The
new Commercial Companies Law (CCL) of the UAE enacted in April this year is a
big leap forward in creating a sustainable private sector growth model in the
UAE, while a lot more fine tuning is expected in the future, the basic
framework is robust, according to experts.
Speakers
participating in a panel discussion ‘The new Commercial Companies Law,
implications from business,’ organised by Dubai Economic Council (DEC) and the
Supreme Legislation Committee of Dubai in partnership with law firm Al Tamimi
& Co. said the provisions of the new law has enhanced clarity in the scope
of private sector investments in the country.
In
contrast with the old law, the new CCL explicitly sets out a bold objective to
contribute to the development of the working environment in the UAE, and to the
capacity of the UAE to regulate companies according to international norms,
protection of shareholders, the support of foreign investment and promotion of
corporate social responsibility.
“Private
sector has been playing a key role in the economy of the UAE. The new companies
law, a significant improvement over the old law is a clear recognition of the
importance of a well regulated private sector in the country,” said Hani Al
Hamli, Secretary General of DEC.
The
government representatives, legal experts and members from the business
fraternity agreed that the new legal framework will improve capital flows into
the country in terms of foreign direct investments, improved domestic
investments and overall competitiveness of the UAE economy. But a few panelists
also suggested that the law need more clarity on 100 per cent foreign ownership
in onshore companies and the possibility of free zone companies doing business
in the UAE, outside their designated free zones.
“Private
sector is certain to benefit from the evolving legal framework in the country.
The new CCL is just one aspect of it. The provisions in the new law relating to
creation of holding companies one such example the will go a long way in
facilitating merger’s and acquisitions and foreign direct investment,” said
Tareq Hajjiri, director of legal policy at DEC.
The
CCL chapter which governs LLCs envisages the establishment and registration of
sole proprietorships as LLCs, and that an LLC may be incorporated and held by
one natural or corporate person.
“The
very fact that the new law allows setting up LLCs with a single shareholder
points to the possibility of 100 per cent foreign ownership and to that extent
this piece of legislation could be a precursor to new on-shore company
ownership law,” said Samer Qudah, Partner and head of corporate structuring
department at Al Tamimi &Co.
Experts
said the new law gives scope for further fine tuning of some of the provisions
while addressing some of the gaps. “While the enactment of the new CCL in
itself has come as a big surprise after a long wait, it has addressed a number
of concerns on the private sector. It certainly is going to ease fund raising
through capital markets,” said Khaled Sifri, CEO of Emirates Investment Bank.
Emphasising
the role of legislation in enhancing ease of doing business, Sifri said, in the
developing world there is a tendency to focus excessively on investor
protection. “In the developed world law is more agnostic on investor
protection, leaving the responsibility to specialised regulators while creating
a mechanism for companies to do business with ease,” he said.
On
funding, the new law permits shareholders in LLCs to pledge their shares.
Easing to rules relating to flotation of a company is widely welcomed. The
existing rules require PJSCs to float at least 55 per cent. The New CCL reduces
the proportion that must be floated to 30 per cent, allowing founders to retain
a majority (up to 70 per cent) of their company.
The
new UAE CCL has been anticipated for long and considerable thought has gone
into strengthening shareholder protection, enhancing corporate governance and
generally making investment in UAE companies easier. Despite the clear
improvements, there is a sense that the new law could have gone further in
bringing more clarity on several aspects which many experts hoped would
eventually happen.
-Gulf News
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