New UAE Commercial Companies Law


Overview

The UAE Commercial Companies Law 2021 (Federal Law No. 32 of 2021), effective January 2, 2022, introduced several key reforms to promote foreign investment, improve corporate governance, and align with international best practices.

Here are the main takeaways:

1. 100% Foreign Ownership:

  • The law allows foreign investors to own 100% of businesses in most sectors, eliminating the need for a UAE national sponsor or partner.
2. Governance Enhancements:
  • Enhanced corporate governance requirements for joint-stock companies and limited liability companies (LLCs).
  • EStricter rules for directors, transparency, and shareholder rights.
3. Flexibility in Shareholding Structures:
  • Companies can now issue different classes of shares (e.g., preferred, redeemable, or non-voting shares).
  • Shareholders can negotiate and agree on profit-sharing ratios irrespective of shareholding percentages.
4. Company Formation and Conversion:
  • Simplified procedures for setting up companies and converting them from one form to another (e.g., from an LLC to a joint-stock company).
5. Mergers and Acquisitionsion (MA):
  • Clearer frameworks for MA transactions, including provisions for mergers, consolidations, and spin-offs.
6. Public Joint-Stock Companies (PJSCs):
  • Reduced minimum subscription thresholds for IPOs from 30% to 5%.
  • PJSCs are now required to have at least two founders instead of three.
7. Penalties for Non-Compliance:
  • Strict penalties for companies failing to comply with the law, including administrative fines and possible suspension of business activities.
8. Aligning with International Standards:
  • The law encourages sustainability, innovation, and adherence to global best practices to attract foreign investment and diversify the economy.
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