Commercial Companies Law

Article (1) Definitions

Part One: General Provisions on Companies · Chapter One: The Concept of Company

For the purpose of applying the provisions of this Decree Law, the following words and expressions shall denote the meanings assigned thereto respectively, unless the context requires otherwise: The State: the Unites Arab Emirates. Federal Government: The Government of the United Arab Emirates. Local Government: Any of the governments of the member Emirates of the Federation. The Ministry: Ministry of Economy. The Minister: Minister of Economy. Central Bank: The Central Bank of the United Arab Emirates. SCA: The Securities & Commodities Authority. Competent Authority: the local authority concerned with the Company affairs in the relevant Emirate. Company: The Commercial Company. Special Purpose Acquisition Company [SPAC]: A public joint stock company, which the SCA has approved to classify as a Special Purpose Acquisition Company with no other purposes, in accordance with the SCA's relevant decision. Special Purpose Vehicle [SPV]: A company incorporated with the aim of segregating the liabilities and assets associated with a particular financing transaction from the liabilities and assets of its founding person, and is used for the transactions involving credit, borrowing, securitization, bond issuance and transfer of risks associated with insurance, reinsurance and derivatives transactions in accordance with the provisions of the decision of the SCA regulating such activities. Governance: A set of controls, standards and procedures that aim to achieve corporate discipline for the management of the Company in accordance with the international standards and practices, through determining the duties and responsibilities of the Directors and the Executive Management of the Company, while ensuring that the interests of shareholders and stakeholders are safeguarded. Business Day: the official business days of the ministries, government authorities and local departments. Special Resolution: A resolution issued by a majority of shareholders holding at least 75% of the shares represented at the General Assembly of a joint stock company. Registrar: The companies registrar appointed by the Minister, and who performs his duties through the Companies Department of the Ministry. Markets: Securities and commodities markets licensed by the SCA to operate in the State. Securities: The shares issued by joint stock companies; Derivatives and investment units approved by the SCA; Bonds, Sukuk and bills issued by the Federal Government, local governments or public authorities or institutions in the State; Bonds, Sukuk and any debt instruments issued by companies in accordance with the regulations to be issued by the SCA; and Any other local or foreign securities acceptable to the Central Bank and the SCA. Public Offering: The process of inviting any natural or legal person or a particular segment or segments of persons to purchase any Securities. Book Building: The process by which the price of a security is determined upon issuance or sale on a Public Offering, in accordance with the provisions of the resolution to be issued by the SCA in this respect. Strategic Partner: A partner whose contribution to the Company provides technical, operational or marketing support that is beneficial to the Company. Share Register: A register that shows the shares held by shareholders in the joint stock companies and the rights associated with such shares. Share Register Secretariat: An entity or entities licensed by the SCA to regulate the Share Register of private joint stock companies. Director: Any member of the board of directors of the Company, including the chairman.

Article (2) Objectives of the Decree Law

Part One: General Provisions on Companies · Chapter One: The Concept of Company

This Decree Law aims to contribute to the development of the business environment and the capacities of the State and its economic standing by way of regulating the companies in accordance with the global variables, especially those related to the regulation of governance rules, the protection of the interests of shareholders and partners, boosting foreign investment flow and the promotion of corporate social responsibility.

Article (3) Companies Subject to the Provisions of this Decree by Law

Part One: General Provisions on Companies · Chapter One: The Concept of Company

The provisions of this Decree by Law and the rules, regulations, and resolutions issued in implementation thereof shall apply to the following: 1. Companies that are established in the State. 2. Foreign companies that conduct their activities in the State or have their head office, branches, and representative offices therein, subject to the provisions of Section Nine of this Decree by Law. 3. Branches or representative offices of companies established in free zones and financial free zones, in case they conduct their activities outside the zone's boundaries and within the State.

Article (4) Companies Not Governed by the Provisions of this Decree Law

Part One: General Provisions on Companies · Chapter One: The Concept of Company

1. Except for registration and renewal of registration in the register of exempted companies kept at the Ministry, the SCA and the Competent Authority, within their respective areas of competence, the provisions of this Decree Law shall not apply to the following: a. The companies exempted under a Cabinet resolution, in respect of anything for which a special provision to that effect is contained in the company's Memorandum or Articles of Association, according to the controls to be issued under a Cabinet resolution. b. The companies fully owned by the federal or local government or any of their affiliated institutions, entities, bodies or subsidiaries, as well as any other companies fully owned by such entities or their subsidiaries, if a special provision to that effect is contained in their Memorandum or Articles of Association. c. The companies, in which the federal government or local government or any of their affiliated institutions, authorities, agencies or subsidiaries, or any other entity directly or indirectly owned by any of them, is holding at least [25%] of their capital, and which engage in the business activities of oil drilling, extraction, refining, manufacturing, marketing and transport, or engage in any energy-related activities of all types, electricity and gas production, or water desalination, transportation and distribution, if a special provision to that effect is contained in their Memorandum or Articles of Association. d. The companies that are granted exemption from the provisions of Federal Law No. [2] of 2015 on Commercial Companies, as amended, prior to the date of entry into force of the provisions of this Decree Law, if a special provision to this effect is contained in the Memorandum or Articles of Association of such companies. e. The companies exempted from the provisions of this Decree Law under special federal laws. f. The SPACs; as provided for in the SCA's decision on such companies. g. The SPV; if a special provision to that effect is included in the decision of the SCA on the regulation of such activity. 2. The companies mentioned in [1/B, C and D] of this Article shall adjust their affairs in conformity with the provisions of this Decree Law, in the event that such companies sell or offer any ratio of their capital at a public offering or list their shares on a financial market in the State. 3. The companies mentioned in [1/F] and [1/G] of this Article shall adjust their affairs in conformity with the provisions of this Decree Law and according to the regulations or decisions issued by the SCA on such companies.

Article (5) Companies Operating in Free Zones and Financial Free Zones

Part One: General Provisions on Companies · Chapter One: The Concept of Company

1. The provisions of this Decree by Law shall not apply to the companies established in the free zones of the State with respect to matters for which a special provision is stipulated in the laws or regulations of the concerned free zone. 2. Where the legislation of free zones and financial free zones permits the companies established therein to conduct their activities outside the boundaries of the zone and within the State, such companies may establish branches or representative offices within the State which shall be subject to the provisions of this Decree by Law. 3. The provisions of this Article shall not prejudice any requirements of any other legislation in force in the State.

Article (6) Corporate Governance

Part One: General Provisions on Companies · Chapter One: The Concept of Company

1. Subject to the requirements of the Central Bank with regard to the financial institutions falling under its control and supervision, the Minister shall issue the resolution regulating the governance of companies, except for public joint stock companies, as the Board of Directors of the SCA shall issue the resolution regulating their governance. The governance resolution shall include the rules, controls and provisions to be observed by the companies. 2. The board of directors of the company or its managers, as the case may be, shall be responsible for applying the rules and standards of governance.

Article (7) Breach of the Rules of Governance

Part One: General Provisions on Companies · Chapter One: The Concept of Company

The governance-regulating resolutions provided for in Article [6.1] hereof shall include fines to be imposed by the Ministry or the SCA, within their respective areas of competence, on the companies and their chairpersons, directors, managers and auditors in the event that such resolutions are breached, so that the fine shall not exceed AED 10 million.

Article (8) The Concept of Company

Part One: General Provisions on Companies · Chapter One: The Concept of Company

1. The Company is a contract whereby two or more persons undertake to participate in an economic project that aims to achieve profit by contributing a share of money or work, and to divide among themselves the profits or losses arising from such project. 2. The economic project referred to in Clause (1) of this Article shall include every commercial, financial, industrial, agricultural, or real estate activity or any other form of economic activity. 3. Notwithstanding Clause (1) of this Article, any of the following may be permissible: a. The incorporation or ownership of a company by a single person in accordance with the provisions of this Decree by Law. b. The incorporation of a non-profit company whose net profits derived from its economic project shall be reinvested to achieve the purposes for which it was established, without distributing such profits to its partners or shareholders, provided that a Cabinet Resolution shall be issued specifying the purposes and regulating the provisions related to such companies and their forms, upon the proposal of the Minister in coordination with the Authority and the Competent Authority. The Cabinet may, in this case, exempt the company from any of the provisions of this Decree by Law.

Article (9) Forms and Nationality of Companies

Part One: General Provisions on Companies · Chapter One: The Concept of Company

1. The Company shall take one of the following forms: a. General Partnership Company. b. Limited Partnership Company. c. Limited Liability Company. d. Public Joint Stock Company. e. Private Joint Stock Company. 2. Any company that does not adopt any one of the forms referred to in Clause (1) of this Article shall be deemed null and void, and the persons who contracted in its name shall be personally and jointly liable for the obligations arising from such contract. 3. Every company established in the State, including free zones and financial free zones, shall have the nationality of the State.

Article (10) Activities Having Strategic Impact

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. A committee, whose membership includes representatives from the competent authorities, and which is vested with the competence to propose activities with a strategic impact and the controls required to license the companies that engage in any of these activities, shall be formed by a resolution of the Cabinet based upon a proposal from the Minister. 2. The Cabinet shall, based upon a recommendation from the committee stipulated in Clause [1] of this Article, issue a resolution defining the activities with a strategic impact and the controls for licensing the companies that engage in any of these activities. 3. Subject to the competencies vested in the Cabinet as per Clause [2] of this Article, the Competent Authority shall have the following powers: a. Determine a particular ratio for the contribution of UAE nationals to the capital or the boards of directors of all companies that are incorporated within the scope of its competence. b. Approve the applications for incorporation of companies and determine the fees as per the controls laid down by the Cabinet and mentioned in Clause [2] of this Article, subject to the provisions stipulated in this Decree Law with regard to joint-stock companies. 4. The Cabinet may, based upon a request from the Ministry, the body concerned or the Competent Authority, as the case may be, relieve any company whose activities are regulated by special legislation from any term or provision that stipulates the percentage of ownership of nationals or their involvement in the management of such company.

Article (11) Business Practice

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The company shall obtain all the approvals and licenses required to engage in the business activities in the State prior to the commencement of business practice. 2. The Cabinet shall issue a resolution determining the formation and credentials of the members of the internal Sharia Supervisory Committees and the Sharia controller of companies incorporated inside the State and which conduct their business in conformity with the rules of Islamic Sharia. The resolution shall determine the controls of operation of such committees. Such companies shall, following their incorporation and prior to the commencement of their activities, obtain the approval of the internal Sharia Supervisory Committees. 3. Only public joint stock companies may conduct banking and insurance activities, unless the laws regulating such activities or the resolutions issued thereunder stipulate otherwise.

Article (12) Name of the Company

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The Company shall have a trade name that does not conflict with the public order of the State. The name shall be followed by the legal form of the Company. No Company may be registered with a name previously registered in the State or a confusingly similar name. 2. Under a special resolution of the General Assembly and the like, the Company may change its name to any other name approved by the Competent Authority and acceptable to the Registrar. The change of the name of the Company shall not prejudice its rights or obligations or any legal proceedings instituted by or against the Company. Any legal proceedings that have already been instituted by or against the Company shall also continue in the amended name of the Company.

Article (13) Address and Communications of the Company

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. Every Company shall have a registered address in the State to which notices and communications shall be sent. 2. All contracts, documents, communications and application forms issued by the Company shall bear its name, legal form, registration number and address, and, if the share capital of the Company is added to such details, the amount of the paid up capital shall be stated. 3. If the Company is uandergoing liquidation, its paperwork shall indicate such status.

Article (14) Drafting the Memorandum of Association (MOA)

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The MOA of the Company and any amendment thereto shall be drafted in the Arabic language and attested by the Competent Authority; otherwise, the MOA or the amendment thereto shall be null and void. If the Memorandum is drafted in a foreign language in addition to Arabic, the Arabic version shall prevail and apply in the State. Attestation by the Competent Authority shall be conducted in person or by electronic signature, as determined by the Competent Authority in this regard. By way of exception, attestation shall be performed before the Notary Public in the cases determined by a decision issued by the Competent Authority. 2. The partners may rely on the nullity arising from failure to draft the MOA or an amendment thereto, or from the failure to attest them, as against one another. However, nullity may not be invoked by the partners against third parties. 3. Where a judgment declaring the nullity of the company is issued upon the request of a partner, such nullity shall take effect only from the date on which the judgment becomes final. 4. Partners in Limited Liability Companies or shareholders in Private Joint Stock Companies may include in the Memorandum of Association or Articles of Association the following: a. A provision permitting one or more partners or shareholders to oblige the remaining partners or shareholders to sell their stakes or shares to a third party upon the fulfillment of specific, pre-agreed conditions, or a provision granting a right enabling a partner or shareholder to join an existing sale transaction conducted by another party, under the same terms agreed upon with the purchaser. b. A provision regulating the mechanism for dealing with the stakes or shares of a deceased partner or shareholder, including granting the other partners or shareholders or the Company itself a pre-emptive right to purchase those stakes or shares at the price agreed upon with the deceased's heirs. In case of disagreement, the competent court shall appraise the value of the stake or share through one or more experts with technical and financial experience in the subject matter of the stake or share.

Article (15) Registration of MOA with the Competent Authority

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The Company's MOA and any amendment thereto shall become effective after being registered in the commercial register with the Competent Authority. 2. If the MOA is not registered as required by Clause [1] of this Article, it shall have no legal effect vis-à-vis third parties. If non-registration is limited to one or more of the items required to be registered, only the non-registered items shall have no effect vis-à-vis third parties. 3. The companies shall notify both the Competent Authority and the Registrar in writing within fifteen [15] business days upon the occurrence of any amendment or change in the registered details of the Company, including its name, address, share capital, number of shareholders or legal form. 4. The managers or directors of the Company, as the case may be, shall be held jointly liable for indemnifying the damage sustained by the Company or its partners or third parties due to failure to have the MOA or any amendments thereto registered in the commercial register with the Competent Authority.

Article (15) BIS Transfer of the Company’s Registration in the Trade Register and its Relocation

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. A company may, by a special resolution of the General Assembly or with the approval of the absolute majority of the partners, transfer its registration in the Trade Register from one Competent Authority to another, while retaining its legal personality in accordance with the provisions of this Decree by Law, provided that the following are observed: a. The commercial registration systems in both the Competent Authority from which the company's registration is transferred and the Competent Authority to which the registration is transferred permit such transfer. b. There is no annotation recorded against the Company in the Trade Register that would prevent the transfer of registration. c. The approval of the Competent Authorities from which the registration is transferred and to which it is transferred. d. The approval of the Ministry or the Authority, as the case may be, with respect to joint stock companies. e. The publication of the decision to transfer the company's registration in the Trade Register by any means determined by the Competent Authority. 2. A company may transfer its registration from a free zone to the Competent Authority, or vice versa, and the provisions contained in Clause (1) of this Article shall be followed in this regard. Companies whose registration is transferred from a free zone to the Competent Authority shall comply with the controls prescribed by the Competent Authority, the Ministry, or the Authority, as the case may be, and shall regularize their status in accordance with the provisions of this Decree by Law and the resolutions and regulations issued in implementation thereof. 3. The Cabinet shall, upon the proposal of the Minister in coordination with the Competent Authority and the financial free zones authorities, issue the controls governing the relocation of the Company from a financial free zone into the State and vice versa.

Article (16) Invocation of MOA by Third Parties

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. Any third party may prove the existence of the MOA of the Company or any amendment thereto by all means of proof. Such third party may invoke the existence or invalidity of the Company vis-à-vis the partners. 2. If the Company is decided to be invalid upon the request of a third party, the Company shall be deemed void ab initio in relation to such third party. Persons who have contracted with such third party in the name of the Company shall be jointly and severally liable for the obligations arising from the MOA. 3. In all cases where a Company is decided to be invalid, the terms of the MOA shall apply to the liquidation of the Company and the settlement of the rights of the shareholders against each other. The debtors of the Company may not request or invoke invalidity in order to avoid their debts to the Company.

Article (17) Nature and Valuation of the Partner's Contribution

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The capital of the Company shall consist of cash contributions and in-kind contributions with an appraised value, or either of them. 2. The partner's contribution may not take the form of work unless the partner is jointly liable, and a partner's contribution may not consist of reputation or influence. 3. The Ministry, in coordination with the Competent Authority, shall determine the standards and requirements for the valuation of in-kind contributions and the approval of the evaluators, with the exception of public joint stock companies.

Article (18) Rules of Contributing to the Company's Capital

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. If the partner's contribution is a title to property or any other right in-rem transferred to the Company, such partner shall be liable in accordance with the provisions applicable to contracts of sale with regard to title transfer, guarantee of the contribution in case of depreciation or maturity or in the event of an apparent defect or shortcoming in the contribution, unless agreed otherwise. 2. If the contribution is based merely on the utilization of funds, the provisions applicable to lease agreements shall apply to the issues set out in Clause 1 of this Article, unless agreed otherwise. 3. If a partner's contribution represents debts payable by third parties or other incorporeal rights, such partner's liability vis-à-vis the company shall only be relieved when such debts are settled. Moreover, the partner shall be liable to indemnify the damage sustained by the Company if such debts are not settled when they become due. 4. Subject to the provisions of the law regulating copyrights and ancillary rights and the law regulation the protection of industrial property rights, if the partner's contribution in the Company is his work, then every revenue generated from such work shall be the property of the Company, provided that the partner has not obtained such revenue from the right to a patent, unless otherwise agreed.

Article (19) Failure to Provide Contribution to the Company

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. If the partner undertakes to contribute to the company a sum of money, and such sum is not paid, or if the contribution consists of debts of third parties that are not settled, such partner shall be liable vis-a-vis the Company for any obligations in consideration of his contribution to the Company. 2. The partner shall be liable to the Company for the difference, if any, between the amount of money or value of the contribution actually provided to the Company and the amount of money or value of such other contribution recorded in the partners register, and which the partner should have provided in accordance with the provisions of this Decree Law.

Article (20) Enforcement upon Anything in Lieu of Capital Contribution

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The creditor of any partner may not satisfy his right from the contribution of his debtor to the capital of the Company, but rather, he may satisfy the same from his debtor's profit share. If the Company is dissolved, the creditor's right shall attach to his debtor's share upon liquidation of the Company. 2. If the partner's contribution to the Company is shares, then his creditor may, in addition to the rights as set out in Clause 1 of this Article, file a case with the competent court for the shares to be sold and the proceeds thereof be used to satisfy the creditor's right.

Article (21) Legal Personality of the Company

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

1. The Company shall, as of the date of registration in the commercial register with the Competent Authority, acquire the legal personality in accordance with the provisions of this Decree Law and the resolutions issued in implementation hereof. 2. During the incorporation period, the Company shall have legal personality to the extent necessary for its incorporation. The Company shall be bound by the acts of the founders in connection with the incorporation procedures and requirements within such period, provided that such incorporation is completed in accordance with the provisions of this Decree Law. 3. Upon its dissolution, the Company shall undergo liquidation. During the liquidation period, the Company shall maintain its legal personality to the extent required for the liquidation process. The phrase "Under Liquidation" shall be added to the name of the Company in a clearly written manner. 4. Subsidiaries of a holding company shall have legal personality and financial liabilities independent of the holding company..

Article (22) Duties of the Person Authorized to Manage the Company

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

The person authorized to manage the Company shall preserve its rights and shall exercise due care and diligence for the benefit of the Company as expected from a Prudent Person. Such person shall perform all such acts that are consistent with the objective of the Company and the powers granted to such person under an authorization issued by the Company in this respect.

Article (23) Liability of Company for Acts of its Authorized Manager

Part One: General Provisions on Companies · Chapter Two: Incorporation and Management of Company

The Company shall be bound by any act or thing carried out by the person authorized to manage the Company in the ordinary course of such management. The Company shall also be bound by any act of any of its employees or agents who are authorized to act on behalf of the Company, where such authority has been relied on by a third party dealing with the Company.