Published: Mar 10, 2019

DIFC Corporate Governance – Amendment of the Articles

The enactment of the new Companies Law (DIFC Law No. 5 of 2018), Operating Law (DIFC Law No. 7 of 2018), Companies Regulations and Operating Regulations (“New DIFC Regime”) has imposed an obligation upon your DIFC business to comply with numerous requirements, one of which is the alignment of your DIFC company articles with the New DIFC Regime.

Based on our discussion with the DIFC, each DIFC company should revise its articles to align them with the New DIFC Regime.

Until such time the new articles are adopted, the existing articles of your company will continue to be valid to the extent that they do not conflict with the New DIFC Regime.

 

Key Areas of Focus:

The following areas require particular attention when the articles re aligned with the New DIFC Regime:

  • overall format and terminology used throughout;
  • licensed activities references;
  • extent of shareholder liability;
  • share capital structure;
  • share classes variety;
  • lien over partly paid shares;
  • calls on shares and forfeiture;
  • number of directors (minimum one); and
  • conflict of interest framework.

 

Options Available

Under the New DIFC Regime, your DIFC company can:

  1. follow the new DIFC format Articles;
  2. adopt the new DIFC format Articles, with some business-specific modifications; or
  3. adopt an individually chosen set of articles, so long as those comply with the New DIFC Regime (“New Articles”).

Although under the New DIFC Regime companies have until 12 November 2019 to revise the articles, the completion of the New Articles takes at least a month, on average.

In addition to Ramadan, summer time, the time required to prepare the documents and secure signatures, the DIFC have been busy accepting numerous submissions under the New DIFC Regime, which has caused some delays in their processing the New Articles submissions.

 

Potential Sanctions

It is important to start the New Articles implementation process as soon as possible as failing to adopt the New Articles may result in the DIFC imposing a penalty of USD 15,000.

 

How Can We Assist You?

Our team of experts will be delighted to assist you by:

  1. identifying areas for revisions under the articles of your DIFC company;
  2. preparing a set of documents to adopt the New Articles;
  3. processing the DIFC portal submission of New Articles.

If you require any assistance in this regard, please let us know and we will be happy to provide our support.

 

Izabella Szadkowska
Partner, Corporate Structuring
i.szadkowska@tamimi.com

 

Noff Al Khafaji
Senior Associate, Corporate Structuring
n.alkhafaji@tamimi.com

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