Wednesday, 3 June, 2015

The new UAE Commercial Companies Law No.2 of 2015

The new UAE Commercial Companies Law No. 2 of 2015 ('New CCL') is expected to enter into force on 30 June 2015. There is a one-year grace period for companies to adjust to the new law. Any company that has not made the required changes to its memorandum by 1 July 2016 will be deemed to be dissolved.

Below is a summary of the key changes applicable to most companies:

  • Unlike the existing CCL, the New CCL invalidates any transfer of title to any share of a partner which may affect the minimum UAE national holding of 51%. Though many were hoping for an abolition or reduction of the existing minimum national participation applicable to UAE mainland entities, this was rejected.
  • The New CCL allows sole shareholder companies. This means that an LLC can be owned by one corporate entity or one individual. 
  • The existing CCL does not cover Free Zone companies. The New CCL will deal with Free Zone companies so long as these companies can operate outside of the Free Zones. A resolution will be issued by the UAE Federal Cabinet to determine the conditions for Free Zone companies to operate outside of the Free Zone.
  • Investment funds are not recognised in the existing CCL, but in the New CCL investment funds have their own legal personality, legal form and financial position.
  • The New CCL treats as void any provision in a company’s memorandum which authorises a company to exempt an officer from personal liability. 
  • The New CCL has more accounting requirements than the existing CCL. International standards have to be adhered to and companies must provide a clear and accurate view of their profit and losses. A fine of up to AED 100,000 will be levied if the company does not keep proper accounting records.
  • The New CCL has increased the penalties for existing offences and personal liability for directors.
  • The New CCL deals with mergers in more detail.

The 51% local shareholding requirement for so-called UAE mainland companies remains in place. A positive change is that Free Zone companies (which do not need any local shareholders) may apply for a licence to carry out activities in mainland UAE or in other Free Zones. However, this will only be possible subject to the terms and conditions set out by the Council of Ministers.

We advise our clients involved with mainland UAE entities subject to the existing CCL to contact their lawyers to make sure their memorandum complies with the New CCL by 1 July 2016. 



Head of Middle East Desk,
+31 88 560 9950