Amendments in the Commercial Changes Introduced by New Company Law for LLC

November 4, 2022Dated:  | |

In every business maintaining books of accounts, conducting audits and recording minutes of meetings is a very important task as per the Commercial Company law and there are some amendments in the Commercial Company law, in the context of LLC, the amendments are explained below.

Commercial Company Law

  • This is the law that applies to any economic entity that practices any commercial, economic, or financial activity backed by transactions on the mainland. The activity can also be agriculture, real estate, industrial, and any other activity that has the exchange of money.
  • The amended enacted law followed is –The UAE federal law no.32 of 2021, the previous law followed before the amendment was – UAE federal law no.32 of 2015
  • The amended law came into force on January 02, 2022, and the Companies who follow the Memorandum of Association as of 2015 need to revise it within one year i.e. the deadline for the amendment of the Memorandum of Association is 02 January 2023

Objective of Amendment

  • Strengthen competitiveness to contribute to economic development.
  • Justify that international best practice is applied.
  • Strengths the policies and nature of the business curriculum

Changes introduced by new company law

01. Statutory Reserves :

Statutory reserve is to be maintained from the portion of the profit, the percentage allocation of which is amended to 5% from 10%.

02. Board Powers :

When there is no replacement found at the expiry of the manager`s term in the office, the period can be extended by up to 6 months.

03. Memorandum of Association :

The Memorandum of Association should comprehend methods to settle any disagreement or discourse arising between the managers/directors/shareholders related to business (Article 73)

04. General Assembly Meetings :

A person who is not a manager may act as a proxy for a shareholder in the meetings.

The notice period to assemble for a general assembly is amended to 21 days from 15 days(Article 93)

Holders with 10% of share capital can request a general assembly. Also, they can attend meetings via electronic mode (Article 92)

Earlier for a general meeting to be valid the quorum was shareholders holding 75% of the share capital, the quorum is amended to 50%. Furthermore, there is a relaxation when the first meeting is unable to proceed effectively because of the absence of members to make up a quorum, the second meeting can be held in 5-15 days without a quorum and the second meeting shall be deemed validly (Article 96).

05. Capital Increase :

There is a relaxation introduced for raising/reducing the capital.

Earlier for any increase or decrease in the capital the consent of the shareholder with 75% of the shares was needed.

The amendment made it possible for any shareholders to go around for a judgment to change the capital of the company provided the following conditions are met-

  • The capital addition or reduction is to put a stop to the liquidation or for selling the third-party liabilities (Article 101).
  • The company is not left with sufficient funds to pay off the outside liabilities and was unable to achieve the needful quorum for capital increase.

Companies Exempted from Provisions of this Law

The law shall not apply to the following cases—

  • Free zones of the state under special provisions.
  • Companies exempted by cabinet resolution under the special indication of their MOAs and AOAs
  • Companies owned by a federal or local government under the special indication of their MOAs and AOAs.
  • Companies exempted from provisions of this Law under special Federal Laws.

The Company should follow the guidelines as per the amendment in the commercial company law and make the necessary changes in the associations as required. For a company, it is always recommended to have books of accounts audited, a complete and correct Memorandum of Association, and Board meetings. A Professional Consultant can guide you with all the formalities of the books of accounts, audit, general board meeting, Minutes of Meetings, MOA preparation, and other mandates as per the commercial company law.

We at Flyingcolour not only guide you but also do it for you. All your mandates will be fulfilled with our assistance along with accounting & audit services, tax consultancy, Feasibility Study & Market research. We will be your one point of contact for all your business and company legalities along with taxation.

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