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UAE's New Company Law: How it will affect your business?

  • First major overhaul of commercial law for 31 years
  • Likely to affect 350,000 SME's
  • June deadline for companies to institute changes-or they could be dissolved

The UAE's New Company Law (NCL) came into effect in June lasts year and gave companies one year to make changes to comply with the new legislation. This means to avoid big fines- or even face dissolution- it is essential that action is taken now to meet the June 25 deadline.

The NCL replaces the Federal Law No.8 of 1984 under which virtually all SMEs operate. The new law aims to strenghten the regulatory framework and bring about greater transparency, thus making the UAE more attractive as an international base for doing business.

It's provision are extensive and mean that some companies will be required to make major changes to the way they operate - but virtually all companies will be affected in some way.

Following are some of the major provisions and potential penalties for not complying:

  • All existing companies shall adjust their memorandum and articles of association by June 25 2016 to comply with the new legislation. If this is not done, the company can be deemed as dissolved as well as being fined AED2,000 per day for non-compliance.
  • Every company shall keep accounting records in it's head office for a period of a last five years. A fine of at least AED50,000, but not more than AED500,000 shall be imposed on a company that does not maintain the records.
  • Additional responsibilities are placed on to directors and managers to act at all times in the interest of their company- a change from the previous legislations where they could be exempt from personal liability by the memorandum and articles of association.

As mentioned above, these are just a few of the changes brought in by the NCL but they indicate the urgency for companies to address the situation without delay.

 

 

     

 

 

 

 

   

 

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