The Federal Law by Decree No. 26 2020 (“Decree Law”), issued on November 23, 2020, introduced new provisions amending various aspects of the Federal Law No.2 2015 regarding Commercial Companies (“Commercial Companies Law”). The Decree Law did not only abolish the general requirement for Emirati Majority participation but also introduced new and amended provisions for corporate governance and structuring. As such, all mainland companies in the UAE are required to make amendments to their Memorandum and Articles of Association (MoA). This update aims to highlight some of the most important amendments that must be made.
Issuance and Compliance Period:
Mainland companies are required to make the necessary amendments to their MoA’s by and before January 2, 2022, this is one year after the entry into force of the Decree Law on January 2, 2021.
Some of the Important Amendments as required by the Law Include:
• An Amendment to allow for a General Assembly Meeting to be called by the Manager/Director of a company upon the request of a shareholder or shareholders that own a capital of 10% of the share capital of the company under Article 92 of the Decree Law. This is as opposed to a capital of 25% as existing previously under the Commercial Companies Law.
• An Amendment for Invitations to a General Assembly Meeting to be sent at least 21 Days prior to the date of the meeting under Article 93 of the Decree Law, as opposed to the previous 15 days.
• As per Article 96 of the Decree Law, the quorum of a General Assembly Meeting now requires the participating shareholders to own at least 50% of the capital as opposed to the previous 75%.
• Invitations and documents for General Assembly Meetings not sent in writing but through Modern Technological Methods are now permissible under the Decree Law. Further to this, General Assembly meetings may be conducted remotely and as such the MoA’s should be amended should the company wish to conduct matters virtually/remotely.
• Under Article 73, companies that previously did not include a method or a forum for settling disputes between the company and its managers/directors or its shareholders must now amend their constitutional documents to reflect their position. Further and in addition to this, companies that have chosen the EMAC or DIFC-LCIA to be their seat of Arbitration must now reconsider their forum due to the issuance of Decree No. 34 of 2021 that dissolved EMAC and made some changes to Arbitration landscape in the UAE.
Failure to comply with the Decree Law and make necessary amendments, may lead to fines and penalties, namely under Article 357 of the Decree Law under which the non-compliant company shall be fined AED 100 per day of delay. In severe cases, in addition to the fines, the company may also be deemed dissolved.
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