New laws were enacted 12 November 2018 to update the legal and regulatory framework in the Dubai International Financial Centre (DIFC). The changes to the companies and property regimes, as well as the overall operating environment, are intended to ensure that the DIFC remains the most sophisticated and business-friendly common law jurisdiction in the region.
The previous Companies Law recognised three main types of companies – companies limited by shares, limited liability companies (LLCs) and ‘recognised companies’ (branches of foreign companies). Under DIFC Law No. 5 of 2018, which repeals and replaces DIFC Law No.2 of 2009, the form of LLCs has been abolished and companies are now categorised either as ‘Private Companies’ and ‘Public Companies’. Generally, private companies are subject to fewer regulatory requirements than public companies. Recognised companies continue to exist
LLCs that were incorporated under the old companies law have been automatically converted into private companies, while entities incorporated as companies limited by shares have automatically been converted into either private or public companies. All companies should have received a notification of their new status following conversion.
The changes to the companies law are accompanied by a complete overhaul of the companies and operating regulations to facilitate ease of doing business, whilst also bringing them into line with the latest requirements of the Organisation for Economic Co-operation and Development (OECD) and Financial Action Task Force in respect of transparency of beneficial ownership and anti-money laundering requirements.
In addition, the new law provides appropriate levels of oversight for complex corporate arrangements, such as those associated with listed entities, mergers, schemes of arrangement and debt restructurings.
Private Companies may not make an offer of their securities to the public, can have between one and 50 shareholders and must use the word ‘Limited’ or the abbreviation ‘Ltd’ after their names. There are no requirements for minimum share capital or fully paid-up shares. Private Companies must have at least one director with an optional company secretary and are not required to hold an AGM unless expressly required in their articles of association.
Public Companies may make an offer of their securities to the public, may have any number of shareholders and must use the words ‘Public Limited Company’ or the abbreviation ‘PLC’ after their names. They must have an issued and allotted share capital (excluding treasury shares) of at least US$100,000 at all times and issued shares must be paid-up as to at least 25% of their value. Public Companies must have at least two directors and a company secretary, and are required to hold an AGM.
The new Companies Law sets out an extensive set of duties on directors of both private and public companies that are based on the provisions of the UK Companies Act 2006. Directors are now obliged to exercise independent judgment and are required by law to promote the success of the company.
There is a carve-out for small private companies with annual turnovers of not more than US$5 million and with not more than 20 shareholders from having to audit their accounts. Directors of every company are still required, however, to arrange for financial accounts to be prepared in relation to each financial year regardless of audit requirements.
All DIFC companies are now required to maintain a register of ultimate beneficial owners – defined as individuals owning or controlling, directly or indirectly, at least 25% of a company. The register must be put in place within 90 days of the date of enactment of the law. It is not a public register but it must be provided to the DIFC Registrar of Companies, which also needs to be notified of any changes. Public companies that are listed on a recognised stock exchange are not required to maintain a register of ultimate beneficial owners, unless an individual or entity owns 25% or more of the shares.
The New Companies Law will affect all types of entities already registered in the DIFC, as well as those entities that are currently in the process of setting up in the DIFC or considering a future incorporation in the financial free zone. For further information or assistance, please contact Zijad Hanic.