Dh2,000 fine if a company fails to amend its MoA, AoA

Such fine shall be calculated from the day following the expiry date of the applicable period for such purpose.

Q: My LLC company is in the process of changing the MoA to be compliant with new Commercial Company Law though I have noticed that most of my other customers and suppliers who also are an LLC have not acted so far. I have been informed the new company law also has some restrictions on sister companies. Kindly throw some light on the same. FF, Dubai
A: It is good to learn that you are already in the process of being compliant with the new Commercial Companies Law of 2015 (CCL), trust the necessary amendments have been carried out to the MoA of your LLC. Existing companies (whether LLC or otherwise) should be complaint with the new CCL no later than June 30, 2016 failing which the company shall be deemed to be dissolved.
Article 357 states that a fine of Dh2,000 (two thousand) per day of delay shall be imposed on any company that fails to amend its Memorandum of Association (MoA) and Articles of Association (AoA) to be compliant with the provisions of this law. Such fine shall be calculated from the day following the expiry date of the applicable period for such purpose. Despite of this stringent requirement of the law, it is surprising that there is an uncanny lack of awareness on behalf of the company management for such change; there is hardly a two-week gap to the deadline yet companies are being lax in the implementation.
It is very common for the UAE local companies to deal with the related parties and sister companies. Most of such transactions are not at arm's length and the management decides the terms mutually. The new CCL has also laid down matters with respect to the transactions with related parties. Article 50 - The manager may not conclude any contracts for his own behalf (benefit) or on behalf (benefit) of his relatives up to the second degree (A second degree relative of an individual is an uncle, aunt, nephew, niece, grandparent, grandchild or half-sibling of the individual) with the company without written permission from ALL the partners to be given for each case separately. These would mean that the such transactions will need approval from all shareholders including the local partner/s.
Q: We shall be witnessing the advent of the VAT from the beginning of 2018 as per the information available to me. As a trading company what do we need to plan and what are resources we will need? HG, Dubai.
A: The UAE government has announced the introduction of Value Added Tax with effect from January 1, 2018. UAE will be one of the more than 150 countries around the world which have VAT under their tax regime. Barring a few items like 100 type of food products, healthcare, bicycles, education and some social services, all others will be under the purview of VAT. Organization will have to register themselves for the VAT. Though a final declaration of the percentage of VAT is yet to be received from the government, it is most likely to be five per cent. All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date.
Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case the authorities need to establish whether they should be registered. VAT-registered businesses generally must charge VAT on taxable goods or services they supply; may reclaim any VAT they've paid on business-related goods or services; keep a range of business records which will allow the government to check and verify.
In order to maintain these, it will be required that you company systems are aligned to VAT, most software's will need a modification to incorporate such VAT. Recording of amounts collected and amounts paid for VAT with proper support is the key, such will entail more resources to be employed. Though you have around 18 months to be ready, considering the amount of work involved it is advisable that necessary preparations are started immediately. Assessment of impact for your line of business, implementation plan, estimate of costs of implementation, allocation of resources and finally monitoring of legislative developments are aspects which you have to be prepared for. Clarifications on VAT are expected from the authorities in this summer.
- The writer is partner at Crowe Horwath, UAE. You can send your business queries to him at atik.munshi@crowehorwath