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German Legal Expertise in the Middle East since 1981

Current Legal Developments in UAE

Guiding Principles

The deadline set by Federal Law No. 2 of 2015 on Commercial Companies (New CClaw), pursuant to which all corporate entities in the UAE had to amend their by-laws until no later than 30 June, 2016, has now been extended by one year to 30 June, 2017.Dealings with public authorities have become more difficult, often leading to our Clients’ daily legal transactions taking significantly longer to complete.

 

A. New Commercial Companies Law – Deadline extended

In previous articles we have explored the new Federal Law No. 2 of 2015 on Commercial Companies (New CCLaw) in some detail and have described the differences between the New CCLaw and its predecessor, Federal Law No. 8 of 1985 (Old CCLaw).

The New CCLaw includes a provision, Art. 374, according to which all UAE registered corporate entities (with the exception of those incorporated in one of the many free trade zones in the UAE) have to comply with the provisions of the New CCLaw within a certain time frame, failing which such entities are being “deemed dissolved” by the New CCLaw.

The deadline set by Art. 374 New CCLaw was “one year from the effective date of this law”, which translated to 30 June this year. On 18 June this year, the Ministry of Economy has now announced that it has extended the deadline by another year. Hence, all corporate entities in the UAE now have until 30 June 2017 to comply with the provisions of the New CCLaw.

This is most certainly welcome news, given that for quite a few of our Clients, changing the by-laws of one of their subsidiaries requires a fairly complex internal approval process to be followed, which is often pretty time consuming. All such Clients are now more at ease to complete such approval processes with the time required instead of being rushed.

The deadline extension also demonstrates that the Ministry of Economy is serious about Art. 374 New CCLaw and is likely to apply the penalties described in the New CCLaw in all cases where a corporate entity fails to update its by-laws in accordance with the requirements of the New CCLaw. That being said, we recommend commencing or completing the process sooner rather than later, should the update of the by-laws not have been taken care of already.

We would like to point out that Meyer-Reumann & Partners has put together an offer to its Clients. For a lump sum of AED 9,500 (our professional fees only), we will review our Clients’ existing by-laws, extract the commercial terms and include such commercial terms as far as possible in a new template, which does comply with the requirements of the New CCLaw. Following translation (translation fees apply), this results in a New CCLaw compliant set of by-laws, which can simply be notarised.

Our offer aims to assist our Clients with the transition from the Old CCLaw to the New CCLaw smoothly, in a foreseeable time frame, at a clearly defined cost and as effortless as possible. Please feel free to speak to us about this offer. We will be happy to assist.

 

B. Dealings with Authorities

Another topic that is worth mentioning is comparatively new developments in the service provided by many public authorities in the UAE.

The laws of the UAE form a sound basis on which to rely upon. They are also very business friendly and facilitate commercial proceedings in the UAE. The laws of the UAE, as all laws, merely provide guidance to individuals and require, by definition, interpretation. Needless to say that there are rules on how laws are to be interpreted too. Together, laws, regulations and their interpretation in accordance with said rules, aim to provide corporate entities and individuals with clear guidance on how to organise their commercial operations and, in case of individuals, even their personal lives.

Until about two to three years ago, these principals were commonly followed in the UAE. While it was common that certain obstacles had to be overcome, local authorities usually followed a “can-do” approach, which resulted in suitable solutions to said obstacles being found and applied.

In more recent times, we have noticed that, in principle, dealings with authorities and banks have become more difficult. Judging by our discussions with a variety of other legal professionals throughout the UAE, this impression would appear to be shared by most legal professionals.

It has become common practice of many public notaries, as well as usually lower level public servants, but also bank clerks, to apply their very individual interpretations of the relevant laws and regulations. This, coupled with an often very risk averse approach, now often constitutes a significant obstacle to achieving objectively simple matters, such as, for example, issuing management or other powers of attorney, transferring shares in companies with limited liabilities, etc.

Further, given that there no longer appears to be a common denominator on how rules and regulations are being interpreted and results largely depend on the individual public notary, public servant or bank clerk, it has, at times, become very difficult for legal professionals to provide reliable advice.

We are certain that the current situation is just a temporary phenomenon and that the relevant Legal Affairs Departments and other public authorities are working on solving this problem. For the time being, however, above mentioned issue is likely to have an impact on many of our Clients’ legal transactions, which is why we would like to caution our Clients accordingly.

July, 2016 Dr. Michael Krämer
Meyer-Reumann & Partners, Dubai Office
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