Company formations in the United Arab Emirates (UAE) continue to evolve, cementing the nation's status as a global commercial hub. With strategic location, world-class infrastructure, and economic stability, the UAE attracts entrepreneurs and corporations seeking growth opportunities.
The UAE government continues to create an optimal environment for every business setup in UAE through the regular refinement of regulatory frameworks. The amendments to the UAE Commercial Companies Law also reflect the government's commitment to enhancing the country's business environment and implementing best international practices. These changes further aim to make procedures smoother, enhance transparency, and provide more operational flexibility. This is all achieved while maintaining the strong corporate governance standards that have become hallmarks of the UAE business landscape.
Continue reading this blog to learn more about the UAE Commercial Companies Law 2021.
Back to topOverview of the Commercial Companies Law in UAE
The UAE commercial companies law provides businesses with a structure to ensure compliance and maintain ethical standards and clear, honest practices. Rolled out in 2015, the law instates the following practices:
- All companies in the UAE must appoint a board of directors. The law mentions the minimum number of members required.
- Companies must conduct annual general meetings (AGM) where shareholders discuss essential matters.
- The law mentions the minimum capital requirements for legal structures in the UAE.
- It protects the rights of minority shareholders and allows them to voice their opinions without the influence of major shareholders.
Key Changes in the New Commercial Companies Law in UAE
Years later, the government made certain amendments to the existing commercial companies law in UAE. Let us have a look at the new Commercial Companies Law in UAE:
Ownership
Entrepreneurs can now have complete control over business operations across most business activities.
Introduction of Legal Entity
The law has introduced two new business structures: Special Purpose Acquisition Company (SPAC) and Special Purpose Vehicle (SPV). SPACs can be opened as a Joint Stock Company (PJSC).
For Limited Liability Companies
Meeting Rules: Shareholders must be given a minimum 21-day notice period to conduct an AGM, and an individual, except a manager, can act as a replacement for a shareholder.
Meeting Validity: If the first AGM does not have enough people and a second meeting is called, the second meeting will be valid even if there are no rules about how many people need to be there.
Dispute Resolution: The Memorandum of Association (MoA) must clearly define the methods of conflict resolution.
Board Continuity: If the current Board of Managers' term ends without a new member being appointed, the members will continue managing for six months, after which the limited liability company (LLC) must appoint a new member. If the LLC doesn't appoint a new board, the Department of Economic Development (DED) is permitted to appoint a temporary board for up to one year.
For Public Joint Stock Companies
Director Replacement: If a director leaves, the company must appoint a new one within 30 days. The new director needs approval at the AGM and will serve the rest of the former director’s term.
Compensation Structure: Board members may receive up to 10 per cent of annual profits after deductions. Even without profits, individual members can receive up to AED 200,000 with proper authorisation.
At this stage, many companies consult a corporate tax consultant in Dubai to ensure accurate tax reporting and benefit from available deductions.
Share Subscription Flexibility: The law also states that there is no minimum or maximum limit on how many new shares company founders must buy during public offerings.
IPO Timeframes: The mandatory 10-day minimum subscription period has been removed, allowing companies to establish their own timeframes.
Unsold Shares: Founders may now acquire unsold shares after subscription periods end.
Trading Freedom: Once companies are listed publicly, founders can freely trade their shares without previous restrictions.
Back to topHow Can Commitbiz Help?
The UAE has one of the most favourable markets worldwide. Starting your business here can help you achieve significant growth and expansion. You can explore the options for mainland and UAE free zone company formation. However, understanding the legalities, requirements, procedures, and more is important.
You can reach out to Commitbiz LLC. As a leading corporate services provider in the UAE and the Middle East, we ensure a hassle-free business setup. Our consultants have thorough knowledge about the country’s business environment and will support you through every step of the company incorporation process. Our expertise ranges from business setup solutions and visa processing to opening a corporate bank account and protecting your intellectual property.
Contact us to learn how to leverage the UAE commercial companies law.
Back to topWhich business activities have seen a rise after the implementation of the UAE Commercial Companies Law 2021?
Since the introduction of the UAE Commercial Companies Law in 2021, there has been notable growth in sectors such as e-commerce, retail, technology, and manufacturing.
What is the best place to start a business in UAE?
The UAE offers mainland and free zone business setup options, each providing a range of incentives and benefits. Entrepreneurs must choose an appropriate jurisdiction based on their business activity, target audience, and more.
Why establish a business in UAE?
The UAE presents an ideal environment for business growth, thanks to the UAE Commercial Companies Law. Additionally, businesses can benefit from world-class infrastructure, tax incentives, reliable high-speed internet, and access to various markets.
