The United Arab Emirates (UAE) Commercial Companies Law 2021 (CCL 2021) applied to any economic entity that engaged in commercial, financial, industrial, agricultural, real estate, or other types of economic activity on the mainland. The law largely covered the same types of companies as the 2015 regulation.

The CCL 2021, also known as Federal Law No. 32 of 2021 on Commercial Companies, replaced the previous commercial companies law, Federal Law No. 2 of 2015. It also codified certain amendments made to the previous law in recent years. The CCL 2021 came into force on January 2, 2022.

The CCL 2021 included the following changes:

  • A person who was not a manager could act as a proxy for a shareholder at a general assembly meeting.
  • The notice period to convene a general assembly was now no less than 21 days (previously 15 days).
  • The law specifically recognized a special purpose vehicle (SPV) as a company established for the purpose of separating the obligations and assets associated with a specific financing operation from the obligations and assets of its parent entity.

Mergers and acquisitions (M&A):

  • SPACS: UAE embraced innovation with Special Purpose Acquisition Companies (SPACs) for mergers and acquisitions (M&A), especially appealing to foreign investors.
  • SPVs: Dedicated Special Purpose Vehicles (SPVs) simplified debt capital market transactions by separating obligations and assets from parent companies.

Other New Provisions:

  • Spin-offs and demergers: The new framework facilitated splitting PJSCs into independent companies, potentially opening up exciting restructuring opportunities.
  • Share value flexibility: Minimum share value dropped to AED 1, and the maximum rose to AED 100, offering greater options for structuring companies and deals.
  • Discounted shares: PJSCs could now issue shares at a discount with SCA approval, potentially unlocking new financing models.

Notable Changes for Public Joint Stock Companies (PJSCs):

  • Founder share ownership flexibility: Limits on initial founder share subscription were lifted, providing greater control and attracting investors.
  • Adjusted public subscription periods: More flexibility for public offerings, with a minimum lowered to 10 days and a maximum extended to 30 days.
  • Enhanced corporate governance: SCA approval was now required for general assembly meetings, aligning with best practices.
  • Director provisions: New rules addressed vacancies and succession planning for directors.
  • Simplified conversions: Removal of profit requirements and restrictions on share sales streamlined conversion processes.

Updates for LLCs:

  • Reduced reserve allocation: Statutory reserve allocation requirement fell from 10% to 5%, improving profitability for companies.
  • Extended manager terms: Up to six-month extensions allowed if no replacement was found, ensuring operational continuity.
  • Shareholder proxy expansion: Non-managers could now act as proxies, broadening participation in general assemblies.
  • Relaxed quorum requirements: Second meetings proceeded regardless of quorum, improving efficiency.

What’s More:

  • Foreign Ownership FTW: Say goodbye to mandatory local partnerships! Foreigners could now wholly own onshore companies across most sectors, unlocking exciting new possibilities.
  • Increased Flexibility: Joint Stock Companies could now choose the nominal value of their shares, offering greater control over the capital structure. No more minimum AED 1!
  • Enhanced Minority Protection: Minority shareholders were empowered with improved voting rights and dispute resolution mechanisms, ensuring fairer treatment within companies.
  • Streamlined Processes: Company registration and licensing were simplified, saving valuable time and resources. Less paperwork, more progress!

Conclusion:

The New Commercial Companies Law offered a significant step forward for M&A, financing, and overall company operations in the UAE. It paved the way for smoother transactions, enhanced investment opportunities, and greater flexibility for both PJSCs and LLCs.