UAE: Cabinet Resolution Number 16 of 2020 updating the Commercial Companies Law

UAE: Cabinet Resolution Number 16 of 2020 updating the Commercial Companies Law

A new Decree updating the Commercial Companies Law 2015 has been issued through Cabinet Resolution Number 16 of 2020. This amendment scraps the need for a UAE national as a sponsor and allows expatriate investors’ 100% ownership, effective from 1^st December 2020. Although individual Emirates allowed foreign nationals to acquire stakes in a company, the latest amendment notably broadens the extent of such ownership.

The Decree annuls the requirement of having a major Emirati investor/ stakeholder and provides full ownership to expatriates in connection with commercial companies. Further, companies have a maximum window of one year to comply with the amended law from the date when the Decree takes effect.

Some crucial changes applicable are as follows;

• Relevant local authorities have been granted the power to, set a certain percentage of Emiratis in areas concerning capital allocation and board of directors; they also have the authority to approve requests regarding the establishment of companies, save and except joint stock companies and are further permitted to identify charges as per Cabinet policies.
• Joint Stock Companies are permitted to sell a maximum of 70% of the company through IPOs, from the current 30% cap, subject to the approval of relevant authorities.
• The Cabinet shall set up a Committee that overlooks the strategic impact of commercial activities and propose new measures to license such companies. Further, the Cabinet shall, upon review of the recommendations of the Committee, set forth activities that are considered to be in the domain of strategic impact and measures for licensing thereof.
• The Securities and Commodities Authority (SCA) is empowered to establish control and procedures for the evaluation of in-kind shares and participants of the general assembly meetings of companies. Further allowing the appointment of board members with the requisite expertise and dismissal thereof, in case there is a judgment regarding their misuse of power or fraud.
• Shareholders have the power to initiate action against a company in a Civil Court in case of any failure of duty resulting in damages.
• The Decree further enables public companies to approve an increase in its capital by way of conversion of bonds into shares.