COVID-19 ushered changes in the functioning of all the major economies around the world. Governments everywhere brought massive reforms to their administrative and legal functioning so as to keep growing effectively amidst Covid-19. The government of the United Arab Emirates (UAE) also adopted various amendments to the laws which have brought massive transformation in how businesses are conducted in the UAE. Some of these changes are highlighted below.
Commercial Transaction Law Amendments
The amendment has been brought to bring changes in the law regarding cheque bounce. The law has been changed to only punish individuals who
(1) ask their banks to deny payment of a cheque (with exceptions);
(2) withdraw funds or close their account with an aim to deny payment;
(3) deliberately sign a cheque in a manner to make it unplayable.
The amendments ensure fair commercial transactions and processes, protect the rights of the citizens, and strengthen the legal practices.
UAE Commercial Company Law amendment
Amendments made to the Commercial Company Law in 2020, has removed the requirement of having Emiratis as 51% owner for registration of an Onshore Company in the UAE. Foreign investments up to 100% are now allowed in all sectors except in ‘Activities of Strategic Effect’. Foreign Companies are no longer required to have UAE nationals as directors in a joint stock company. The Departments of Economic Development in each of the Emirates are given the responsibility to come forward with list of such business activities where 100% foreign ownership is to be allowed. Dubai, Ajman and Abu Dhabi have drawn up a list of 1,105, 1000 and 1100 commercial activities respectively, where 100% foreign investment will now be welcomed.
Ultimate Beneficiary Owner (UBO) Declaration
Intending to curb money laundering, financial fraud, tax evasion, and terror finance, the UAE government is taking steps to ensure financial transparency. The Cabinet Decision No. 58 of 2020, has created a mechanism to recognize the Ultimate Beneficiary Owners (UBOs) of an entity. UBOs are (1) individuals who have control or ownership (direct/indirect) or have the right to vote with a minimum 25% shareholding in a company or the individuals who have the right to appoint or dismiss the majority of the directors/managers. (2) If any natural person fails to satisfy the above conditions then UBO will be such an individual who exercises indirect control over the entity.
If conditions in (1) and (2) do not provide a clear UBO, then the individual responsible for senior management of the company shall be deemed as the Ultimate Beneficiary Owner of that entity. The cabinet decision requires the entities to maintain adequate and up-to-date information about their shareholders and the ultimate beneficiary owners.
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