In December 2020, the UAE government announced Federal Decree-Law No. 26/2020 (the Amendment) amending key provisions of Federal Law No. 2/2015 on Commercial Companies (the CCL).

With this amendment to the law all companies in the UAE will be subject to enhanced corporate governance standards to be issued by the government at a future date and the amendment introduced changes to the process of convening and holding general meetings including:

• Increase in the notice period to 21 days for holding a meeting.
• One or more shareholders holding 10% or more of the share capital may request a general meeting to be called.
• Allowing for meetings to be called and held remotely using available video conference technology.

According to the amendment to the law, existing companies are required to ‘adjust their positions’ by 2nd January 2022 (one year after the Amendment on 2nd January 2021). This will require LLCs to amend their Memorandum of Association (MOA) to bring the relevant changes to the CCL into their MOAs - for example to bring in changes to quorum and notice and meeting requirements into line with the amendment.

We are now seeing practically that UAE Notaries and some government departments are requiring that companies in Dubai and Abu Dhabi update their MOAs to reflect the new CCL points before allowing companies to make any significant changes to corporate structure or licence activities or regulatory approvals. Companies that have not updated their MOAs are being restricted from undertaking UAE Notary processes until the company has updated its MOA. New companies setting up must have an MOA that conforms to the new CCL changes as well.

Under the law companies must renew and update their MOAs at least before 2nd January 2022 to align their provisions with the amendment. Failure to update the MOA by this date is likely to attract penalties and will prevent a company being able to renew their trade licence or undertake changes to the company licence and documentation.

We are therefore recommending that companies look to make the relevant amendments to their MOAs now ahead of licence renewal or any other changes that the company wishes to make.

Summary of changes

Below is a summary of the key changes to general assembly procedures and other notable amendments to the CCL introduced by the Amendment:

• Changes to general assembly procedures
  
  Old CCL - Article 92
  A general assembly may be convened at the request of one or more partners holding at least 25% of the share capital.
  
  New CCL - Article 93
  A general assembly may be convened at the request of one or more partners holding at least 10% of the share capital.
  
  >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
  
  Old CCL - Article 93
  Notice period for calling a general meeting was 15 days.
  
  New CCL - Article 93
  Notice period for calling a general assembly extended to 21 days. A general assembly may now be conducted remotely using available video conference technology.
  
  >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
  
  Old CCL - Article 96
  Quorum at a general assembly shall not be valid unless one or more partners holding at least 75% of the capital of the company are present.
  
  New CCL - Article 96
  Unless the MOA provides for a higher majority, quorum for a general assembly is attendance by partners holding at least 50% of the share capital of the company.
  
  >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
  
• Other changes
  
  CCL Article 6
  This article contemplates that increased Corporate Governance regulations which will apply to all companies, private companies and public joint stock companies.
  
  CCL Article 101
  Previously there was no procedure available to limited liability companies facing financial distress . With the Amendment a shareholder of a limited liability company facing inability to pay its debts may apply to the courts “for an urgent judgement to increase the capital as necessary to save the company or settle the debts”.

Corporate governance requirements

The Amendment introduces adjustments to the procedure for convening and conducting annual meetings, permitting a general meeting to be conducted through modern means of technology; and requiring a 21-day notice period to hold a general meeting that may be requested to be convened by shareholders holding 10 per cent of the share capital.

The immediate effect of these changes is to require companies to review their MOAs and update them before 2nd January 2022 to align their provisions with the amendments.

Next steps and how can PRO Partner Group help?

If you have already updated your Company MOA to include the Amendments to the CCL then please ignore this update.

If you have not yet updated your MOA then we can review your current MOA and undertake the redrafting of the relevant amendments and assist fully in notarising the restatement of the MOA to fall in line with the updates to the CCL.

For further guidance in relation to the MOA amendments please contact your PRO Partner Group relationship manager if you are an existing client.

If you are not yet a PRO Partner Group client and if you need assistance and guidance in relation to amendments to your MOA or any other related company set up, restructuring, local partner or PRO support matter then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, complete the contact form below or email us at info@propartnergroup.com we will be delighted to assist you.