Category: Corporate And Commercial Law

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New UAE Commercial Companies Law: 100% Foreign Ownership in LLC Mainland Companies

New UAE Commercial Companies Law: Which companies can claim 100% foreign ownership?

On 1st June 2021, amendments to Federal Law No. (2) of 2015 on Commercial Companies came into effect to allow 100% foreign ownership in LLC mainland companies in the UAE. Until recently, foreign investors could own a maximum of 49% of shares in such companies leaving 51% shareholding for an UAE national. Or, if speaking of a branch of a foreign company, it was prerequisite to have a local service agent to be named in the license.

The amendments were initially introduced by Federal Law by Decree No. (19) of 2018 on Foreign Direct Investment (FDI). This is in line with the UAE Cabinet initiative to loosen restrictions in certain economic sectors thus making it more attractive for foreign investors to run their business in the UAE mainland market, including global startups, and enhancing the positions of the UAE as a leading Middle East economy.

No requirement for nationality is now in place for establishing a company with the 100% foreign ownership. The Law states that “a foreign investor is considered a natural or corporate person who does not hold the nationality of the State (the UAE) and who invests in the State in accordance with the provisions of this Law by Decree”. Such persons will then be eligible for a renewable three years investor or partner visa.

The aim of these changes is to promote and develop the investment environment and promote attracting foreign direct investment in line with the developmental policies of the UAE. In particular:

  • Asserting the position of the State as a major attraction hub for foreign direct investment both regionally and globally.
  • Attracting and encouraging foreign direct investment.
  • Expanding the production base, diversifying it, and transferring and attracting advanced technology, knowledge and training.
  • Increasing the flow of foreign direct investment in the priority sectors to achieve balanced and sustainable development and create job opportunities in various fields.
  • Achieving the best return with the available resources and securing high added values for the State’s economy.

The new regulations are to relax restrictions for companies engaged in one of the 122 business activities which are on the Positive list fixed in Cabinet Resolution No. 16 of 2020 on the Determination of the Positive List of Economic Sectors and Activities Eligible for Foreign Direct Investment and Percentage of their Ownership (enclosed at the end of this article). Activities on the Positive list fall under the following sectors:

  • agricultural sector;
  • manufacturing sector;
  • services sector;

and include such activities as administrative and support services, agriculture, art and entertainment, construction, educational activities, healthcare, hospitality and food services, information and communication, manufacturing, professional, scientific and technical activities, renewable energy, space, transport and storage, etc.

In addition to establishing a comprehensive Positive list, the Resolution sets forth the licensing criteria for commercial companies falling under the FDI law, including the amount of minimum share capital for each activity – varies from AED 2 to 100 mln, minimum percentage of Nationals employed by such a company, the use of modern technology, contribution to R&D, bringing high added-value, and some other conditions for specific business activities.

There are certain exemptions to the 100% foreign ownership rule. Companies carrying out activities of a “strategic impact” will continue to be subject to foreign ownership restrictions. The following activities have already been listed in the Federal Law on Foreign Direct Investment and are on the Negative list:

  • Exploration and production of petroleum materials.
  • Investigations, security, military sectors, manufacturing of arms, explosives and military equipment, devices and clothing.
  • Banking and financing activities, payment systems and dealing with cash.
  • Insurance services.
  • Hajj (pilgrimage) and Umrah services, providing employment and recruitment services for staff and servants.
  • Water and electricity services.
  • Services related to fisheries.
  • Postal services, telecommunications services and audio and video services.
  • Land and air transport services.
  • Printing and publishing services.
  • Commercial agents’ services.
  • Medical retail such as private pharmacies.
  • Blood banks, venom and quarantine centres.

The Council of Ministers is eligible to add or remove activities from this list.

Also, a resolution is to be issued to specify the procedures for registering and renewing the registration of foreign investment companies in a special register at the Investment Unit called “Register of Foreign Direct Investment”.

The introduction of the law on 100% foreign ownership can affect already existing LLC companies with local shareholding which may desire to reconsider their ownership structure. To do so such companies can sell the shares belonging to an UAE national to a foreign national and thus become a 100% owner of the company. Certain charter documents will need to be amended (Memorandums of Association) accordingly. Companies planning to make respective rearrangements can do so by 2 January 2022.

Among other notable changes are:

  • introduction of mandatory corporate governance rules for all companies in the UAE (expected in the near future);
  • general shareholders meetings can now be held with the use of modern technology and be presided by foreign nationals as well as Emirati;
  • a general meeting can be called upon the request of one or more shareholders holding a minimum of 10% of the share capital;
  • the notice period for holding a general meeting has been increased to 21 days;
  • the amount of shares allowed to be sold via IPO has been increased to 70% (as opposed to 30%);
  • the shareholders have been given the right to sue a company in civil court in the event of any failure of duty by its directors that resulted in loss of money or damage;
  • expatriates can now be on the board of directors of joint stock companies;
  • and the authority to recognize required capitalization, shareholding percentages, approve the establishment of an onshore company is now with the local government institutions.

All the novelties introduced both by Foreign Direct Investment Law and the Cabinet Resolution introducing the Positive list are likely to even further open both the UAE mainland market and stock market to foreign investors and international companies, at the same time making UAE business more transparent and attractive for listing by means of introducing proper unified corporate governance standards.

You can view or download the Foreign Ownership Activities (FOA) PDF List by clicking this link: Foreign Ownership Activities (FOA)

 

Company Restructuring Law in Dubai UAE

RESTRUCTURING PROCESS IN UAE

CORPORATE RESTRUCTURING PROCESS IN UAE | LEGAL GUIDE

Corporate restructuring in the event of bankruptcy or liquidation is a legal means resorted to by companies to significantly modify the operational aspects of the company. This could include financial, technical or organizational changes aimed to correct any operational issues that could led to company’s distressed. Restructuring process is complex process and solutions must be thoroughly tailored enlisting appropriate guidelines to ensure that specific needs and objectives of the company are addressed fully.

UAE Federal Law governing bankruptcy, restructuring and insolvency are embodied primarily under the following legal framework and legislations:
• Federal Law No. 18 of 1993 (the “Commercial Code”)
• Federal Law No. 2 of 2015 (the “Companies Law”)
• Federal Law No. 5 of 1985 (the “Civil Code”)
• Federal Law No. 3 of 1987 (the “Penal Code”)
• Federal Law No. 11 of 1992 (the “Civil Procedures Law”)
• Federal Law No. 10 of 1980 (related provisions concerning bank liquidation and other financial institutions)

Corporate restructuring process often resorted to could be:

BANKRUPTCY PROCEEDING

• Filing of bankruptcy before the court
• Court will appoint expert to determine the veracity of the petition filed
• If the court is satisfied that bankruptcy is an appropriate measure, then the court will adjudicate an order and appoint a trustee to administer the proceeding
• Bankruptcy order will be made available to the Ministry of Economic and relevant Commercial Register and UAE Central Bank
• Bankruptcy adjudication summary will be published is daily newspapers as specified by the court, this must include invitation to the company creditors to have their debts recorded in the bankruptcy and creditors must subsequently submit a statement setting out their claims against the petitioner.
• Trustee will then deposit with the court a document listing all the company’s creditors and their claims including the securities held against those claims
• The court will then issue statement setting forth the claims of creditors which have been accepted and the court rules on objections.

LIQUIDATION PROCEEDING (WINDING-UP OF THE BUSINESS)

Under UAE Law, liquidation and dissolution of company is a process of bringing a business to an end. This is a tedious process as this involves liquidating the shares and assets, collecting debts and paying the creditors’ or discharging liabilities towards creditors. A Company may be dissolved on any of the following grounds:
• Depletion of company’s assets which renders the remaining assets of the company unbeneficial
• Expiry of the term of the company as specified in its constitutional documents
• Fulfillment of the company’s objectives as stated in its memorandum of association
• Amalgamation of the company
• Shareholders decision as set out in the company’s memorandum of association

Initial step in liquidation proceeding must be initiated by publicly declaring it through registration in the Commercial Register and publication in two local daily Arabic newspapers.

Subsequently, a liquidator will be appointment (could be by shareholder’s decision or by court order) primarily to ascertain the company’s assets and liabilities. This will in effect vest all the company’s board power in the liquidator, this includes the ability to commence or defend legal claims and to take steps necessary for the protection and preservation of the company’s assets.

Liquidator will notify all known creditors to submit their claims and for unknown creditors, notice will be made by publication in two local daily Arabic newspapers. Creditors are given 45 days from notice to present a claim or any debt disputed.

Company assets will be liquidated accordingly (payment of creditors / shares distribution to shareholders ratably. Final account will be submitted by the liquidator and upon ratification of the shareholders, liquidation will cease and will be noted on the Commercial Register. The company will then be struck off the Commercial Register.

AL REYAMI ADVOCATES ARE DEDICATED PROFESSIONALS WHERE YOU CAN GET IN TOUCH WITH FOR INITIAL CONSULTATION. WE CAN GUIDE YOU THROUGH ALL STEPS AND PROVIDE YOU UTMOST LEGAL ASSISTANCE THROUGHOUT THE PROCESS.

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new financial law in dubai uae

NEW FINANCIAL LAW IN UAE

NEW FINANCIAL LAW IN UAE CAN AID INDIVIDUALS FACING FINANCIAL DIFFICULTIES 

Financial crisis spurred host of efforts in UAE Cabinet to re-engineer their bankruptcy law regimes and approved a federal law as a legal mechanism to regulate cases of insolvency and/or aimed to resolve debt relief cases for individuals or natural person in UAE.

 

The newly pioneered Federal Decree-Law aims to strengthen UAE’s financial and economic stability by building a legislative and legal system primarily focused to increase transparency in civil debts and bolster financial security. This law guarantees the protection of debtor’s propriety and helps to devise an opportunity for them to cope with their finances and lessens their financial distress. More to say, this legal framework helps individuals repay their debts and guarantee that financial institutions receive their financial dues through transparent mechanism.

 

WHAT DOES THE INSOLVENCY LAW OFFERS?

The following are the main facets of the law:

  • Aids individuals who faces current or anticipated financial difficulties that makes them unable to fulfil their financial obligations and pay their debts.
  • Enables insolvent individuals to reschedule their debts and be granted new concessional loans.
  • Decriminalize financial obligations on insolvent individuals and protect debtors from legal prosecution.

 

This law provides two main avenue and procedures to insolvent individuals:

  • EXPERT ASSISTANCE: Insolvent person are given leeway to seek court assistance to settle debts. One or more experts will be appointed by the court, and these experts will coordinate with the debtor and creditor assisting them to advocate a financial settlement plan beneficial to both parties.

 

However, the court can terminate or reject a request made by the debtor under the following circumstances:

  • Insolvent individual tried to conceal any part of his assets;
  • Insolvent individual submitted false / fabricated statements concerning his assets, rights and liabilities; or
  • Insolvent individual failed to settle a due debt for a period of more than fifty business consecutive days.

 

  • LIQUIDATION PROCEEDING: In the event the insolvent individual is unable to pay his debts for an extended period of time, he then can resort to these process which is done by a trustee appointed by the court. However, this proceeding will impose restrictions on debtors use of his/her money and assets and will apply further restrictions in regard to entering into new obligations or obtaining new loans during the process.

Notwithstanding the above, the insolvent individual shall restore all his rights at any point in time in the event that he was able to conclude a settlement with his creditors and complies to its execution, or if the insolvent individual was able to establish that he has been discharge from debts to all his creditors.

ARE YOU LOOKING FOR LEGAL ASSISTANCE?

The Office of Al Reyami Advocates & Muhyealdeen can provide you legal advice and assistance through its dedicated team of experts in the light of the new Insolvency Law.

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business lawyer in dubai

Legal Support for Your Business

Knowing The Legal Requirements When Starting a Business in Dubai UAE.

When it comes to setting up a business or owning one, seeking legal support is essential. Running a business has its reasonable share of strains and endeavors. On occasion, the law is impending. Getting a legal assistance at these times are critical to a business’ success. It allows you to explicitly seek legal advice, and letting you operate your business effectively. This ensures that your business is compliant with the relevant laws and legal obligations that apply to overseeing it legitimately and ethically. If you have decided to open up a business in Dubai, you will stumble upon copious lawyers and law firms accessible for your company. In choosing a legal support, one should ensure that it has a comprehensive experience tailored to your business industry. There are many factors to consider in hiring legal services or lawyers. Good communication skills are keys to the efficacy of a lawyer. An effective verbal conveyance, good listening skills and a sound counsel is as imperative to understanding. For start-up businesses, its best recommended to appoint a law firm that can accommodate your budget yet is professional. There are legal solicitors who render consultation free of charge. They should have a clear understanding of your business commerce and provide a logical explanation while dealing with your case.

It’s a challenging task to find the best law firm for your business. Many law firms in the U.A.E. are working for different legal issues according to their forte.  You can search for law firms in Dubai on the internet through the Directory of advocates and legal consultants or bar associations. These are the best places to look in the business lawyers in Dubai and the law firms who are updated with the laws and work efficiently. You often perceive these commendable law firms on advertisements in the newspapers or the social media platforms. If someone recommends you the legal services, make sure to pay a visit to those law firms. The reputation of a law firm is categorically important for any business. It should provide you with proficient legal consultation and satisfactory outcomes. A good law firm is comprised with capable lawyers with an expertise to manage legal matters accordingly. They should be offering excellent and coherent solutions to their clients. There are some cases that don’t require a lawsuit but can be managed out of the court.

A law firm has an ethical infrastructure of legal practice and should know the business moral codes. In Dubai, client and case confidentiality is a key tenet of any law firm. The duty of confidentiality fosters trust between lawyers and clients. Lawyers will aim to protect every information shared by the client. The duty of confidentiality is an obligation which every lawyer must adhere to. In fulfillment of the customer, law firms should have legal solicitors who are orally articulate, have good written communication skills and be good listeners. They must be able to explain the case in English and Arabic. English is an international language but the local language of government institutions and court is Arabic, so attorneys must be fluent in both languages. The lawyers should be reachable 24/7 to the clients who have profound legal cases.

For Free Legal Consultation, Call Us Today!

loan agreement

Are interest provisions in a loan agreement valid in the Arab Region?

Business Lawyers in Dubai – Drafting Loan Agreements

The topics regarding loan interest rates and usury in relation to lending activities in the Middle East Region are in themselves a slippery slope area and must be approached with the necessary caution. Given this delicate issue, one would question: are interests on loans illegal in the Arab Region.

To answer the question, it is best to understand first the belief behind the subject. According to Islamic teachings, interest and usury are based on the concept of “riba”, which literally means “excess or addition”, and the same is outlawed under the Sharia Law as grounded on the principle that profiting from lending money is considered “haram” or forbidden.

In today’s modern society, the prohibition against interest is generally applied to loans between individuals.

On the other hand, lending activities between two companies or between a corporate entity and an individual may not be included in the ambit of the prohibition.

Under UAE Law, the civil courts shall be the final arbiter of controversies regarding the validity or invalidity of interest clauses in a loan agreement. This goes without saying that any creditor may institute a case to collect on a loan agreement but it is within the discretionary powers of the court to accept these provisions relating to interest, surcharges, and penalties.

Noteworthy as well is the fact that a specific UAE Law deals with the obligation to pay interest and penalties. Under UAE Federal Law No. (18) of 1993 or the Commercial Transactions Law: it is stated under “Art. 76: A creditor is entitled to receive interest on a commercial loan as per the rate of interest stipulated in the contract. If such rate is not stated in the contract, it shall be calculated according to the rate of interest currently in the market at the time of dealing, provided that it shall not exceed 12% until full settlement.” and “Art. 88: Where the commercial obligation is a sum of money which was known when the obligation arose and the debtor delays payment thereof, he shall be bound to pay to the creditors as compensation for the delay, the interest fixed in Articles (76) and (77), unless otherwise agreed.”

Given these particular provisions that explicitly provide legal bases for the collection of interest and surcharges, a creditor is assured that he is protected under relevant legislation.

liability manager

Limited Liability Manager in a UAE Company

Liability of Managers and Directors in an LLC Company in Dubai UAE

The formation of a Limited Liability Company in UAE is the widely used and adapted method by expat as it gives them ownership of 49% in a local business partnership.

The manger in a limited liability company can be appointed for a specified length of time or for an unlimited time. The appointment is to be made and governed under a memorandum of association (although at times can also be determined via a side bar agreement).

A general manger has the authority to take any action or decision in the best interest of the company. If it is stated in the memorandum of association that the manager cannot be removed then the only way to apply for his dismissal is to hold a vote with the shareholders to do so. It is important to note that the manager will still be held responsible and liable for his actions as the GM even after his or her removal.

In the event a third or external party files a complaint or case regarding any illegal or fraud the general manager can be held liable in his personal capacity.

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corporate lawyers in dubai

The importance of Hiring a Corporate Business Lawyer

Hiring a Corporate Lawyer in Dubai | Hire Business Lawyer in Dubai UAE

As the owner of your own business, you will at some point require a lawyer to assist with any number of legal issues from company documentation and contracts through recovery of unpaid invoices to handling labour disputes. In an ever-changing legal environment, particularly in the UAE where the pace of growth is prolific, legal complications can crop up at any time and having the right Corporate Lawyer at your disposal can be invaluable.

How can a corporate lawyer help you?

1- Protect your legal interests
2- Labor issues
3- Partnership disputes
4- Financial help (banking issues and unpaid invoices)
5- Facilitate mergers & acquisitions
6- Preparation of legally sound contracts to protect you and your clients interests and intentions.

Corporate Lawyer Assistance – What are the benefits?

1- Due to the complexity of the laws, it is difficult for a businessman to follow and understand let alone doing so at the same time as running a business. Your corporate lawyer can remove this burden allowing you to focus on what you do best.
2- The frequent changes in law make it tricky for a business person to keep track and can be caught out unknowingly. A good Corporate Lawyer will be up to date with these changes and advise you how and when to adapt.
3- A lawyer may perform a dual role by acting as a legal advisor and legal counsel to the firm at the same time.
4- You can conduct your business safe in the comfort that the legal processes binding your contracts and agreements are effective.

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