UAE Commercial Companies Law: Federal Law No. 2 of 2015 Analysis

This report provides a comprehensive overview of the Federal Law No. 2 of 2015 on Commercial Companies in the United Arab Emirates. Enacted on April 1, 2015, and enforced on July 1, 2015, the law replaced the previous commercial companies law of 1984, aiming to modernize the UAE's market and enhance corporate efficiency. The report summarizes key chapters, including general provisions applicable to companies established in the country and foreign companies operating branches in the UAE. It details the types of companies recognized, such as Joint Liability, Simple Commandiate, Limited Liability, Public Joint Stock, and Private Joint Stock Companies. The analysis covers the formation, management, and operations of these companies, including the roles and responsibilities of managers, shareholders, and the company registrar. Furthermore, the report highlights the law's emphasis on social corporate responsibilities, protection of shareholders, and support for foreign investments, while also addressing provisional and financial provisions, including the transition period for existing companies to comply with the new regulations. The paper concludes by emphasizing the law's positive impact on company management and its role in attracting foreign investments.

Running head: Legal Environment and Regulation 1
Federal Law on Commercial Companies No.2 of 2015
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Legal Environment and Regulation 2
Introduction
The Federal Law No.2 of 2015 was enacted on 1 April, 2015 and came into force on 1
July 2015, replacing the original commercial companys’ law that had been used since 1984. The
reception of the law was positive, with companies looking forward to a prevailing corporate
structure. It has so far made remarkable changes that have seen the UAE shift to a more
organized market that incorporates efficiency in its operations. This has been done through slight
but profound changes like an overhaul on provisions that determine which type of companies to
operate in UAE and the number of manager in a company. As a result of this, the state`s role in
ensuring an efficient economic has been emphasized on social corporate responsibilities of
companies, protection of shareholders and the support of foreign investments. This paper will
give an overview summary of the chapters in the law.
General Provisions for Companies
The provisions of the law and all the issued instructions under the law apply to the
companies established in the country, while the laws on foreign companies apply to the foreign
companies that have based their full corporate operations or branches in the country. The
exemptions of certain companies is also outlined in the law and applies to the companies owned
by either the federal or local government either directly or indirectly .Oil exploration, drilling,
refining, manufacturing or companies operating in the energy sector with a 25 % share allocation
to the federal government are also exempted from Federal Law No. 2 of 2015.Other companies
exempted from the law include those operating in free zones unless registered and authorized to
carry out their operations in the state outside the free zones by the Cabinet (Article 5).

Legal Environment and Regulation 3
Article 6 tasks the Minister with issuance of laws of Governance concerning private joint stock
companies with a number of shareholders exceeding 75-As, the breach of these laws attracts
fines imposed on the chairman or directors not exceeding AED ten million. True to its objective
the Federal Law No. 2 of 2015 instructs companies to take the following forms, Joint Liability,
Simple Commandiate, Limited Liability, Public joint Stock and private stock companies.
The UAE partners are given are share capital of 51 %, incorporating the cabinet solely
with UAE nationals. The company is then required to obtain a permission of practicing within
the state unless armed with the Memorandum of Association. The company goes through the
basic formation requirements like drafting, registering, evidencing the Memorandum. The
second phase is the partners’ contribution to the company and accounts, records of the company.
The law also outlines the process for profit and loss distribution. When it comes to company
registrar, its activities are issued by the Minister along with the Competent Authority. The law
also stretches to the role of the registrar and the period it should keep the company`s document.
Partnerships
For a Joint Liability Company, the law prescribes that a partner who is not a manager
does not have the power to run or authorize the activities of the company despite the fact
decisions of the company are made under consultation by all the partners (Article 49).The Joint
Liability partners are given the ability to trade like a company and an incorporation procedure
outlined. Furthermore the law gives any detailed procedure involved in the dismissal,
resignation, liability of a manager. This also proposes that both a joining and withdrawing
partners are liable and bear the same obligations as the other partners in terms of debt. The rest is
on the assignment of shares, and rights of a deceased partner, whereby the shares of the deceases

Legal Environment and Regulation 4
at to be paid either immediately upon their death or at the date of the dissolution (Article 47 and
48). The Federal Law N.O 2 Of 2015 goes ahead to outline the acts that a manager is not allowed
to do and their liability.
The other types of companies such as the Limited Liability Company also have been given
specified instructions on how to run their operations ranging from the rights of a silent partner to
the restrictions of a manager in undertaking the running of competing company.
Private Joint Stock Companies
This is a company with a minimum of 2 and maximum of 200 shareholders and under the
Federal Law shall have a capital not exceeding AED five million. The founders of the company
are instructed under the law to choose two of their members to structure and finalise on the
necessary documents needed for incorporation and do a follow up in the procedures of
application with the Ministry and Competent Authority (Article 258). It shall provide an
application of incorporation to Competent Authority along with the Memorandum of Association
and the Articles of Association for consideration. The company is required to register the names
of shareholders and their shares along with a certificate of incorporation that is accompanied by
the memorandum of Association, Articles of Association and bank certificates that validate the
capital effectiveness of the company (Article 113). Furthermore the company is not allowed to
transfer its shares before conducting a publication of the documents showing the profits and
losses of the company within that financial year. The same case applies to increasing the capital
of the company. According to article 79 and 80, a partner may assign their shares to another
partner or a third party as long as they follow the rules prescribed by the Memorandum of
Association.

Legal Environment and Regulation 5
Companies with Special Structure
The law defines a holding company as either a joint Stock Company or Limited Liability
Company that has a subsidiary company within or outside the company, has power over existing
companies by holding their stock or shares hence giving it an upper hand in the decision making
and management of the company. The objectives of the holding company are:
 Holding stock or shares in Joint Stock Companies and Limited Liability Companies
 Providing an efficient stream of funding to maintain its subsidiaries
 Management and planning of the subsidiary like the acquisition of real estates.
The holding company can only have dominion and management of the subsidiary company if
it has the highest number of shares in that company. Moreover, the subsidiary company is
prohibited from holding in the holding company that controls it (Article 269).
Provisional and Financial Provisions
Article 374 requires all existing companies to heed to the provisions prescribed under this
law within a year from the time it is affected .In the event of a breach or non- compliance the
company is to be deemed dissolved with the express authorization of the Federal Law No.2 of
2015.Any other law contravening the provisions and instructions of this law are to be revoked.
The decisions given in the implementation of the Federal Law No. 8 of 1984 shall continue to be
enforced without any conflicting collisions with the provisions of this law.
Conclusion

Legal Environment and Regulation 6
Since the enforcement of the Federal Law No 2 of 2015, companies have been keen on
obeying its provisions. This has improvement management of companies and tightened any lose
notes on company shares. The law has also played a huge part in attracting foreign investments
due to the structuring and credibility of the companies in the country.
Reference
Federal Law on Commercial Companies No. 2 (2015)