You may have heard that there were changes to the Commercial Companies Law last year.
You may have heard that there is an extension for companies to comply with the Commercial Companies law (the deadline is 30 June 2017).
But did you know that despite an extension, there are still strict penalties for a company failing to comply with the Commercial Companies law, including amending their constitution?
Should a company fail to amend it’s constitution by 30 June 2017, it will be deemed to be dissolved.
To compound matters, a daily fine of AED 2000 will be imposed on any company that fails to comply by the deadline.
Most companies are unaware that there are certain matters that need to be updated in their Memorandum of Association. For example,
- The procedures for transferring shares to a third party have changed.
- Companies are now required to hold an annual general meeting to discuss matters important for the next financial year.
- The quorum for holding these meetings have also changed.
Legal and Compliance Officers risk facing unusually heavy fines and penalties should they fail to carry out their legal duties as outlined in UAE law. Worryingly, most are unaware of their duties.
Some of the duties that Legal and Compliance Officers should be aware of include:
- Companies are required to keep accounting records at their head office for a minimum of 5 years.
- Companies are required to call an annual general meeting in case of losses that amount to half of its capital.
- Officers of a company must also cooperate with the company’s auditors or an inspector from the competent authority.
The fines for failing to observe these legal duties are as follows:
- Failure to call an AGM in case losses of the company reach half of its capital: the chairman of the board of directors of LLCs will be fined between AED 50,000 – AED 1,000,000;
- Refusal to cooperate with auditors or inspectors: anyone who fails to cooperate with an auditor or inspector, whether it is the chairman, director, CEO, general manager or employee, will be fined between AED 10,000 – AED 100,000;
- Lack of accounting records: a company will be fined if it does not keep accounting records reflecting its transactions between AED 50,000 – AED 500,000; and
- Maintaining accounting records: if a company fails to maintain its accounting records at its head office for at least five years, it will be fined between AED 20,000 – AED 100,000.
If you want to save money, reduce your risk and ensure your company is compliant with the Commercial Companies Law contact James Berry & Associates to find out how we can help.
James Berry & Associates provides compliance services to help companies amend their constitution. We also offer company secretarial services to assist Legal and Compliance Officers of a company to carry out their duties; thereby protecting them and the company from heavy fines and penalties arising from a failure to observe legal duties outlined in UAE law. Should you wish to benefit from these services, we would be happy to assist you and answer any queries you may have. Please feel free to contact James Berry at enquiries@jamesberrylaw.ae.
Managing Partner