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In addition, some provisions of the law served to create uncertainty in the minds of lawyers.
One such provision was Article 104 which states: “In respect of matters not specifically provided herein, the provisions concerning Joint Stock Companies shall apply to the Limited Liability Company; and the words “Competent Authority” shall replace the term “Authority” wherever it appears.”
The precise operation of this provision was not spelled out in the CCL. Therefore, confusion developed in determining which provisions concerning public joint stock companies (“PJSCs”) may or may not apply in respect of limited liability companies (“LLCs”). Even expert legal practitioners disagreed on the best and most feasible interpretations.
In order to assist the business and legal community the UAE Ministry of Economy recently issued Ministerial Resolution No. (272) of 2016 entitled ‘Application of Some Provisions of Public Shareholding Companies to Limited Liability Companies’ (“Resolution”). This Resolution serves to clarify the precise scope of operation of Article 104.
In this article, we have addressed key points the Resolution covers.
Which CCL provisions affecting PJSCs now apply to LLCs?
The following PJSC provisions are now confirmed as applying to LLC’s:
Which provisions affecting PJSCs do not apply to LLC’s?
The key provisions affecting PJSCs which do not operate in the running of LLCs are provisions concerning the election of Board members, the number of members (minimum and maximum), or nationalities of the Board Chairman and members and their annual remuneration (Articles 143, 144, 145, 147, 149, 151 and 169), provisions governing related party transactions (Article 152) and restrictions concerning financial assistance (Article 222).
How has the Resolution served stakeholders in the UAE?
The Resolution has provided the legal and business community with some much needed clarity particularly in clarifying that the restriction on companies providing financial assistance connected to the purchase of their own shares applies only to PJSC’s and not to LLC’s. This major clarification alone is a welcome development in resolving a key question in construing Article 104 of the new Law.
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