The New Commercial Companies Law was published in the Official Gazette on the 31st of March 2015 and came into effect on 1st of July 2015. The new regulations under the law are aimed at refining regulatory structures within LLCs and Joint Stock Companies.
Though the law came into effect 9 months back, companies were given a year from the date of effect, 1st of July 2015, to amend their Memorandum of Associations (MOA) and make the necessary modifications. However, companies in the UAE are still unaware of the new law and the consequences that come with the failure to make amendments effectively.
With just over few days left, companies must immediately address the requirements of the new law to avoid fines and in extreme cases face dissolution.
Some of the more critical changes in the law relating to LLC are as below*
Article 27- Accounts of the Company
Every Joint Stock Company or Limited Liability Company shall have one or more auditors to audit the accounts of the company every year.
The company shall apply the International Accounting Standards and Practices upon preparing its periodical and annual accounts, to give a clear and accurate view of the profits and losses of the company.
Article 28- Financial Year of the Company
Every company shall have a financial year as determined in its Articles of Association, provided that the first financial year of the company shall not exceed 18 (eighteen) months, but at least 6 (six) months, to be calculated from the date of registration of the company in the Commercial Register with the competent authority.
The subsequent financial years shall consist of consecutive periods, each of 12 months commencing directly upon the expiry of the preceding financial year.
Article 29- Distribution of the Profits and Losses
If the company's Memorandum of Association does not stipulate the proportion of a partner in the profits or losses, his share thereof shall be pro rata to his stake in the capital. If the Memorandum of Association is limited to specifying a partner's share in the profits, his share in the losses shall be equivalent to his share in the profits and vice versa.
If it is agreed in a company's Memorandum of Association that one of the partners is to be deprived of the profits or exempted from loss, or to receive a fixed percentage of profits, such Memorandum shall be deemed void.
Article 86- Competition of the Company by the Manager
The Manager shall not, without the consent of the General Assembly of the company, undertake the management of a competing company or a company with objects similar to those of the company or make, for his own account or for the account of third parties, deals in a trade in competition or similar to the activity of the company, otherwise the Manager may be dismissed and required to pay compensation.
Article 96- Quorum for Convene and Voting
Quorum at the General Assembly shall not be valid unless one or more partners holding at least 75% of the capital of the company are present.
We advise companies to not take this new laws lightly. Further, as each Memorandum is unique to each company, a professional must be appointed who can ensure that infringing clauses are removed and all relevant clauses to your business are added to the MOA.
We understanding the severity of the situation, recommends all LLCs to have their memorandums examined and begin preparing a draft of the amendments to be made before the end of June. For further support and information please contact : IMRAN for Business services today, contact us on : +971563849356.