A Brief

To commemorate the UAE's 50th anniversary, the government has enacted a series of critical legislative amendments to consolidate the country's status as worldwide trade and economic centre. The issuing of Federal Law by Decree No. 32 of 2021 on Commercial Companies ("New Law", which took effect on January 2, 2022, is one of these revisions. This notice serves to remind all UAE-based businesses to make the required modifications to comply with the New Law's essential provisions within one year (subject to any additional extensions) beginning January 2, 2022. Companies that do not comply may be deemed dissolved.
Federal Law No. 2 of 2015 (the "Old Law" is repealed and replaced by the New Law, which was updated in 2020 by Decree No. 26 of 2020 (the "2020 Amendment". The 2020 Amendment aimed to improve the regulation of Public Joint Stock Corporations ("PJSCs" while also enabling foreign direct investment.

Highlights of New Amendments

1. The Special Purpose Acquisition Company (SPAC) and the Special Purpose Vehicle (SPV) are introduced
● The Special Purpose Acquisition Company (SPAC)
The SPAC is a PJSC recognized by the UAE Securities and Commodities Authority ("SCA" as a special purpose acquisition company with the sole aim of purchasing or merging with another firm. SPACs are excluded from the New Law and governed by the SCA's rules.
The SPAC was introduced in tandem with regulations about the split of JSCs, to provide more flexibility to public offers, spin-offs, mergers, and demergers.



● Special Purpose Vehicle (SPV)
Additionally, the CCL 2021 recognizes a Special Purpose Vehicle (SPV), which is defined as a corporation formed for ring-fencing liabilities and assets associated with a specific financing arrangement. Financing may be accomplished via credit transactions, borrowing, securitization, and the issuing of bonds, as well as the risk transfer connected with insurance, reinsurance, and derivative activities in compliance with the SCA's laws in this area.
SPVs and SPACs will continue to be governed under the CCL 2021 until the SCA establishes rules controlling their activities.

2. Notifying Creditors of the Intention to Liquidate:
CCL 2020 stipulated a minimum notice time of 45 days for creditor claims against a corporation in liquidation. This term has been decreased to no less than 30 days by CCL 2021.

3. Minor revisions to the laws relating to limited liability companies
• Expiration of Board of Manager tenure
Suppose the Board of Managers term expires without a new Board of Managers being appointed. In that case, the existing Board will continue to manage the LLC for six months, after which the LLC must select a new board. If not, the Department of Economic Development (DED) can appoint aboard for a period of one year, after which the LLC must appoint a new Board of Managers. As a result, the DED's appointment of the Board of Managers is an interim measure that will be formalized if the LLC fails to nominate its Board.
● Formation of a Supervisory Board
CCL 2020 mandated that LLCs with more than seven (7) shareholders form a Supervisory Board. The number of shareholders necessary to participate in CCL 2021 has been raised to fifteen (15). Directors of a limited liability company (LLC) are required to serve on a supervisory board composed of three or more shareholders elected by their fellow members to serve for a three-year term and report to the General Assembly on their activities and findings.

● Reduction in the Legal Reserve
The CCL 2021 reduced the amount of legal reserve that may be allocated from 10% to 5%, and, as required by the CCL 2020, the CCL 2021 stated that shareholders might cease this allocation if the legal reserve exceeds 50% of the share capital.

Significant revisions to PJSCs
● Subscription to PJSC shares
Specific rules governing subscriptions to PJSC shares have been changed, and a separate notice will be published on this subject. However, it is critical to underline one significant factor about the number of shares that founders may subscribe to. The original provision requiring founders of a PJSC to subscribe to a minimum of 30% and a maximum of 70% of the PJSC's issued share capital has been revised to require founders to subscribe to a proportion indicated in the prospectus in line with SCA standards.

● Vacancy for the position of Director
The CCL 2021 states that if a directorship becomes vacant, the Board of Directors (Board) must appoint a replacement within 30 days, provided that such appointment is submitted to the General Assembly in its first meeting for approval or to nominate another individual. The newly appointed Director shall hold the remainder of the predecessor's term. Suppose the Board fails to appoint a director within the time allotted. In that case, the Board must conduct an election to choose a new director at the first meeting of the General Assembly, and the newly chosen Director will serve for the remainder of the predecessor's tenure.

● Board of Directors' Remuneration
The CCL 2021 allows directors to be paid a bonus of up to 10% of the company's earnings. A director may be given a lump-sum yearly pay of not more than AED 200,000, even if the firm does not produce any profits, provided (a) the PJSC's Articles of Association allow it and (b) the General Assembly authorizes it.

● Meeting of the General Assembly
The CCL 2021 provides that invitations to General Assembly meetings must subsequently be sent in conformity with the SCA's rules and procedures and approved by the SCA. Unless shareholders owning no less than 95 per cent of the company's share capital authorize a time shorter than 21 days before convening the General Assembly meeting, the invitation for the meeting must be publicized 21 days before the date of the meeting.

To chat with us about the new Commercial Companies Law and its consequences for your company or any corporate and commercial matters in general, don't hesitate to get in touch with one of the attorneys at Notary Public Dubai
.