DIFC Introduces New Law Supporting Small Private Companies in the UAE

Key changes in the Companies Law and Regulations

• The new law has abolished limited liability companies and has introduced a new classification of public and private companies. The private and public company regime will now allow maximum flexibility, especially for small private companies. With the introduction of the new law, private companies limited by shares (Ltd.) can have up to 50 shareholders and public companies limited by shares (Plc.) can have any number of shareholders. Moreover, there will be a distinct set of requirements for both of them.
• A public company must operate with at least two directors and a company secretary whereas a private company is not required to appoint a company secretary and can operate with just one director.
• The new law will further expand directors’ duties for DIFC companies. They are expected to disclose any interest in a transaction that is entered into or is proposed to be entered into by the company that conflicts or may conflict with the interests of the company. Furthermore, directors are required to act honestly, lawfully and in good faith keeping the best interest of the company.
• Another change is, a public company is required to have a minimum of USD 1,00,000 capital, of which at least 25% must be paid up. However, a private company is not required to have a minimum share capital.
• The new law also introduced a statutory pre-emption right for existing shareholders of the companies to guard against undue dilution of their existing rights.
• The new law has enacted a new schedule of administrative fines that the Registrar of Companies can impose on a company.
• As per the new law, companies are not required to notify ROC about the initial allotment of shares. Notification is required only in case of subsequent allotments.
• The law further provides new provisions for ‘whistle-blower’ protection.
• The law also enhanced the company accounting and auditing requirements.