• Home
• /
• Corporate
• /
• Business

New Commercial Company's Law is in force

Frauds by their very nature are difficult to detect as they are designed to deceive and hide, many a time it takes long before the same is uncovered.

Q: I have come to know that there is a new Company's Law is in place and it will affect all LLCs. I have LLC in Sharjah and Dubai. Will this require any changes to be made in the legal documents? Please guide. MS, Sharjah
A: The new Commercial Company's Law 2015 is in force. This affects many forms of UAE entities including the limited liabilities companies (LLCs) of the UAE. There are several revisions, which may affect the working of such LLCs. It is stipulated that these companies should be compliant no later than June 30, 2016. Though there are many changes, the major changes with respect to LLCs are (a) One natural person, or corporate entity, may be the sole shareholder of an LLC (article 71 of the New CCL), and one corporate entity may be a sole shareholder of a Private JSC (article 255 of the New CCL), (b) Share pledges allows shareholders in LLCs to pledge their shares, and such pledges must be made in accordance with the company's memorandum and articles of association, and be notarised. Such pledges shall only be valid (against the company and/or relevant third parties) from the date of its entry on the commercial register (article 79 of New CCL), (c) Maximum number of directors / managers; the management of an LLC can be undertaken by one or more directors / managers as determined by the company's memorandum and articles of association or the general assembly of the company (article 83 of New CCL), (d) Non-compete by directors / managers Other than with the consent of the general assembly of the company, a director / manager is not permitted to manage another competing company (including another company with objects similar to the company) (article 86 of New CCL) and (f) Valuation of shares for non-cash consideration Valuation of shares can be assessed in kind either by: as (a) agreement with all of the shareholders, and subject to the approval of the DED; or (b) by a financial consultant approved by DED (article 78 of New CCL). These changes will require one or more amendment to be made to the Memorandum Article of the LLC which have to be completed on or before June 30, 2015. It is suggested that you seek professional advise on the same.
Q: We are a trading company located in Dubai. It has been found that there are discrepancies in the stocks for a large amount. The ERP accounting system which we are using is showing two different values in two reports and our physical count of stock has shown a shortage as well. We suspect a foul play and would like to find out if there has been a fraud in the company and identify the culprits. CG, Dubai
A: There are many reasons as to why frauds occur in an organisation though one primary reason is the loose internal control. It also seems that your company is suffering due to the weak accounting software system. Frauds by their very nature are difficult to detect as they are designed to deceive and hide, many a time it takes long before the same is uncovered. Normally an organisation follows a preset procedure/s to complete a transaction/s where more and one person is involved. Authorisation happens at each level of the procedure. Overriding the procedure, whether by the owners or staff, is a recipe for disaster. Fraud also happens due to collision of parties. To uncover the damage and locate the perpetrators one should investigate the documents trail as one of the tool. Professional forensic auditors also resort to taking interviews and doing the background check on people in the organisation to find if a person is living beyond his/her means. You may need to go to records and accounting system for more than one year. Please bear in mind that this is an historical analysis or postmortem which may or may not locate the problem. The management should have a priority to plug the holes in the internal controls of all aspects of purchase/sales/inventory to ensure that such misgivings do not occur in the future. Investigation is a specialised task and hence you can take advise from a professional. Inventory is one of the major asset for a trading company hence due care should be taken to avoid leakages.
The writer is partner at Crowe Horwath, UAE. You can send your business queries to him at atik.munshi@crowehorwath.ae. Views expressed are his own and do not reflect the newspaper's policy.