UAE limited liability companies need to update their memorandum and articles of association before 30 June 2016 or risk dissolution under the new Commercial Companies Law, according to Hamad Haider, partner at PwC Legal, speaking at the National Bank of Fujairah (NBF) Knowledge Series 2016.

“Failure to make these changes may result in stringent penalties,” says Haider. “The first is dissolution of the company, which is a harsh penalty, and it is not clear how it will be applied.” 

A fine of AED2,000 a-day will also be levied from any companies that fail to comply. However the law does not set out how long fines will be applied before dissolution, or how dissolution and liquidation of assets and liabilities would be carried out.

Many companies have not updated their memorandum and articles of association, hoping that the deadline would be extended.

“In our last discussion with the DED [Department of Economic Development] in Dubai, we asked them about rumours that the deadline was going to be extended, and the DED has confirmed that there are no plans to extend the deadline,” Haider warned an audience of NBF clients.

The changes to the memorandum and articles of association are relatively minor. The changes include additional details of shareholders, removal of references to the old law, the use of international accounting standards, quorum of the general assembly and valuations for pre-emption of shares.

The requirement does not apply to freezone companies.

The UAE’s Commercial Companies Law was issued in July 2015, and aims to update the regulation of companies in a rapidly growing and changing economy, but many think the much anticipated law has fallen short of the expectations of the business community.