UNITED ARAB EMIRATES – FNC passes draft companies law in UAE

THE Federal National Council on Tuesday, 28 May 2013, passed the long-awaited draft companies law, which requires to be signed into law by President His Highness Shaikh Khalifa Bin Zayed Al Nahyan. 

Members of the House voted for a change in the name of the draft law, which they said should be referred to as Commercial Companies Law. Sultan Bin Saeed Al Mansouri, Minister of Economy, said he favoured the name to remain Companies Law and that he will raise this point with the Cabinet. 

The members said the bill would be enacted three months after being published in the official gazette, by the end of this year. The Ministry of Economy, they said, has to issue the executive statute. The members also discussed certain clauses related to corporate social responsibility and the system of excluding companies from the law, among other issues. Several members of the House pressed for making it obligatory for businesses to contribute towards the welfare of the society which provides them with the environment and resources to flourish and which is affected by their actions. 

Al Mansouri said international best practices in corporate social responsibility in many countries, including the US, Malaysia, Jordan, Egypt and India, make corporate social responsibility voluntary and is regulated by each company’s bylaws. Eventually, the House voted for allowing companies to voluntarily contribute up to two per cent of their average profits during the two fiscal years before the contribution is made. 

The council voted for authorising the Cabinet to issue a decision to further regulate corporate social responsibility.The bill carries a prison term of up to six months and a fine of up to AED10 million for the offence of market manipulation or transactions which create an artificial price or maintain an artificial price for tradeable securities. 

Under the draft law, misrepresenting a company’s true financial position carries a jail term of up to three years, or a AED500,000 fine or both. Some members of the House demanded a clause be included in the draft companies law regulating protection of competition and prevention of monopoly practices. A draft law on protection of competition and prevention of monopoly practices will be submitted this year to the FNC. “The law is aimed at providing a climate of free competition based on developed and world-class regulations free of monopoly practices,” Al Mansouri said. 

A clause which would have eased foreign ownership of companies was scrapped with Al Mansouri saying the issue will be addressed in the investments laws, scheduled to be approved by the end of this year. 

The draft law also stipulates that chairpersons of public joint stock companies and the majority of the board members must be Emirati. According to the bill, distribution of profits or dividends in violation of the law carries up to three years in prison, or a fine of up to AED500,000 or both. The same punishment is handed to a liquidator who intentionally inflicts harm on a company. Under the bill, the penalty for disclosure of company secrets shall be up to six months in jail, or a fine up to AED500,000 or both.

Sultan Bin Saeed Al Mansouri, Minister of Economy