Key Changes under the new labour law

The United Arab Emirates (UAE) has issued Federal Law No. 33 of 2021 (the New Labor Law), which became effective on Feb. 2, 2022, and repealed UAE Federal Law No. 8 of 1980 (the Current Labor Law). The New Labor Law will apply to all companies and employees in the UAE, including its free zones, except the Dubai International Financial Centre and the Abu Dhabi Global Market, which implement their own employment laws. Pursuant to the Law, the employees both in government and private sectors will have similar working environment and facilities. These include equality, non-discrimination, models of work, similar hours of work, leave and payment of end of service benefits. 

It should be noted that, the New Labor Law introduces several unexpected changes. The rationale for some of the changes is to identify the rights of all the employees and workers in the UAE in a balanced manner. The objective of this Decree-Law is to:

  • Elaborate and unify the general rules of work for all employees and workers in the UAE.
  • Promote an effective, attractive and sustainable employment market by ensuring protection for parties to the work relationship and its developments.
  • Identify the rights of all Employees and Workers in the UAE in a balanced way.

Nevertheless, there are a number of significant issues for affected employers to bear in mind and changes will need to be made to employment contracts, policies, and practices. The key aspects of the New Labor Law below, together with the main action points for employers are: 

  1. Update template employment contracts to reflect the requirement for all employees to be issued with fixed-term contracts not exceeding three years
  2. Ensure that all existing employees employed on indefinite employment contracts are moved onto fixed-term employment contracts by no later than Feb. 2, 2023.
  3. Amend or replace existing employment contracts or policy documents that contain references to specific statutory entitlements (for example, 45 days’ maternity leave).
  4. Amend current sick leave policies to reflect the fact that employees are not entitled to take paid sick leave during their probationary period.
  5. Amend existing maternity and paternity leave policies to reflect the different entitlements
  6. Consider implementing equal opportunities and anti-bullying and harassment policies to reflect the new anti-discrimination/bullying/harassment provisions.
  7. Consider implementing a grievance policy to facilitate employee complaints of discrimination, bullying and harassment.
  8. Update disciplinary policies to reflect (i) the expanded number of reasons for termination; (ii) the fact that an employee’s end-of-service gratuity can no longer be withheld in any circumstances; (iii) the prohibition on discrimination, bullying and harassment.
  9. Amend working time policies to reflect the cap on overtime hours and the changes to the calculation of overtime pay.

The New Law also prohibits discrimination against persons specifically on the grounds of race, color, sex, religion, national origin, ethnic origin or disability. It remains to be seen how this protection will be enforced in practice or what the remedy will be for individuals who are victims of discriminatory conduct. 

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The new UAE Commercial Companies Law — The Notable Changes

As part of major reform, Federal Law by Decree No 32 of 2021 (the “New Commercial Companies Law“) has been introduced, which repealed and replaced the existing Federal Law No 2 of 2015 (as amended) (the “Existing Commercial Companies Law”)in UAE . The New Companies Law came into force on 2 January 2022, and notably strengthens the principles of foreign ownership of companies, corporate governance and minority protection. 

The New Companies Law also introduces a range of amendments to the Existing Law, including introducing a regime to allow for public joint stock companies (PJSCs) to be divided (by splitting up the company’s assets or activities and related obligations and ownership rights into two or more separate companies), the introduction of special purpose acquisition companies (SPACs) and special purpose vehicles (SPVs), and the introduction of measures aimed at facilitating public offerings. The notable changes under the new law are: 

1. Introduction of new corporate vehicles

  • The New Companies Law sees the introduction of SPACs, to be established as a PJSC and as approved by the UAE Securities and Commodities Authority (SCA), for the sole purpose of acquiring or merging companies. This follows the recent trend of utilizing SPACs for IPOs, as seen in other jurisdictions such as the United States and will serve as another option to facilitate M&A activity including foreign investment. The SCA is expected to issue regulations providing clarity on the framework in which SPACs will operate.
  • In addition, the New Companies Law also recognizes the concept of an SPV, which is defined 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. This vehicle may feature in debt capital market transactions, borrowings and transfer of risks associated with insurance and reinsurance. The SCA is expected to issue further resolutions and guidance but we anticipate that such vehicles could be utilized in bond issuances and credit transactions

2. Key Changes impacting LLC’s

  • Reduction in LLC Statutory Reserves-The percentage of net profits, which must be allocated each year to the statutory reserves of an LLC, has been reduced from 10% to 5%. This allows LLCs to have more cash to invest in their businesses.
  • LLC Manager powers – Where a manager has not been replaced at the end of their term, their term in office can be extended by up to six months from the date of expiry of their term (pending appointment of a new manager).
  • LLC General Assembly Meetings

Notice: The notice period to convene a general assembly is now no less than 21 days, whereas previously it was 15 days. This provides shareholders with a longer notice period for general assembly meetings. 

Quorum: A relaxation of quorum requirements has been introduced. In the event a first general assembly meeting is not quorate and a second meeting is held, there will be no quorum requirement and that second meeting shall be deemed validly constituted regardless of the number of attendees at such second meeting (and the provisions of the LLC’s memorandum of association cannot disapply this new relaxation).

  • LLC Memorandum of Association – The company’s Memorandum of Association must include methods for settling any disputes which may arise between the company and any of its managers/directors or between the shareholders, relating to the business of the company.

3. Notable Changes to PJSC’s

  • Convening General Assembly Meetings for a PJSC- The New Companies Law now expressly provides for SCA approval prior to convening a general assembly for a PJSC, a requirement which was provided for in SCA Decision No: 3 of 2020 (as amended) but not the Repealed Companies Law.
  • Replacement directors appointment – In the event a director departs their role prior to the expiry of their term, the board shall appoint a replacement within 30 days (who shall be presented to the general assembly and), who shall complete the remaining term of the previous director.
  • Nominal Value of Shares- The New Companies Law no longer provides any restrictions on the nominal value of shares in a PJSC.  This means the nominal value of shares may now be lower than AED 1 and higher than AED 100, provided such nominal value of the shares is equal to the amount specified in its articles of association.
  • PJSC subscription shares – Founders must now subscribe to such number of percentage of shares as specified in the prospectus and subject to SCA requirements. Previously the percentage of subscription shares was designated to be between 30% and 70%. 
  • Directors remuneration – the remuneration of the board members may not exceed 10% of the net profits of the fiscal year (after depreciation and reserves deductions) but where the company fails to generate profits, and subject to the company’s constitution and approval of the general assembly, a board member may be paid a lump sum fee not exceeding AED 200,000 at the end of the fiscal year. 

Existing companies must adjust their position within one (1) year of the New Companies Law coming into force, and companies which fail to do so shall be considered as dissolved.


The New Commercial Companies Law contains several significant provisions that will deliver major changes in the way public companies conduct transactions in UAE. It is yet another positive move aimed at enhancing the competitiveness of the United Arab Emirates in the field of economic development and illustrates to the world its ability to maintain pace with international best practices, thereby stimulating existing companies and attracting further investments to UAE.

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UAE – Decriminalization of Bounced Cheque

The UAE, being one of the business hubs in the world, cheques are one of the common forms of payment. There are certain hardships with cheques usage, such as bounced or dishonored cheques for various reasons, which can lead to civil or criminal action. 

The new law -Federal Decree-Law No. (14) of 2020- came into effect in the UAE from January 2, 2022, decriminalized cases of bounced cheques, amending the previous law, which stipulated that anyone who issues a cheque that is not honored can face criminal proceedings.  The new law made path-breaking amendments in relation to the dishonor of cheques and limits the options for filing a criminal action for a bounced cheque.  They are in line with the Central Bank’s strategic initiatives and plans to upgrade banking laws and regulations to track developments in the financial sector, fill any legal gaps and deliver its vision to follow best practices internationally. 

While the law itself is quite detailed, it de-criminalises bounced cheques – except specific cases related to forgery, ‘stop payment’ instructions, etc. The Attorney General’s Office, Government of Dubai issued Circular No. 9 of 2021 directing police and public prosecution authorities to close all pending cases on bounced cheques or cases that are already decided by criminal courts.

The amendment also helps to promote commercial and banking transactions, streamline procedures for collecting the cheque’s value and make the use of cheques more flexible. The amendments also aim to secure the rights of cheque bearers and beneficiaries and would expedite the collection of a cheque’s value in a more effective manner, which will be determined by the Central Bank. 

As said, the scope for the criminalization of returned cheques due to insufficient funds has been narrowed and confined to cases of bad faith and other cheque crimes. This would deliver the desired goals of replacing decriminalization with preventive measures, coupled with deterrent alternative penalties to reduce the misuse of cheques and also encourage the public to use modern, technological, and digital means instead of traditional paper cheques.

Further, the decriminalization of the issuance of cheques without funds is an essential step in developing and enhancing the flexibility of legislation regulating economic, business, trade, and investment activities in the UAE.


The new amendments reduce the negative aspects revealed by the practical experience of dealing with cheques, compared to the best and most successful international practices. The new amendments would also consolidate the principles of justice by striking a balance between the interests of the cheque beneficiary or bearer in fulfilling their rights as soon as possible and the drawer’s interest in removing any criminal case filed for non-payment of the cheque. This will definitely help to boost business between companies and individuals and provide clarity to banks concerning the procedures and processes associated with the criminal acts, helping them to amend their bank policies. 

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