The UAE Ministry of Economy recently issued the ministerial resolution no. 694 of 2016 (the “Resolution”) which waives the requirement of amending the memorandum of association (“MOA”) of limited liability companies (LLC), joint liability companies, and limited partnerships (collectively, the “Exempted Companies”) as per the provisions of the Federal Law No. 2 of 2015 concerning Commercial Companies (“New Companies Law”).
Previously, the Companies Law stipulated that failure to amend the MOA of mainland companies to bring it in line with the New Companies Law before the compliance deadline of 30 June 2017 would result in deemed dissolution of the company and the imposition of a fine of AED 2,000 per day of default.
Applicability of the Resolution
The Resolution only applies to LLC, joint liability companies, and limited partnerships. As such, joint stock companies continue to be under the obligation to amend their MOA to align it to the New Companies Law.
New Companies’ MOAs
The Resolution states that new companies that are incorporated post the date of Resolution must have an MOA which conforms with the Companies Law.
Waiver for Exempted Companies
The Resolution further states that the MOAs of the Exempted Companies will continue to be valid and that any inconsistent provision will be deemed amended and replaced by the provisions of the Companies Law. In effect, this means that in the event of any conflict between a company’s existing memorandum and articles and the New Companies Law, the provisions of the New Companies Law will prevail.
The Resolution will be a relief to many Exempted Companies who were finding it is a logistical hurdle to bring their partners together to sign the MOA. That said, it is advisable for Exempted Companies to nevertheless amend their MOA in due course for ease of reference. In addition, MOAs would need updating to avail the benefit of some of the optional and commercially advantageous provisions in the New Companies Law such as a shorter notice period for convening a general meeting and the flexibility to send such notice through means other than by way of registered post (eg. email, fax).
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This article was co-authored with Franco Grilli.