DubaiAbuDhabi

6 Chapter Company Law

    • Company form

      Federal law No. 8 (Commercial Company Law, hereinafter referred to as the Association) in 1984 stipulates the form of seven companies (Article 5).
      Features of the establishment form are as follows, Of these, only the limited liability company (LLC: Limited Liability Company) is suitable for establishing a foreign company.
      In addition to the above, the Commercial Company Law also provides for the branches and representative offices of foreign companies, and in addition to LLC, it is possible to establish these forms.
      Also, there is a "free zone" outside the framework of the Commercial Company Law. Many free zones in UAE are managed based on special laws and regulations, and companies established therein comply with their own laws. All free zones allow 100% foreign ownership, and in addition to the above, establishing a company within the free zone can also be a choice for establishing a corporation by a foreign company.
       
      Based on the above, the types of companies that foreign companies can establish are effectively as follows.
       
      · Limited liability company
      · Branch
      · Representative office
      · Companies in the free zone
       
      ■ Companies in the Free Zone
      In the free zone 100% not only foreigners can own but also various incentives such as tax exemption for corporation tax, no need for sponsors, freedom of remittance, etc. are prepared, so many foreign companies are in the free zone We have set up a company. The form of foundation establishment varies depending on each free zone, but usually it can take the following three forms.
       
      · Free zone · Establishment (FZE: Free Zone Establishment)
      · Free Zone Company (FZCO: Free Zone Company)
      · Branch of foreign company
       
      The law on FZE is stipulated in the FZE Implementing Regulations (FZEIR), and the law on FZCO is stipulated in the FZCO Implementing Regulations (FZCOIR).
      In the next section, let us take a look at the characteristics of FZE, FZCO taking the typical free zone "Jebel Ali Free Zone" as an example.
       

    • stock

      ■ Capital
      The minimum capital is 1 million dirham. However, as appropriate, the Free Zone Establishment Authority can decide (FZEIR Article 8).
      The amount of stated capital can be changed by the articles of incorporation with the preliminary approval of the authorities (Article 11).
       
      ■ Shareholders
      Only one shareholder (investor) is considered (Article 18).
       
      ■ Stock
      In principle, it is necessary to issue share certificates (Article 21). With regard to the transfer of shares, it can not be done unless authorized prior approval (Article 24).

    • organ

      It is necessary to have at least one director and secretary. However, it is said that the same person can be a director and a secretary (Article 25).
       
      ■ Directors (Association)
      [Appointment / dismissal of directors]
      The appointment and dismissal of directors is subject to the provisions of the articles of incorporation (Article 28).
       
      [board of directors]
      The Board of Directors (Managers) is convened by the directors and resolutions of the Board of Directors are resolved by a majority of the directors.
      A director can appoint a chairman and the chairman has a casting boat (Article 30).
      Also, proxy resolutions (Article 30) and document resolution (31) are allowed.
       

    • stock

      ■ Capital
      The minimum capital is 500 thousand dirham. However, as appropriate, it can be decided by the FZCO Department (Free Zone Company) (FZCOIR Article 9).
      The amount of stated capital can be changed by the Board of Directors with advance approval of the authorities (Article 12).
       
      ■ Shareholders
      The number of shareholders (shareholders) is set to 2 or more and 5 persons or less (Article 19).
       
      ■ Stock
      In principle, it is necessary to issue share certificates (Article 22). With regard to the transfer of shares, it can not be done without prior approval by the authorities (Article 25).

    • organ

      It is necessary to establish at least two directors and one secretary. However, it is said that the same person can be a director and a secretary (Article 26).
       
      ■ Directors (Association)
      [Appointment / dismissal of directors]
      The appointment and dismissal of directors will depend on the resolution of the Board of Directors (Article 29).
       
      [board of directors]
      The Board of Directors is convened by the Directors, and resolutions of the Board of Directors are resolved by a majority of the Directors.
      The directors can appoint the chairperson, the chairman has a casting boat (Article 31).
      In addition, proxy resolution (Article 31) and document resolution (Article 32) are also accepted.
       
      [Resolution of Board of Directors]
      A copy of the director's resolution must be submitted to the authorities within seven days when the Board of Directors has been held (Article 56).

    • Limited Liability Company (LLC)

      A limited liability company is the most common form of establishment when a foreign company establishes a company in an area other than the free zone. Also, because LLC has greatly accepted the articles of incorporation autonomy, various resolutions are based on the articles of incorporation.

    • stock

      ■ Capital
      The minimum capital is 300 thousand dirham (meeting 227).
       
      ■ Employees
      There are 2 to 50 employees (Partner) (Article 218).
       
      ■ Stock
      Employees can transfer shares to employees according to the articles of incorporation (Article 230). However, a person with UAE nationality is required to own a majority of shares.
      In addition, when an employee transfers shares to a person other than an employee, the employee is notified of the allocation condition to other employees through the directors, and the other employees are given the right to take over the shares preferentially. If neither employee accepts such shares, employees who intend to transfer shares can freely dispose of such shares, that is, they can transfer shares to non-employees (Article 231).

    • organ

      Organizations of limited liability companies consist of a general meeting of employees, a board of directors, and a corporate auditor (Auditor).
       
      ■ General Meeting of Employees
      The general meeting of employees should be held at least once every year, within four months after the start of the fiscal year, at the place and date stated in the articles of incorporation (Article 244).
       
      ■ Director
      There are one to five directors.
      Directors are, in principle, elected according to the articles of incorporation (Article 235).
      Likewise, the dismissal of directors is subject to the provisions of the articles of incorporation (Article 236).
       
      ■ Corporate Auditor
      Every year it is necessary to appoint a corporate auditor at a general meeting of employees (Article 253).

    • Corporation (JSC)

      Although it is not common as a form of entering a foreign company, we will look at the characteristics of the Dubai-Abu Dhabi stock company (JSC: Joint Stock Companies, public company / private company) below.

    • stock

      ■ Type of shares
      1 Shares must be 1 dirham or more and 100 dirhams or less (Article 153).
       
      Issuance of new shares
      Issuance of new shares will be resolved at an extraordinary general meeting of shareholders. Effective date can be delegated to the Board of Directors. However, it will be invalid if the effective date exceeds five years from the issue date of new shares (Article 199).
       
      Capital reduction
      Capital reductions can be implemented if the capital exceeds the company's required amount, or if the company determines that losses that can not be recovered from future profits will continue (Article 209).

    • General meeting of shareholders)

      ■ Shareholders
      In the case of a public company it is necessary to have more than 10 shareholders (Article 71) and in the case of a private company three or more shareholders (215) are required.
      Also, as with the aforementioned limited liability company, people with UAE nationality are required to own a majority of shares.
      In Japan, even one shareholder can establish a company, but in Dubai / Abu Dhabi two or more people are required even in a limited liability company, so you can not establish a company alone like in Japan.
       
      General shareholders meeting
      There are two types of general meeting of shareholders, an annual general meeting of shareholders and an extraordinary general meeting of shareholders.
       
      [Ordinary General Meeting of Shareholders]
      At least once a year within four months after the end of the fiscal year by the Board of Directors shall be held at the place and date and time stipulated in the articles of incorporation. In addition, the Board of Directors will convene a General Meeting of Shareholders (Article 119).
      In addition, in any case, the Board of Directors must convene a meeting if it is requested from the corporate auditors to hold a general meeting of shareholders. If we can not convenish within 15 days, the corporate auditors can call directly (120 articles).
      If more than 10 shareholders holding more than 30% of the total shares require the holding of an ordinary shareholders meeting based on serious reasons, the Board of Directors shall convene a meeting within 15 days from the requested date I have to do.
      If there is such a request and the Board of Directors does not convene within 15 days, the relevant ministries and agencies may convene an ordinary shareholders meeting in response to the request (Article 121).
      The agenda of the ordinary general meeting of shareholders includes approval of the Board of Directors report and audit report, approval of the company's balance sheet and profit and loss statement, appointment of directors and statutory auditors and determination of remuneration (if not stipulated in the articles of incorporation) Examination of distributing profits, directors, corporate auditors' immunity, etc. (Article 124).
       
      [Extraordinary shareholders meeting]
      Extraordinary shareholders' meeting will be held in case of serious impact on shareholders, such as change of articles of incorporation (Article 137).
      In addition, if two or more shareholders who hold 40% or more of the total shares request an extraordinary shareholders meeting based on serious reasons, the Board of Directors may convene within 15 days from that date Yes (Article 139).
      At the Extraordinary General Meeting of Shareholders, the agenda includes deferring the duration of the company concerning acquisition, etc., such as increase or decrease of capital, dissolution of company or absorption merger (Article 137).
       
       
      ■ Convener and the convocation notice
      The meeting of the shareholders shall be convened by the Board of Directors and notified to shareholders by sending a written document or posting it in a newspaper (Articles 119, 123).
       
      ■ Resolution of general shareholders meeting
      The General Meeting of Shareholders is the company's supreme decision-making body, and to the extent that it does not harm the rights of third parties with good intentions, the decision against this will be invalid. In addition, important matters for the company, such as election of executive officers, approval of financial statements and dividend decisions, must be decided by resolution of the shareholders meeting, not by the Board of Directors (Article 136).
       
      [quorum]
      Holding will be held with the attendance of 50% or more of the total number of ordinary shareholders' general shareholders. If the quorum is less than the quorum at the first general meeting of shareholders, the general meeting of shareholders must be held again within 30 days (Article 128). An extraordinary general meeting effective only when shareholders with shares of three quarters or more of the stated capital of the Extraordinary General Meeting of Shareholders are present (Article 140).
       
      [Voting Rights]
      All shareholders can participate in the shareholders meeting, and one vote can be held per share (Article 125). If it is not a director, you can appoint an agent. However, it is not possible for an agent to constitute more than 5% of the capital (Article 126).
       
      [Resolution Requirement]
      In the case of a resolution of an ordinary general meeting of shareholders, a majority of the voting rights of shareholders present will be resolved (Article 128). In the case of an extraordinary general meeting of shareholders, matters concerning increase or decrease in capital, addition of articles of incorporation, merger, organization change were resolved with more than three quarters of the voting rights of shareholders present and attended for matters other than those It is resolved by a majority vote of shareholders (Article 141).
       
      [Chairman of the shareholders meeting]
      The Chairman of the General Meeting of Shareholders shall be chaired by the Chairman of the Board or by the Vice Chairman of the Board. If they can not attend the general meeting of shareholders, they can appoint the chairperson and vice chairmen from the shareholders (Article 127).
       
      ■ Protection of minority shareholders
      [Shareholder representative litigation right]
      The company and shareholders can file a lawsuit against the director for reasons such as fraud and abuse of authority (Article 111).
       
      [Book viewing right]
      Shareholders (those who do not have seats at the Board of Directors) can view the company's books with permission from the Board of Directors or shareholders meeting (Article 170).

    • board of directors)

      ■ Number of Directors
      The number of directors of a public company or a private company is 3 or more and 12 or less. In addition, a majority of the directors are required to be UAE citizens (Article 100).
      ■ Election / dismissal of directors
      In the case of a public company or a nonpublic company, the directors are appointed in the ordinary resolution of the general meeting of shareholders (Article 96), and the term of office is three years (Article 95). Also, the directors at incorporation will be appointed by the incorporators (Article 96).
      In addition, at the general shareholders 'meeting, directors can be dismissed, in which case the general shareholders' meeting must appoint an alternative director. In addition, we must inform Minister of Competent Authority to that effect (Article 106). In addition, the dismissed director can not be reappointed for three years from the date of dismissal (Article 117).
       
      ■ Requirements for Directors
      Those who fall under the following matters can not be a director (Article 98).
       
      · Person who concurrently serves as a director of five or more companies within the state
      · Person who concurrently serves as the chairman of the board of directors or vice chairman of the board of two or more companies within the state
      · Person who concurrently serves as a representative director (managing director) of one or more companies in the state
      * State is an administrative area located under each emirate
       
      The majority of the directors must be UAE nationals. If you decide to break a majority, you will have to revise the number of people within 3 months and the resolution of the Board of Directors after that period will be invalid (Article 100).
      In addition, the Chairman of the Board of Directors must be a UAE citizen (Article 99).
       
      Convocation of Board of Directors
      Under the Commercial Company Law, there is no special provision concerning the convocation of the Board of Directors, and it will be held as necessary by the Board of Directors or the Chairman of the Board.
       
      ■ Vacancy, absence etc. of the Board of Directors
      In the event of a vacancy at the Board of Directors, the Board of Directors may appoint an alternative director and appoint it at the shareholders meeting. Alternate directors will follow the period of their predecessors. If 25% of vacancies occur, the general meeting of shareholders must be convened and supplemented within 3 months from the date of the last vacancy (Article 102).
       
      ■ Authority of the Board of Directors
      The Board of Directors has the necessary authority in carrying out the business of the company. However, acts that are important for the company, such as activities outside the scope of laws and articles of incorporation, borrowing over three years or disposing of company property, are excluded (Article 103). In the case of a public company or a nonpublic company, the Chairman of the Board has authority to represent the company (Article 104).
       
      ■ Responsibilities of Directors
      The Chairman of the Board of Directors and the Board of Directors will be responsible to the Company (§ 111) if they conduct illegality or abuse of authority, etc. for shareholders or third parties.
       
       

    • Auditor

      Election / dismissal of corporate auditors
      In the company, one or more corporate auditors must be appointed at the shareholders meeting (Article 144). The term of office of corporate auditors shall be automatically dismissed unless reappointed at the general meeting of shareholders in a year.
       
      ■ Requirements of corporate auditors
      Statutory auditor must be a registered auditor in compliance with federal law 1975 (9) (Article 145). Also, as long as the corporate auditor engages in business, it is not possible for a corporate auditor to appoint a person having a stakeholder relationship with the company, such as a director, an employee (Article 2).
       
      ■ Authority and responsibilities of corporate auditors
      Statutory auditors are authorized to investigate the balance sheet and profit and loss statement (Article 146), the company's books, the right to view vouchers and others (Article 147), the right to convene a general shareholders meeting (Article 148).
      In addition, corporate auditors must be responsible to the company for the reliability of audits and audit reports (Article 151). In addition, we must be responsible for company confidentiality obligation (Article 149), shareholder meeting attendance obligation (150) etc.
       

    • New commercial company law

      The UAE New Commercial Company Law, which had been discussed since 2004, was approved by the Federal National Council of the UAE (FNC), and the draft was published in the Federal Government of the United Arab Emirates (as of February 2014). Specifically, the following points are expected to be revised.
       
      ■ limited liability company
      · When establishing it, it was necessary for two or more equity owners (partners) to be established, it was possible to establish alone
      · The current law abolishes the upper limit of the number of business executors (Managers) who are supposed to be a maximum of five people
      · Maximum number of equity owners increased from 50 to 75
      · Apply regulations on corporation to limited liability company
       
      ■ Public company
      · Increase minimum capital from 10 million dirham to 30 million dirham
      · Change the maximum number of directors from 12 to 11
       
      Particularly noteworthy in the New Commercial Companies Act was the abolition of the capital contribution ratio restrictions that allowed up to 49% of the capital contribution by foreign capital and the prescribed foreign capital that the majority of the public companies' It was the elimination of obstacles in foreign companies' investment, such as the non-application to the company, the optional appointment of a local service agent (sponsor) that was mandated for establishing a branch office of a foreign company or a representative office . However, contrary to the original expectations, these are not adopted after deliberations at the Federal National Council, and the new commercial company law is considered to be essentially the same as the existing law.