Investors and shareholders will be better protected with the new commercial companies law, a Federal National Council member has said.
UAE companies law 'will protect investors'
ABU DHABI // Investors and shareholders will be better protected with the new commercial companies law, a Federal National Council member has said.
Ali Al Nuaimi, deputy head of the council's finance committee, said the legislation - which was finally passed after a marathon five public and 23 private sessions - will benefit investors and help small businesses to start up.
But first, some Emiratisation requirements must be followed.
The FNC removed a controversial clause allowing majority foreign ownership of companies, so an Emirati must still be a partner and own a majority stake, even if that is 51 per cent.
Boards of directors of publicly held companies will also have to be majority Emirati.
A draft of the law contained a clause giving foreign companies opening a branch in the UAE the option to have an Emirati agent, but the council made it obligatory.
"Their reasoning was if it was optional, then no one would have an Emirati service agent," Mr Al Nuaimi said.
He said the agent was not a partner but an employee who could be changed when necessary. The presence of such agents is also intended to ease government procedures.
Small and medium enterprises will not need to meet any Emiratisation requirement.
"But if they employ Emiratis it would be better," Mr Al Nuami said. "It would ease procedures in government ministries."
He said the new regulations were not that different from existing laws.
What was new, he said, was that the law will ensure boards of directors, managers and auditors can be held to account, give the Securities and Commodities Authority more power of scrutiny, and ensure companies follow an international auditing system to keep all information transparent and up to date for company managers.
Voting rights are also described in the law.
"The law sets corporate governance for public companies," Mr Al Nuaimi said. "It protects the rights of shareholders. This was one of the main objects."
The law removes the minimum of Dh150,000 capital to start a limited liability company and will set up a single nationwide register of company names.
"This is a big change in the law," Mr Al Nuaimi said. "This will encourage companies to open in the UAE. It will encourage small businesses to start up - it will be easy to establish a company, especially since there is a no-tax requirement. We made sure that the UAE has no intention to introduce taxes."
Another major change brought about by the law will make it illegal to run an unregistered company.
Only limited liability companies, limited partnership companies, private share-holding companies, public share-holding companies, and partnership companies will be recognised.
"There was another kind of company, which the council decided to not recognise any more," he said. "These companies were not official, they are not registered. There were there before, but now with the new law, this will not be allowed. Nothing hidden is allowed."
Free zones will now be the only option for those who want to start a business without Emirati partnership.
Sultan Al Mansouri, the Minister of Economy, and the FNC decided to exempt professional companies from the new law as a later version would set rules for those kinds of businesses, which are regulated by individual emirates with no federal umbrella.
Mr Al Nuaimi said professional companies where those headed by a specialised professional.
"For example, a doctor owns a medical clinic. That would be a professional company, but if it was a hospital, with staff and profit and beds and services, that would be commercial," he said.
However, an Emirati will still need to be made a service agent.
The minister said a first draft of the law would be ready by the end of the year. Mr Al Nuaimi said the law was likely to be enacted by the summer of 2014. Companies will have three months to comply.
"Having a revised updated commercial companies laws will give investors more confidence," he said. "Rights will be protected now that there are articles to protect their rights - this is the main point."