The UAE Cabinet recently approved a proposal by Sultan bin Saeed Al Mansouri, Minister of Economy, to extend the period for existing companies in the UAE to comply with Federal Law No. 2 of 2015 on Commercial Companies by one more year.
Companies established before the issuance of the new law under Article No. 374 were originally given from July 1, 2015 to June 30, 2016, to amend their Memorandum of Association and Articles of Association in compliance with the provisions of this law.
According to article 357, in case of Late Adjustment, companies will be fined Dh2,000 per day of delay calculated from the day following the expiry date of the applicable period for such purpose.
The second clause of article 374 states that a company will fall under the provisions of the law should it fail to make adjustments within the given period.
The Cabinet agreed with the Minister of Economy’s suggestion to allow the companies concerned to adjust their positions according to the provisions of the law within no later than one year.
For this purpose, and based on the UAE Cabinet’s proposal of Minister of Economy, an additional one year has been given for the adjustment of positions, starting from July 1, 2016 and ending 30 June, 2017.
During this period companies covered by the new Commercial Companies Law are requested to make the necessary adjustments in accordance with the law’s provisions.
Al Mansouri proposed the extension after receiving requests from the Securities and Commodities Authority, the Departments of Economic Development across all the emirates, and a number of existing companies in the UAE.
The said parties voiced the need for the UAE’s private sector companies – which number 219,735 limited liability, 162 public joint stock, 60 private joint stock, and 500 solidarity companies and limited partnership corporations – to have more time to adjust to the new Commercial Companies Law.
They pointed out the difficulty of holding general assemblies for some companies as well as the considerable time required to complete the statute amendments and obtain government approvals. The Minister said that the new deadline is in line with government efforts to facilitate business, enhance the role of the private sector, and to achieve a smooth transition to the new Companies Act.