The UAE's long-awaited commercial companies law should be passed soon or it risks becoming outdated, a government lawyer who helped to draft much of the legislation has warned.
Commercial companies law needed soon, says UAE official
The long-awaited commercial companies law should be passed soon or it risks becoming outdated, a government lawyer who helped to draft much of the legislation has warned.
Lubna Qassim, the director of the economic legislations department at the Ministry of Economy, said the law was also required to help to improve the business and investment climate.
"I would not want 2013 to pass by without this law being issued," she said.
"It must, because we are living in a complex economic landscape and corporate governance rules are evolving and things put in four or five years ago may need to be updated if it's not issued."
Considered one of the key cornerstones in reforming the economy, the companies law will set out a framework for how businesses should be run; ranging from how shares can be allocated to accounting standards.
However, the part of the law most eagerly anticipated by foreign businesses is a provision allowing the Cabinet to issue a separate resolution specifying the types of businesses that could be majority-owned by foreigners.
Currently, at least 51 per cent of a business has to be owned by an Emirati national if it is located outside a free zone.
But the law has remained in the planning stage for some time. The existing draft dates from 2006.
A statement from the Emirates news agency (Wam) on Saturday said the law was being discussed by the Committee on Financial Affairs at the Federal National Council. The FNC has been discussing the draft since January.
"It's probably one of the largest and heaviest draft laws the UAE has come up with," said Ms Qassim.
Spanning 12 chapters and 383 articles, the draft has been based on international corporate best practices in areas such as directors' duties, accounting and compliance.
But one of the challenges is that the international rule book is already being updated as western policymakers change business regulations in the wake of the global financial crisis.
Ms Qassim has worked on a number of planned economic laws yet to see the light of day. A bankruptcy law and legislation to help small and medium enterprises are still to be approved
But she considers the companies law one of the most significant. "It's very important for the entire business community and I hope businesses will be able to enjoy the fruits of it soon."
Officials hope the legislation will help to entice foreign investment and give the country a boost in its hopes of getting its stock markets upgraded to emerging market status by MSCI, the index compiler.
It is perhaps the foreign ownership component of the law that is attracting most attention.
"It is one of the areas people are thinking about," said Chris Lister, corporate counsel at Latham & Watkins, the law firm. "We always deal with foreign entities that are looking at doing business here and one of the downsides is the 49 per cent foreign ownership limit."
Dating from 1984, the current companies law is considered inadequate for overseeing the country's now vibrant business climate.