The new UAE Commercial Companies Law: Highlights

The much anticipated new UAE Commercial Companies Law (Federal Law No. 2 of 2015) was issued on 1 April 2015 and comes into force three months from the date of its publication in the official gazette. Some of the key themes and changes introduced by the new law are highlighted below.

Major amendments

Corporate governance, shareholder protection and corporate social responsibility are highlights of the stated objectives of the new law, which are set out in article 2. The provisions relating to corporate governance have been significantly enhanced, and with the proposed issuance of further regulations by the Ministry of Economy and by the Emirates Securities and Commodities Authority (ESCA).

The role, responsibilities and liability of management have been strengthened and increased oversight functions are granted to concerned authorities. Minority shareholders holding at least 5% of a company’s equity have been granted the right to apply to ESCA for relief if they believe the company is being managed to the detriment of any shareholder, which is a potentially significant new shareholder protection.

Some of the most significant amendments relate to public companies and capital markets. The minimum free float permitted in an initial public offering has been reduced from 55% to 30%. The share price can now be determined by way of a book building process and shares can be issued at a premium. These steps will make it far more attractive for businesses to tap the local bourses for capital, as they can retain control and are less likely to end up leaving money on the table.

James Bowden is a partner at Afridi & Angell, a UAE-based law firm with offices in Abu Dhabi, Dubai, the Dubai International Financial Centre and Sharjah.