Abu dhabi: The UAE government has issued a Federal Decree-Law amending certain provisions of the Law on Commercial Companies. This legislative change is designed to enhance the competitiveness of the business environment in the UAE and align with global economic developments.
According to Emirates News Agency, the amendment aims to evolve the legal framework for companies in the UAE, offering broader options for investors and stakeholders while modernizing ownership and financing legislation. This initiative is expected to bolster the UAE’s standing as a prime investment destination.
A noteworthy introduction in the Decree-Law is the concept of a non-profit company. These companies are mandated to reinvest their net profits to fulfill their stated purposes, without distributing profits to partners or shareholders. This facilitates operations within the social and developmental sectors under a flexible and transparent institutional framework.
The Decree-Law has also introduced advanced capital structure options, which include multiple categories of shares and stakes. These options encompass rights such as voting, profit distribution, and priority in redemption and liquidation, as specified in the articles of incorporation or bylaws. This is seen as a significant advancement in corporate governance, promoting private capital investment.
In terms of financing, the Decree-Law allows private joint-stock companies to offer securities for private subscription on national financial markets, subject to regulations by competent authorities. This provides a new financing avenue for companies without necessitating their conversion into public joint-stock firms.
Additionally, the Decree-Law regulates the movement and registration changes of companies between the seven emirates and financial free zones, while retaining their legal personality. This measure establishes clear requirements and procedures, thereby enhancing business mobility, expanding economic activities, reducing commercial disputes, and safeguarding minority shareholders’ rights.
The Decree-Law incorporates modern contractual mechanisms for managing shares and stocks, including tag-along and drag-along transactions. It also addresses procedures for the disposition of shares in the event of a partner’s or shareholder’s death, thus promoting company stability and continuity.
Further, the Decree-Law emphasizes standards for valuing in-kind shares and accrediting appraisers under strict controls to ensure transparency and fairness, protecting the rights of partners and investors in capital.
This legislative development is a strategic milestone in the UAE’s ongoing efforts to modernize business legislation, providing a flexible and robust legal environment conducive to innovation and investment, and enhancing the national economy’s competitiveness on a regional and global scale.