Private sector companies in the UAE are required to amend their memorandum and articles of association (AoA) within a period of one year from the implementation of the regulation to avoid violations, says an expert.
In a business breakfast seminar held by MBG Corporate Services, Sakina Dickenwala, Associate Partner at MBG, spoke to Khaleej Times about the impact of the 100 per cent foreign ownership on UAE businesses and said the businesses should comply with latest regulations issued by the government.
“Impact analysis is something we emphasise on. What will be the impact on the business in the conversion process? Companies are engaged in several activities — DED may be involved in one case, but there are other authorities also involved. Supreme Petroleum Council may be involved and that authority is currently not giving approvals to foreign nationals to own the company 100 per cent and thus you will need to keep a local in the company. These things need to be checked,” Dickenwala said.
She said there could be other examples also. “There could be cases where companies are owning the assets in terms of non-freehold properties which have only been acquired through the profile of a local, as per the local land regulations. As per the conversion, what happens to the asset, do they need to sell it off or if they have any loan facilities, what will happen to those facilities if the local goes away from the company? These things need to be thoroughly checked,” she said. Various individuals from the business fraternity attended insightful talks about the future prospects of their businesses as companies may now move to 100 per cent foreign ownership in the UAE.
Update mandates, articles of association
Over a period of years, Dickenwala said companies and individuals have also developed a good relationship with the local. “So a conversion also impacts that and companies also ask this question how this would pan out. This also needs to be analysed. They can set up a new company or acquire a majority stake in the company rather than removing the local from the company. It really depends on case-to-case basis,” she said.
She also spoke about how the companies are now required to change their mandates and articles of association as well. “There are some mandates in the regulation,” said Dickenwala.
“All the companies are required to amend their memorandum and articles of association within a period of one year from the implementation of the regulation. And that needs to be done by the company, whether they are going ahead with the conversion. All companies are required to amend the MoU within one year with some of the provisions of attending and conducting meetings. With Covid, they have the facility of conducting meetings virtually. These provisions need to be reflected in the constitutional document. Dispute resolution and mechanism between partners has been now devised and these need to be included in the memorandum and all companies are required to comply with this.”
While there are many companies who have converted their licences, some are still considering. “There are some considerations from the government authorities point of view,” Dickenwala stated.
“If they are bidding in a project, will they be given priority as compared to a company that would have a local as a partner, say in getting visas or quotas. These questions remain questions but we will come to see their answers in a period of time. Authorities will be cooperative, it is hoped, because this law has been passed after a lot of discussions and without a lot of restrictions. The locals are also responding positively because for some dormant partners it was not convenient for them to continue but they would due to having a good relationship with other partners. There were times when the local partners would want to restrict their liabilities also. We have seen cases where foreign partner has gone away and whatever the liabilities are there fall upon the local partner.” There was also a presentation on ICV (In-Country Value) as MBG is an approved certifying partner for the Unified ICV programme.
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