Before the year-end of 2019, the Dubai Multi Commodities Center Authority (DMCCA) announced the issuance of new regulations for all entities registered and licensed by the DMCCA. The new regulations are following international best practice and will support the DMCC’s standing as a leading global free zone.

1. Current Situation

The previous Company Regulations dated back to 2003. Amendments were introduced in 2007, 2009 and lastly in 2013 without having implemented the UAE Commercial Companies Law introduced in 2015.

The Company Regulations 2003 did not include – for example – different types of shares or the possibility to migrate to or from the DMCC. Furthermore, it was not mentioned whether the provisions of the Federal Commercial Companies Laws were applicable to entities registered and licensed by the DMCC.

2. New Company Regulations

The new Company Regulations 2020 (Regulations) came into effect on January 2, 2020 and are applicable likewise to existing and new entities in the DMCC.

With the new Regulations, the DMCCA has introduced several new procedures that will make the administration of the companies in DMCC more flexible. Furthermore, the Regulations provide greater clarity on certain other topics and corporate roles.

It should be noted that the Federal Commercial Companies Law is not

applicable to companies and branches registered and licensed in the DMCC (Art. 184.9 Regulations).

Hereinbelow, we have summarized the most noticeable changes introduced and clarifications provided under the Regulations:

a) Share Types

Corporate entities licensed by the DMCCA can now issue different types of shares which allows them to structure their shareholding in accordance with their needs.

The shareholders of the company may provide in their Articles of Association as to which types of shares can be issued and which rights are attached to each type of share (Art. 27 Regulations). It should be noted that the Regulations do not mention any specific types of shares. In accordance with Art. 32 of the Regulations, only bearer shares are expressly prohibited from being issued.

The issuance of different types of shares provides the company with the possibility to look for financial investors without the requirement of furnishing them with the same rights as the existing/voting shareholders.

New Company Regulations in the DMCC

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b) Management

The Regulations clarify that each corporate entity has to have at least one manager, one director and one secretary. In case of a branch only one manager is required whereas the appointment of a secretary is optional.

While directors and managers can only be natural persons, the secretary may also be a corporate entity. This means that third party service providers – such as (legal) consultants – may be appointed as secretaries in order to fulfil this legal requirement.

The duties of the directors, manager and secretary are set out in the separate Officer Rules (Officer Rules). The Officer Rules define the requirements and conditions for the appointment of a director, manager and secretary and they define the tasks and obligations of the respective position as follows:

Director

implementation of overall strategy,

business activities and affairs;

risk management (compliance and

governance); and

ensuring the manager and secretary

are fulfilling their tasks.

Manager

day to day management in accordance

with the directors’ directives; and

implementation of any powers granted

to him by the Articles of Association

and/or by the directors and

shareholders.

Secretary

filing all documents with the registrar

in accordance with the Regulations;

calling for the directors‘ and/or

shareholders’ meetings; and

maintaining and keeping the register

for the minutes of meeting.

c) Dormancy

In accordance with Art. 172 of the Regulations, any company may now apply with the DMCCA to suspend its license for a period of up to 12 months. During this period the company will not be allowed to carry out any commercial activity.

The suspension of the license may give companies in a difficult financial situation an opportunity to put the license on hold instead of deregistering it altogether. This will help reduce the costs for the companies whilst keeping the company in exitence.

d) Articles of Association

For the first time and as one of a few free zones in the UAE, DMCCA is now allowing companies to use their own Articles of Association draft instead of the standard DMCC Articles of Association form (which will still be available for companies).

If a company decides to adopt its own draft of Articles of Association, such shall not contradict the Regulations. Furthermore, the company will be required to submit a legal opinion – issued by a independent legal firm – on the compliance of the proposed Articles of Association with the Regulations.

e) Migration

Under the Regulations, DMCCA also offers existing companies to migrate into the DMCC. A company registered in another free zone in the UAE, in the mainland of one of the Emirates of the UAE or even in a foreign jurisdiction now has the opportunity to relocate its business to the DMCC by keeping its corporate identity.

However, it should be noted that a migration into the DMCC will only be possible if the exiting jurisdiction

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acknowledges and recognizes the possibility to migrate into another jurisdiction. In order to succesfully migrate into the DMCC, the company will require a non objection certificate from its registrar.

So far in the UAE, the Jebel Ali Free Zone, the Dubai Airport Free Zone and Dubai South are offering such a possibility and hence provide the necessary tools.

The same aforementioned conditions apply if a company wants to migrate out of the DMCC into another jurisdiction.

3. Summary

The new Regulations provide clarity on matters that raised questions in the past – especially about the tasks and responsibilities of office holders.

Furthermore, the possibility to adopt own Articles of Association together with the possibility to issue different types of shares will provide companies with the a greater flexibility to structure their shareholding, attract new investors and expand their business.

Although SCHLÜTER GRAF Legal Consultants make every effort to provide correct and up to date information in our newsletters and briefings, we cannot take responsibility for the accuracy of the information provided. The information contained in this briefing is not meant to replace a personal consultation with a qualified lawyer. Liability claims regarding damage caused by the use or misuse of any information provided, including information which is incomplete or incorrect, will therefore be rejected, unless this misinformation is deliberate or grossly negligent.

SCHLÜTER GRAF The Citadel Tower, Offices 2001-2005 Business Bay, P.O. Box 29337 Dubai / United Arab Emirates Tel: +971 / 4 / 431 3060 Fax: +971 / 4 / 431 3050 Yulia Kasiyanova (yulia.kasiyanova@schlueter-graf.com)