Participants at the Iftar and panel discussion hosted by ICAI Abu Dhabi Chapter
Abu Dhabi — The Institute of Chartered Accountants of India (ICAI) Abu Dhabi Chapter, hosted an Iftar for its members and guests, during which a panel discussion on “UAE Commercial Companies Law and Recent Amendments” took place. The event was held in Abu Dhabi recently.
The panel comprised some eminent panellists and professionals from the business circles of Abu Dhabi, namely, Ibrahim Yousef Mubaydeen, managing partner of the Abu Dhabi office of Allen & Overy; Padmanabha Acharya, partner at Deloitte Middle East, Abu Dhabi office; and T.K. Raman, who currently serves as group chief financial officer of Finance House.
The session was moderated by Manish Bucha, a chartered accountant and currently head of Audit, Risk and Ethics at National Marine Dredging Company.
Rajiv Shah, chairman of the Abu Dhabi Chapter explained that the Commercial Companies Law is a welcome step in the right direction to fuel the corporate growth in UAE.
On March 25, the new Commercial Companies Law (UAE Federal Law No. 2 of 2015) was issued. The New Law was published in the Official Gazette on March 31, 2015, and will come into force from July 1, 2015.
This new law replaces the existing Commercial Companies Law, UAE Federal Law No. 8 of 1984. Companies registered in the UAE under the existing Commercial Companies Law have one year to comply with the new law, failing which the company shall be treated as dissolved.
The panel then discussed some salient important provisions of the new law.
Acharya mentioned that companies — which are exempt from the application of certain provisions of the law pursuant to a resolution by the UAE Cabinet, or are directly or indirectly wholly owned by the federal government, local government, free zone companies operating within free zones, oil and gas companies, power and water companies where government holds at least 25 per cent of the capital — are exempt from the provisions of the new law.
All companies which are exempt from this law need to amend their Articles of Association by listing the provisions of the law from which they are exemption. Companies have a one year grace period to comply with the new law.
T.K. Raman lauded the corporate governance measures relating to liability of directors, protection of minority shareholders, lending to directors, etc. taken under the Law.
Ibrahim Mubaydeen stated that the new naw has introduced a number of much-awaited concepts, such as holding companies, the ability of a company to issue different classes of shares (pursuant to regulations to be issued by the Cabinet); new book-building regulations with respect to the IPO price discovery process; and a “strategic partner” and employee share option schemes concepts to which pre-emption rights on an issue of shares would not apply.
He explained that the new law, however, only introduces these concepts, deferring the detailed provisions required to implement them to regulations which need to be promulgated in the future. It therefore remains to be seen how these concepts will be realised.
The panel also commented on Article 10 of the new law which deals with the ownership structure which requires companies established in the UAE (other than in a free zone) to be at least 51 per cent owned by a UAE national.
It was being anticipated that there would be some relaxation of this rule under the new naw, which did not happen. Further, sub clause three makes any side arrangements to the structure invalid.
The new law, vide article 243 sub clause 2 includes provisions for rotation of auditors in three years for Public Joint Stock Companies. This is expected to be challenging for both the businesses as well as the Auditors.
The event was well attended by dignitaries from Abu Dhabi and over 250 members and guests.
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