The new UAE Commercial Companies Law — The Notable Changes

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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of major reform, Federal Law by Decree No 32 of 2021 (the “New Commercial Companies Law“) has been introduced, which repealed and replaced the existing Federal Law No 2 of 2015 (as amended) (the “Existing Commercial Companies Law”)in UAE .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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If you have queries or are concerned as to the effect of the introduction of the New Companies Law on your business and are unsure of the next steps you should be considering, Binu Karthikeyan would be happy to assist. Book a consultation now !