
Organizations and investors should review their current structures and corporate documentation to ensure they are aligned with the new laws. Reach out to KPM PRO. Our lawyers will take advantage of the flexibility of foreign ownership and ensure that you follow all of the new UAE business regulations.
FAQs:
What does Article 76 of the UAE Commercial Code indicate?
It mainly addresses how to figure out the interest on business loans. If the loan agreement fails to clarify the rate, it will be determined using the present market interest rate.
What is a commercial transaction?
It is an exchange of products, services, or valuables between two or more people, usually for money, and it is controlled by the law. It can involve sales, rentals, or other business activity agreements.
What does Article 218 of the UAE Commercial Firms Law indicate?
The main point of this article is that a shareholder in a limited liability corporation is solely responsible for the amount of shares they own in the firm’s capital.
