Non Compliance may lead to automatic dissolution

Legal 18 Jun 2016
Non Compliance may lead to automatic dissolution

As you are aware the new UAE Commercial Companies Law viz Federal Law No. 2 of 2015 (“New Companies Law”) has been promulgated by the UAE Government and came into effect on July 01, 2015, to strengthen the legal and regulatory framework of the Companies operating in the UAE. In accordance with the New Companies Law all companies incorporated and operating in the mainland, are required to (i) reconcile their existing legal statuses; and (ii) amend their existing Memorandum and Articles of Association to comply with provisions contained in the New Companies Law. The New Companies Law which replaced the Federal Law No. 8 of 1984 (“Old Law”) also applies to branches and representative offices of foreign companies.

As per the New Companies Law any company that fails to make the requisite changes to its legal status or amendments to its existing Memorandum and Articles of Association (as the case may be) by 1 July 2016 (unless the dead-line is extended or waived by the authorities) shall without prejudice to the penalties imposed under the Law viz, AED 2,000/- per each day of delay, be deemed to be dissolved in accordance with the provisions of the New Companies Law, with no further recourse available for restoring registration of the company. We have reproduced the relevant provision of the New Companies Law as hereunder;

Article 374 Adjustment of Positions
1. Existing companies that the provisions of this Law apply to shall adjust their positions in compliance with the provisions of this Law; within no more than one year from the effective date of this Law. Such term may be extended for another similar term under a Resolution by the Cabinet on a proposal made by the Minister.
2. Without prejudice to the penalties as provided by this Law, if a company fails to comply with the provision of Clause 1 of this Article, the company shall be deemed as dissolved in accordance with the provisions of this Law.

The prime objective of the New Companies Law is to promote levels of good corporate governance and to ensure protection of the rights of the shareholders, consistent with the global standards to stimulate more direct foreign investment into the country.

Whilst the above seems to be the position on statute, we have conflicting information from various sources as to the implementation of this law. However, we recommend that the companies should carry out the amendment in their MOA’s to be compliant with the law.

Our firm would be pleased to extend necessary legal support in reviewing the Memorandum and Articles of Association of your Company and advising on the necessary amendments required thereof, consistent with the provisions set forth in the New Companies Law.

Trust the above information is of assistance to you.

In the event you have any queries or require quotation for the above support or any clarifications on the above, please feel free to contact us.

Carolina Karlsson
Client Relations Executive.

Suite 1406 to 1410, Citadel Tower,
Business Bay, P.O.Box 113297
Dubai, United Arab Emirates.

Tel: 9714 277 6075
Fax: 9714 277 6071
Mob: 97155 7646910
email: carolina.karlsson@kochhar.com

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