In celebrating its landmark 50th anniversary, the UAE has introduced various legislative changes reinforcing its position as a market leader in the region. The new legislation requires additional compliance from businesses and thus, we at Fichte & Co. intend to give you a brief overview of the major legislative changes.
The New Labour Law of 2021, which will come into effect on 2nd February 2022, has been passed to replace the erstwhile Labour Law of 1980. The changes brought about in the employment law are in line with recently developed models of working and balancing the interests of both parties to the employment contract.
- Employment Contracts: Unlimited contracts are no longer permitted. The employment contracts must be for a determined period, not exceeding 3 years, which will be renewable for the same or shorter period at expiry.
- Probation period: It cannot exceed 6 months, during which the employer may terminate the worker after providing 14 days’ notice. The employee is required to give 30 days’ notice in the event that he wishes to work for another employer within the UAE. However, in this case, the new employer will have to compensate the old employer for the costs of recruitment.
- Leave: Additional categories of leave such as bereavement leave (5 days for spouse and 3 days for other relative) parental leave (5 days) to take care of a child within 6 months of birth.
- Work Patterns: New models of work such as part-time work, temporary work, flexible work etc. have been introduced. Remote work is also a possibility, with the consent of the employer.
The Commercial Companies Law (CCL) replaces in its entirety Federal Law No. 2 of 2015 regarding Commercial Companies and has come into force on 2nd January 2022.
- Foreign Ownership: The erstwhile Article 10 of the 2020 Amendment (Federal Law No. 26/2020) relaxing the foreign ownership restrictions has been retained within the new law. The Economic Department has published a list of activities permitted for the purpose of 100% foreign ownership. Accordingly, the entire issued share capital of a limited liability company may now be held by a single non-UAE shareholder.
- General Assembly: The quorum for a GA is at least 50% failing which a second meeting must be held 5-15 days from the date of the first meeting. The previous law permitted this ‘unless the Articles stated otherwise’. The new law has removed this discretion available within the Articles of Association. Hence, existing companies must adjust their position in compliance with the law within a period of one year, i.e. Jan 2nd
- Changes for Public Joint Stock Companies: With respect to PJSCs, earlier requirements of 30% and 70% contribution by founders prior to invitation to the public has been removed. They may now subscribe to shares up to the percentage specified in the prospectus, subject to requirements of the SCA.
- Furthermore, the subscription period has been extended up to 30 days from the previous 10 working days. Founders may also subscribe to any unsubscribed shares at the end of the subscription period. Restrictions on the trading of shares by founders once the company is listed have also been removed.
- In order to facilitate spin-offs and demergers, PJSC can now divide its assets, liabilities, rights and obligations either horizontally or vertically.
- SPAC and SPV: Two new company forms, Special Purpose Acquisition Company (SPAC) and Special Purpose Vehicle (SPV) introduced. SPACs are established for the sole purpose of acquiring or merging with another company, whereas SPVs are used to separate the obligations and assets for a particular financing operation. These companies will be exempt from the application of the CCL, after issuing regulations by the Securities and Commodities Authority.
Recognizing the increasing importance of personal data, and in line with global best practices, the UAE has enacted the Federal Decree-Law No. 45/2021 On the Protection of Personal Data (DPL). In simple terms, data protection refers to the safeguarding of an individuals’ personal information and the manner in which it is accessed, stored, disseminated and destroyed. The law is a new development and imposes certain obligations on companies processing the personal data of UAE data subjects.
The DPL mainly applies to Data Processors and Data Controllers. Consider a scenario where a Construction firm hires a payroll company to manage the payment of wages to its employees. The payroll company stores the employee data and is thus, the data processor. The Construction firm instructs them on payment of wages and is the data controller.
The DPL is in effect from 2nd January 2022; however, it will not be enforced until six months after the publication of further executive regulations. Nevertheless, businesses must start preparing to comply with the law. An interesting point to note is that the law has extraterritorial application, meaning even if the controller or processor is located outside UAE but is processing the data of subjects within the UAE, the DPL comes into play.
One of the main requirements under the DPL is the express and unambiguous consent of the owner. A range of obligations is imposed on the processor and controller, including the collection of data for lawful purposes and prohibition on using such data for any other purpose. After completion of the purpose, the data may be retained only if it is anonymized. The data collected must be kept secure and protected from any breach.
A regulatory body called the UAE Data Office will monitor the development of this law and investigate the records maintained by the processor and controller.
If you require further information or assistance on this matter, please do not hesitate to reach us at firstname.lastname@example.org or call +971 4 435 7577.
Dr Laura Voda, Of Counsel
Maquelin Pereira, Paralegal