UAE Federal Law No. (2) of 2015 AD On Commercial Companies

Federal Law No. (2) of 2015 AD

On Commercial Companies

We, Khalifa bin Zayed Al Nahyan, the President of the United Arab Emirates;

 Having reviewed the constitution;

  Federal Law No. (1) of 1972 Regarding Competencies of Ministries and Powers of Ministers, and laws amending the same;

 Federal Law No. (5) of 1975 Regarding Commercial Register;

 Federal Law No. (10) of 1980 Regarding the Central Bank, Monetary System and Regulation of Banking Profession;

  Federal Law No. (8) of 1984 Regarding Commercial Companies, and Laws amending the same;

 Civil Transactions Law, enacted by Federal Law No. (5) of 1985, and Laws amending the same;

 Federal Law No. (6) of 1985 Regarding Islamic Banks, Financial Institutions and Investment Companies;

 Penal Code enacted by Federal Law No. (3) of 1987, and Laws amending the same;

 Federal Law No. (22) of 1991 Regarding Notary Public, and Laws amending the same;

 Civil Transactions Law No. (11) of 1992, and Laws amending the same;

 Criminal Procedure Code enacted by Federal Law No. (35) of 1992, and Laws amending the same;

 Evidence Law in Civil and Commercial Transactions enacted by Federal Law No. (10) of 1993 and Laws amending the same;

 Commercial Transactions Law enacted by Federal Law No. (18) of 1993;

 Federal Law No. (22) of 1995 Regulating Auditing Profession, and Laws amending the same;

 Federal Law No. (29) of 1999 Establishing the General Authority of Islamic Affairs & Awqaf (Endowments), and Laws amending the same;

 Federal Law No. (4) of 2000 Regarding the Emirates Securities & Commodities Authority and Market, and Laws amending the same;

 Federal Law No. (7) of 2002 Regarding Copyrights and Neighboring Rights, and Laws amending the same;

 Federal Law No. (8) of 2004 Regarding the Financial Free Zones;

 Federal Law No. (17) of 2004 On Combating Commercial Concealment, and Laws amending the same;

 Federal Law No. (1) of 2006 Regarding Electronic Transactions & E-Commerce;

 Federal Law No. (4) of 2007 Establishing Emirates Investment Authority;

 Federal Law No. (6) of 2007 Establishing and Regulating Activities of Insurance Authority;

 Federal Law No. (4) of 2012 on Regulation of Competition;

 Upon the proposal of the Minister of Economy and approval of the Cabinet and Federal National Council, and ratification of Federal Supreme Council; The following Law is hereby enacted:

Chapter (1)

General Provisions of Companies

Section (1)

Definition of Company

Article (1)

Definitions

In the application of the provisions of this Law, the following words and expressions shall have the meanings respectively assigned against each, unless the context otherwise requires:

 Derivatives and investment units approved by the Authority.

 Bonds, Sukuk and bills issued by Federal Government, Local Governments, authorities or public institutions of the State.

 Bonds, Sukuk and any debt instruments issued by companies as per the regulation issued by the Central Bank and the Authority.

Article (2)

Law Objectives

This Law is aimed at contributing to the development of business environment and State’s capabilities and economic standing through regulation of companies as per international changes, especially in relation to governance rules, protection of rights of shareholders and partners, supporting flow of foreign investment and enhancing corporate social responsibilities.

Article (3)

Companies Governed by Provisions of this Law

Provisions of this Law as well as regulations, byelaws and decisions issued in execution of the same, shall apply to commercial companies that are incorporated in the State. The provisions regarding the foreign companies set forth in this law as well as the decisions and byelaws issued in execution of the same shall apply to the forging companies which exercise any activity or have any branches or representation offices in the State.

Article (4)

Companies Exempted from Provisions of this Law

Article (5)

Companies Working in Free Zones

Article (6)

Corporate Governance

Article (7)

Violating Governance Rules

Article (8)

Concept of Company

Article (9)

Company Forms

Section (2)

Incorporation and Management of Company

Article (10)

National Shareholding Percentage

Article (11)

Exercising Activity

Article (12)

Company Name

Article (13)

Company Address & Correspondence

Article (14)

MOA Writing

Article (15)

Registration of Company’s MOA with Competent Authority

Article (16)

Substantiation of Company’s MOA by Third Party

Article (17)

Nature of Share Contributed by a Partner

Article (18)

Company’s Contribution Rules

Article (19)

Violation of Company’s Contribution Rules

Article (20)

Execution Against In-Kind Share

Article (21)

Legal Entity of Company

Article (22)

Obligations of Company’s Authorized Manager

Company’s authorized manager shall maintain its rights, exercising due diligence and care, and shall undertake all actions that are consistent with Company’s purpose and powers conferred thereon under an authorization issued by the Company in this regard.

Article (23)

Company shall be liable for any procedure or actions taken by its authorized manager while exercising normal managerial works, and shall be liable for any action taken by any of its employees or agents, whenever such person is authorized to act on behalf of the Company and a third party relies on such authorization in its dealing with the Company.

Article (24)

Exemption from Liability

Subject to provisions of this Law, any provision included in Company’s MOA or AO allowing the Company or any of its subsidiaries to agree to exempt any person from any personal liability incurred by such person due to his present or former role in the Company, shall be null and void.

Article (25)

Protection of Company’s Customers

Article (26)

Accounting Records

Article (27)

Company’s Accounts

Article (28)

Company’s Fiscal Year

Article (29)

Distribution of Profits and Losses

Article (30)

Distribution of Profits

Article (31)

Issuance of Securities

Subject to provisions of Article (4) of this Law, only joint stock company may issue negotiable stocks, bonds and Sukuk.

Article (32)

Public Offering of Securities

Only a public joint stock company may offer securities for public subscription, and in all cases no company, entity or natural or artificial person incorporated or registered in the State, free zones or abroad may publish any adverts in the State including an invitation to public subscription to securities, save upon prior approval from the SCA.

Article (33)

Regulation of Registrar Activities

Minister shall, in coordination with Competent Authority, issue the regulations governing activities of registrar.

Article (34)

Supervising Trade Name Register

Article (35)

Article (36)

Company’s Documents Maintained by Registrar

Minister shall issue a decision determining the following:

Article (37)

Accessing Records Maintained by Registrar

Subject to provisions of this Law, concerned parties may request access to the following:

Article (38)

Fees Payable to Ministry and SCA

Cabinet shall, upon proposal of the Minister, and in coordination with the Ministry of Finance, issue a decision of the fees payable by companies against works performed by the Ministry and SCA in execution of this Law.

Chapter (2) Partnerships

Section (1)

General Partnership

Article (39)

Definition of Partnership

General partnership is a company formed of two partners or more of natural persons who are personally and jointly liable, by their properties, for liabilities of the Company.

Article (40)

Capacity of Partners

Active partner acquires capacity of trader, and is deemed to exercise company’s activities personally on behalf of the Company, and declaring bankruptcy of the partnership means bankruptcy of all partners under the Law.

Article (41)

Partnership Name

Article (42)

Partnership’s MOA

Article (43)

Incorporation Procedures

General partnership shall be incorporated and registered as follows:

Article (44)

Information and Documents to be Maintained

General partnership shall maintain the following documents and information at its head office:

Article (45)

Partnership Management

Article (46)

Works Competing with Partnership’s Activity

Article (47)

Dismissal of Manager

Article (48)

Resignation of Manager

If Manager is a partner or not a partner, he shall be entitled to resign from Management, provided that partners are notified of such resignation 60 working days before its effective date, unless the MOA provides otherwise, or else the Manager shall be liable for compensation. Manager’s resolution shall not result in dissolution of partnership, unless MOA provides otherwise.

Article (49)

Prohibited Acts for Manager

Manager may not take any actions beyond ordinary managerial works, save upon consent of all partners or explicit provision in MOA, and such prohibition shall particularly be applicable to the following acts:

Article (50)

Manager’s Contracting for His Own Account

Article (51)

Manager’s Liability

Manager shall be held liable for any damage inflicted on the Company, partners or third parties due to any violation of Company’s MOA, his appointment contract or any negligence, omission or errors in performance of his job or failure to exercise due diligence and care, and any provision to the contrary hereof shall be null and void.

Article (52)

Liability of Multiple Managers

Article (53)

Partnership’s Liability

Partnership shall be liable towards third parties for compensating any damage resulted from acts of any partner, performed by consent of other partners, or during Partnership’s ordinary course of business.

Article (54)

Associate Partner

If a partner joins the partnership it shall be held liable jointly with other partners by all properties thereof, for partnership’s former liabilities, provided that the same have been previously disclosed to such partner by the partnership. Such partner shall be jointly liable with other partners and with all properties thereof for subsequent liabilities of the partnership, and any agreement concluded between partners to the contrary hereby shall not be valid argument towards third parties.

Article (55)

Withdrawn Partner

Register engage a new partner(s) in lieu of the withdrawn partner, or otherwise the partnership is deemed legally dissolved.

Article (56)

Assignment of Shares

Article (57)

Rights of Deceased Partner

Unless otherwise is agreed upon between partners, the amount payable by remaining partners of share of deceased partner shall be considered a payable debt as from the date of dissolving the partnership or date of partner’s death, whichever occurs first.

Article (58)

Article (59)

Mutual Obligations of Partnership and Partners

Without prejudice to provisions of partnership’s MOA, the following obligations shall be maintained:

Partner shall compensate partnership for any benefit he has received due to performing any work related to the Company, using its properties, name or trademark without partnership’s prior approval.

Article (60)

Execution Against Partner’s Properties

No execution may be made against partner’s property due to partnership’s liabilities, save upon securing a writ of execution against the partnership, serving a notice thereon and failing to collect rights therefrom, and a writ of execution issued against the partnership shall be valid evidence against partners.

Article (61)

Profits & Losses

Section (2)

Limited Partnership

Article (62)

Definition of Limited Partnership

Limited partnership is a company formed of one active partner or more who shall be personally and jointly liable for company’s liabilities, and shall have capacity of a trader, and of one limited partner or more who shall not be liable for company’s liabilities, save to the extent of their share in company’s capital and shall not have trader’s capacity.

Article (63)

Capacity of Limited partner

Any natural or artificial person may act as a limited partner in a limited partnership.

Article (64)

Name of Limited Partnership

Name of limited partner may not be mentioned in company’s name, and if his name is added by his knowledge, it shall be deemed as an active partner towards bona fide third parties.

Article (65)

Limited Partnership’s MOA

Article (66)

Management of Limited Partnership

Management of limited partnership shall be limited to active partners, and decisions shall be taken by consensus of active partners, unless its MOA provides that their majority vote shall be sufficient. Any change of the nature of partnership’s business or amendment to its MOA shall only be valid upon consent of all active and limited partners.

Article (67)

Limited Partnership’s Borrowing

Article (68)

Rights of Limited Partners

Pursuant to the provisions of this Article, a limited partner shall not be deemed to participate in management of partnership when exercising any internal regulatory business thereof, and shall not be held jointly liable for partnership’s debts towards bona fide third parties.

Article (69)

Managerial Works

Article (70)

Assignment of Shares

Limited partner may not assign his share in the company fully or partially to third parties, save upon consent of all partners, or as otherwise provided by partnership’s MOA. Assignee shall be deemed a partner only upon registration of such assignment with competent Authority and notifying the registrar of the same.

Chapter (3)

Limited Liability Company

Section (1)

Incorporation of Limited Liability Company

Article (71)

Definition of Limited Liability Company

Article (72)

Company’s Name

Article (73)

Company’s MOA & Incorporation Procedures

Limited liability company shall be incorporated and registered as per the provisions set out in Articles (42 and 43) of this Law.

Article (74)

Register of Partners

Article (75)

Increasing Number of Partners

Article (76)

Company’s Capital

Article (77)

Indivisible Share of Partner

Partner’s share shall be indivisible, and if owned by multiple persons without naming their representative before the Company, the person whose name is mentioned first in MOA shall be considered as their representative, and the Company may grant shareholders a period of time to make such choice, and upon expiry of such period, the company may sell such share on behalf of the owners thereof, and in such case, partners shall have priority to redeem the same. If redemption right is used by more than one partner, shares shall be divided amongst them as per their respective capital shares, unless otherwise is agreed on.

Article (78)

Valuation of Corporeal Shares

Article (79)

Assignment and Mortgage of Partner’s Share in Company

Article (80)

Article (81)

Execution Against Partner’s Share in Company

In the event of commencement of the execution procedures by a creditor against proceeds of the share of his debtor, such creditor may agree with the debtor and the company on the method and terms of sale, otherwise the share shall be put forward for public auction sale upon an application submitted to the Court of competent jurisdiction. One partner or more may recover the share sold under the same auction conveyance terms awarded thereto within fifteen days from the date thereof. The above provisions shall apply in the event of a partner’s bankruptcy.

Article (82)

Partner in limited liability company shall be held liable towards the company for any properties of the company held by such partner in a fiduciary capacity, profits or benefits he gains through company’s business or activities or through utilizing company’s properties, name or commercial relations.

Section (2)

Company Management

Article (83)

Company Managers

Article (84)

Liability of Company Managers

Article (85)

Vacancy of Company’s Manager Position

Article (86)

Competitive Business Exercised by Company’s Manager

Save upon approval of General Assembly of partners, Manager may not assume management in another competitive company or with similar purposes, and may not conclude for his own account or for third parties any transactions in a competitive or similar trade, and violating this provision shall result in dismissal of the Manager and indemnity.

Article (87)

Liability for Preparation of Accounts

Company’s manager shall prepare annual budget, profit and loss account and annual report on company’s activities and financial standing, and shall provide suggestions regarding distribution of profits to the General Assembly within 3 months as from the expiry date of the fiscal year.

Article (88)

Appointment of Supervisory Board

Article (89)

Powers of Supervisory Board

The supervisory board may inspect the company’s books and documents and may, at any time, instruct the managers to submit a report on their activities and control the budget, the annual report and distribution of the profits, and shall, at least five days before its convention, submit a report to this effect to General Assembly of partners.

Article (90)

Liability of Supervisory Board Members

Members of the supervisory board shall not be liable for the actions of managers unless they became aware of the defaults therein and failed to mention the same in their report to the General Assembly of partners.

Article (91)

Rights of Non-Managing Partners

Partners who are not managers in the limited liability companies where no supervisory board exists shall have the same rights of partners mentioned under this Law or MOA and any agreement to the contrary of this provision shall be null and void.

Section (3)

General Assembly

Article (92)

Formation & Convention of General Assembly

Article (93)

Invitation to General Assembly Meeting

With the exception of deferred General Assembly meeting due to incomplete quorum as per the provision of Article (96) of this Law, invitation to the General Assembly meeting shall be addressed by registered letter or any other means set out in the MOA, at least 15 days before the date fixed for the meeting or during a shorter period agreed upon by all partners.

Article (94)

Agenda of Annual General Assembly Meeting

General Assembly meeting of limited liability company shall have competence in its annual meeting to consider and decide on the following matters:

Article (95)

Attending General Assembly Meeting

Each partner is entitled to attend the General Meeting irrespective of the number of shares he holds. He may appoint a partner, other than a manager, or any other person allowed under MOA to represent him by proxy at the General Meeting. Each partner shall have a number of votes equal to the number of shares owned or represented by him.

Article (96)

Legal Quorum for Convention and Voting

Article (97)

The General Meeting may not deliberate on matters outside the scope of the agenda except, if, during the meeting, certain significant facts demanding discussion, be disclosed. If a partner requested the inclusion of a specific item on the agenda, the managers shall comply therewith, otherwise the partner shall be entitled to refer to the General Meeting.

Article (98)

Discussing Topics on Agenda of General Assembly Meeting

Each partner shall be entitled to discuss items on the agenda and the managers shall give replies to their questions to such an extent that is not detrimental to other company’s interests. If a partner considers the reply to his query insufficient, he may refer to the General Meeting whose resolution shall be enforceable.

Article (99)

Voting on Release of a Managing Partner

The managing partners may not vote on resolutions relating to their release from the management responsibilities.

Article (100)

Minutes of General Assembly Meeting

An adequate summary of minutes of the General Meeting deliberations shall be prepared. Together with the General Meeting resolutions these minutes shall be entered in a special register kept at the company head office. Any of the partners, either in person or through an attorney, may inspect that register as well as the company balance sheet, profit and loss account and annual report.

Article (101)

Amendment of Company’s MOA and Increasing or Reducing Its Capital

It is not permissible to amend the company’s MOA nor to increase or decrease its capital, save by the approval of a number of partners representing three quarters of the capital, and increase or decrease percentage must be consistent with shares of partners in the Company, unless otherwise is agreed on. However, obligations of partners may not be increased, save upon their unanimous agreement.

Article (102)

Company’s Auditor

The limited liability company shall have one or more auditor(s) appointed each year by the partners General Assembly. With the exception of provisions of Article (244) of this Law, these auditors shall be subject to the same provisions concerning the auditors in the public joint-stock companies, and competent authority shall replace the SCA wherever mentioned.

Article (103)

Statutory Reserve

In order to create a statutory reserve, each year, the limited liability company shall lay by as savings 10% of its net profit. If such savings amount to half of the capital, the partners may opt to suspend same.

Article (104)

Where no special provision is made in this Law, the provisions of joint stock companies shall apply, and competent authority shall replace the SCA wherever mentioned.

Chapter (4)

Public Joint Stock Companies

Section (1)

Definition & Incorporation of Public Joint Stock Companies Article (105)

Definition of Public Joint Stock Company

Public joint stock company is any company whose capital is divide into negotiable shares of equal value and partners therein subscribe to a part of such shares, while the remaining part is offered for public subscription, and shareholder is held liable only to the extent of his share in capital.

Article (106)

Name of Public Joint Stock Company

Each public joints stock company shall have a trade name, which may not be a name of natural person, unless the company’s purpose is to invest a patent registered in name of such person or if the company acquires a trade name or the right to utilize the same, and in all cases, the term “Public Joint Stock Company” shall be annexed to company’s name.

Article (107)

Number of Founders

Article (108)

Term of Company

Term of company shall be determined in its MOA and AOA, and may by special decision be extended or reduced if company’s purpose so requires.

Article (109)

Founder

Article (110)

Company’s MOA & AOA

Article (111)

Shareholders’ Compliance with AOA

Article (112)

Founders Panel

Article (113)

Incorporation Procedures Applicable at Competent Authority

Article (114)

Incorporation Procedures Applicable at SCA

and all documents and remarks related thereto, and amended copy thereof shall be sent to competent authority.

Article (115)

Notarization of MOA

Founders Panel shall have MOA notarized as per the provisions of this Law and shall provide SCA with a copy thereof as well as of the initial decision issued by the competent authority agreeing to the license, and a certificate issued by a licensed bank in the State confirming that Founders have paid any due amounts before the SCA approves announcement of prospectus.

Article (116)

Amendment of Incorporation Application

No information in the incorporation application may be amended after being submitted to the competent authority during any incorporation phase, including information related to company’s capital, purposes, names of founders and any other information included in the application, and in case any such amendment is made, the matter shall be referred to the competent authority to take necessary procedures it sees fit.

Article (117)

Contribution of Founders to Company’s Capital

Article (118)

Valuation of Corporeal Shares

Article (119)

Post-Incorporation Valuation of Corporeal Shares

Post incorporation valuation of corporeal shares shall be subject to same valuation provisions stated in this Law.

Article (120)

Exaggerated Valuation of Corporeal Shares

Article (121)

Invitation to Public Subscription

Article (122)

Entities Licensed to Receive Subscription

Article (123)

Underwriter

Article (124)

Subscription Term

Article (125)

Distribution of Shares to Subscribers

If subscription exceeds number of shares offered, shares shall be distributed to subscribers at their subscription percentage or in the manner determined in the prospectus and approved by SCA, and distribution shall be made to nearest whole share.

Article (126)

Upon end of subscription period, entities licensed to receive subscriptions shall:

Article (127)

Emirates Investment Authority shall have the right to subscribe to shares of any public joint stock company to be incorporated in the State and offers its shares for public subscription, by no more than 5% of the shares offered for public subscription, provided that value of such shares shall be paid before end of subscription period, and probative documents are submitted to SCA in this regard.

Article (128)

Announcing Non-Incorporation of Company

If company is not incorporated, SCA shall so announce to the public, and such announcement shall result in the following:

Article (129)

Book Building of Securities

Subject to provisions of Articles (117 and 279) of this Law, SCA may issue a decision regulating subscription mechanism based on book building of securities, and entities wishing to follow such mechanism shall abide by provisions and procedures set out in the SCA’s decision in this regard.

Article (130)

Incorporation Expenses

Company shall incur all incorporation expenses spent by Founders Panel for purposes of establishing the Company and issuing securities, and detailed statement of such expenses shall be referred to the Constituent General Assembly for discussion and approval.

Article (131)

Constituent General Assembly

Article (132)

Competences of Constituent General Assembly

Constituent General Assembly shall particularly have competence to consider and take decisions regarding the following matters:

Article (133)

Incorporation Certificate Application

Company’s board of directors shall within 10 working days as from the date of the Constituent General Assembly meeting, submit an application to SCA to issue Company’s incorporation certificate, and such application shall be enclosed with the following documents:

Article (134)

Issuance of Incorporation Certificate

Upon completion of documents referred to in Article (133) of this Law, SCA shall issue Company’s incorporation certificate within five (5) working days as from submission of complete application by Company’s board of directors.

Article (135)

Registration of Company with Competent Authority

Article (136)

Notifying Registrar

Chairman of the company’s board of directors shall, within five (5) working days as from the date of commercial license issued by competent authority, notify the Registrar of the incorporation certificate, MOA, AOA and commercial license of the company to be entered in Companies Register and published at expense of the company according to controls set by the Minister in this regard.

Article (137)

Article (138)

Acts of Founders

Immediately upon entry if company in Commercial Register with the competent authority, effects of all acts taken by Founders for account of the company and before its registration shall be transferred to the Company, which shall bear all expenses made by founders in this regard.

Article (139)

Amendment of Company’s MOA or AOA

Subject to the provisions of this Law, company may, upon approval of SCA and competent authority, issue a special decision amending its MOA or AOA.

Article (140)

Access to Data and Information

Article (141)

Shareholders Register & Company Records

Article (142)

Purchase of Assets During First Fiscal Year

If the company, before the General Assembly approves accounts of first fiscal year, purchases assets, corporations or institutions in total value exceeding 20% of its capital, the board of director shall so notify SCA, which may have such assets, corporations or institutions valuated as per the provisions of this Law.

Section (2)

Management of Public Joint Stock Company

Article (143)

Formation of Board of Directors

Article (144)

Election of Board Members

Article (145)

Vacancy of Board Member Position

Article (146)

Voting Mechanism in Election of Board Members

Each shareholder shall have a number of votes equals the number of shares owned thereby, and the SCA shall issue a decision determining voting mechanism in General Assembly meetings in elections of board members.

Article (147)

No person may be appointed or elected as a member of the board of directors, save upon his written acceptance of nomination, provided that such acknowledgement shall include disclosure of any work he undertakes directly or indirectly and competes with the Company, and names of companies and institutions in which he undertakes such work or acts as a board member.

Article (148)

Government’s Membership in Board of Directors

With the exception of the provision of Article (143) hereof, Federal or Local Government may, if holds 5% or more of Company’s capital, appoint its representative in the board of directors at the same percentage of board members and at least one member, if the percentage required for appointment of a member exceeds such percentage, and its right to vote shall be abated for the percentage of its representation. However, if Government has a shareholding percentage, which is insufficient to nominate another member, it may use such percentage in voting.

Article (149)

Board Membership at Multiple Joint Stock Companies

Article (150)

Article (151)

Nationality of Board Members

Chairman and majority of board members must be UAE nationals, and if percent of citizens is reduced at the board of directors below the limit required under this Article, it must be raised again within three months at most, or otherwise the decisions of the board beyond such period shall be invalid.

Article (152)

Acts Prohibited on the Relevant Parties

Article (153)

Prohibition of Loans to Board Members

Article (154)

Powers of Board of Directors

Board of directors shall assume all powers determined in the Company’s AOA, with the exception of powers reserved under this Law or AOA to the General Assembly. However, the board of directors may not conclude loans for periods exceeding three years, sell company’s properties or shop, mortgage company’s movable and immovable properties, release company’s debtors, conduct conciliation or concluded arbitration agreement unless such acts is authorized under the Company’s AOA or otherwise naturally affect company’s purpose, and beyond these two cases, a special decision must be sought from General Assembly for undertaking such acts.

Article (155)

Company Representation

Article (156)

Meetings of the Board of Directors

Article (157)

Decisions of the Board of Directors

Article (158)

Absence of Board Member

If a board member fails to attend three successive sessions or five interrupted sessions of board meetings during the term of the board and without any admissible reason, he shall be deemed resigned.

Article (159)

Minutes of Board Meetings

Rapporteur shall prepare minutes of board meetings and same shall be signed by members who attended session, together with the Rapporteur, and a member who objects to board decision may establish his objection in minutes of board meeting, and signatories of such minutes shall be liable for validity of data included therein, and SCA shall set the controls necessary in this regard.

Article (160)

Article (161)

Company’s Liability for Board Activities

Company shall be liable for activities undertaken by the board of directors within the limits of its competence, and shall be liable for compensating any damage resulting from any unlawful actions committed by chairman and members of the board of directors in management of the company.

Article (162)

Liability of the Board of Directors

Article (163)

Acts of Board Member

Company shall be liable for acts of board members towards bona fide third parties, even if it is subsequently discovered that election or appointment procedures of such member were invalid or that conditions for such election or appointment were not met.

Article (164)

Acts Against Interests of Company

Article (165)

Company Claim

Liability claims filed against company’s board of directors due to errors resulting in damage to shareholders shall be filed by a decision from the General Assembly, which shall name a person to file the same in name of the company.

Article (166)

Shareholders Claim

Each shareholder may solely institute liability claim against the company’s board of directors in case the company does not file the same, and if the error would cause a specific damage to such shareholder, provided that he shall notify the company of his intention to file the claim, and any provision made to the contrary hereof in the company’s AOA shall be null and void.

Article (167)

Extinguishment of Liability Claim

A resolution adopted by the General Assembly shall in no way release the Board of Directors or dismiss a civil liability action against Board members because of defaults committed in the course of their functions. If the liability action was forwarded to the General Assembly and it was endorsed thereby, the liability action shall be extinguished one year after the date of the meeting. However, if the act attributed to the directors creates a criminal action, the liability claim shall be extinguished only if the public claim was dismissed.

Article (168)

Dismissal of Board Members

Article (169)

Remuneration of Board Members

Article (170)

Invalidity of Decisions

Section (3)

Article (171)

Convention of General Assembly

Article (172)

With the exception of deferred General Assembly meeting for reasons of failure to achieve quorum required under Article (183) of this Law, invitation to the General Meeting shall be addressed upon SCA’s approval to all shareholders through publication in two daily local newspapers at least 15 days before the fixed date. Announcement must include agenda of meeting. Copy of invitation papers shall be sent to SCA and competent authority.

Article (173)

If the announcement of invitation to General Meeting is made before the meeting date by a shorter period than the period determined in Article (172) of this Law, the invitation shall be considered valid if accepted by 95% of shareholders.

Article (174)

are enlisted, showing prohibition of disposal of his shares, upon his request, until convention of the General Assembly Meeting.

Article (175)

Call for General Meeting Requested by Auditor

Company’s board of directors shall call for convention of a General Meeting whenever so requested by Company’s auditor. If the board of directors fails to address the invitation within five days as from the date of such request, auditor shall direct the invitation himself. General Meeting shall then be held within at least 15 days and no more than 30 days from the date of the invitation.

Article (176)

Call for General Meeting Requested by SCA

Article (177)

Agenda of Annual General Assembly Meeting

General Assembly of company shall have competence in its annual meeting to consider and decide on the following matters:

Article (178)

Right to Attend General Meeting

Article (179)

Control Over General Assembly Meetings

Article (180)

Powers of General Assembly

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Article (181)

Register of General Assembly Meeting

Shareholders shall enter their names in a special register prepared in company’s head office before the set date of the General Meeting. Such record register shall include names of shareholders, number of shares represented or held by such shareholders, together with the authorization documents, and shareholder shall be given cards to attend the meeting, showing the number of votes they are entitled to whether pro se or by proxy.

Article (182)

Chairmanship of the General Assembly

General Assembly shall be chaired by the Chairman of the board of directors, and in case of his absence, it shall be chaired by vice-chairman of the board of directors, or in case of their absence, by any shareholder elected by shareholders through ballots by any mean determined by the General Assembly. General Assembly shall appoint a Rapporteur. If the General Assembly discusses any matter related to the Chairman of the meeting, irrespective of his identity, the General Assembly shall elect from amongst shareholders any other person to chair the meeting while discussing such matter.

Article (183)

Quorum of General Assembly Meeting

Unless the company’s AOA provides for a higher percentage, quorum for General Meeting is achieved upon attendance of shareholders holding or representing at least 50% of company’s capital. Failing to reach quorum at first meeting, General Assembly shall be called for a second meeting at least after 5 days and not more 15 days from the date of first meeting, and deferred meeting shall be valid irrespective of the number of attendees.

Article (184)

Withdrawal from General Assembly Meeting

If a shareholder or his representative withdraws from General Assembly Meeting after achievement of quorum, such withdrawal shall not affect validity of the General Meeting, irrespective of the number of withdrawn shares, provided that decision shall be issued by majority vote as set out in this Law.

Article (185)

Discussing Agenda of General Assembly Meeting

Article (186)

Voting on General Assembly Resolutions

Article (187)

Minutes of General Assembly Meetings

Article (188)

General Assembly Resolutions

Article (189)

Execution of General Assembly Resolutions

Chairman of the board of directors shall execute resolutions of the General Assembly and serve a copy of the same on the SCA and Capital Market wherein shares of such company are enlisted, and competent authority according to the controls set by the SCA in this regard.

Article (190)

Article (191)

Suspension of General Assembly Resolution

Article (192)

Section (4)

Capital of Public Joint-Stock Company

Article (193)

Issued & Authorized Capital of Company

Article (194)

Increase of Company’s Capital

Article (195)

Means for Increasing Company’s Capital

Company’s capital shall be increased by any of the following means:

Article (196)

Issuance Premium

Article (197)

Priority Right

Article (198)

Subscription to New Shares

Article (199)

Distribution of New Shares

Article (200)

Incorporating Reserve into Capital

Reserve may, by special decision, be incorporated into company’s capital by creating bonus shares to be distributed to shareholders, each as per its respective percentage of shareholding, or by increasing nominal value of shares at same percentage as that in excess of the capital, and such procedure shall not impose any additional financial burdens on shareholders.

Article (201)

Transferring Bonds or Sukuk to Shares

Bonds or Sukuk shall be transferred into shares as per provisions of prospectus and conditions approved by SCA, and approval of Central Bank shall be secured for companies licensed by the same.

Article (202)

Reduction of Company’s Capital

Company’s capital may not be reduced without a prior approval of SCA and issuance of a special decision after hearing auditor’s report, and such procedure is carried out in any of the following two cases:

Article (203)

Methods for Reducing Company’s Capital

Company’s capital shall be reduced by any of the following means:

Article (204)

Procedures of Reducing Company’s Capital

Article (205)

Company’s board of directors shall, within 5 working days as from the effective date of the decision increasing or reducing company’s capital, register such decision with SCA, competent authority and registrar.

Section (5)

Shares, Bonds and Sukuk

Article (206)

Rights Associated with Shares

Article (207)

Nominal Value of Share

Article (208)

Nature of Shares & Dividend Coupons

Only nominal shares may be issued, excluding bearer shares, and such shares shall be negotiable.

However, Dividend coupons, which form and provisions shall be determined in company’s AOA, may be in nominal or bearer form, and shall in all cases be negotiable, and any condition limiting free trading thereof shall be null and void.

Article (209)

Disposal of Shares

Method and conditions for disposal of shares shall be determined under provisions of this Law, and regulations and decisions issued by SCA, and company’s AOA, provided that disposal of any such share shall not result in reduction of shares held by national shareholders in company’s capital below the limit established in this Law.

Article (210)

Mortgage of Shares

Shares may be mortgaged, by being assigned to creditors or their representatives according to procedures applicable in this regard, and Mortgagor may receive profits and use rights related to such shares, unless otherwise is agreed on in mortgage contract.

Article (211)

Transfer of Title of Shares Listed in Markets

Transfer of title of company’s shares listed in Capital Markets licensed in the State shall be carried out according to the controls applicable at SCA and Capital Market in which such shares are listed.

Article (212)

Article (213)

Transfer of Shares by Inheritance, Will or Court Judgment

If shares title is transferred by inheritance or will, heir or will beneficiary may request registration of shares transfer in shares register.

Article (214)

Indivisibility of Share

Share shall be indivisible. However, if share title is transferred to a number of heirs or acquired by multiple persons, they shall select one of them to be a representative before the Company, and such persons shall be jointly liable for obligations created by ownership of such share, and failing to agree on their representative, any of them may resort to court of competent jurisdiction to appoint a representative.

Article (215)

Restrictions on Founders’ Shares

Article (216)

Attachment of Shareholders’ Shares

Company’s properties may not be attached due to debts payable by a shareholder. However, creditors of such shareholder may impose attachment on his shares and dividends generated from same, and shares shall be marked as attached in shares register with the Capital Market in which company’s shares are listed.

Article (217)

If shareholder in a joint stock company fails to pay due premium of the value of share on maturity date, the board of directors may, under registered letter, serve notice on such shareholder requiring it to pay the due premium, and failing to pay within 30 days, the company may sell shares at public auction or according to decisions issued by SCA.

Article (218)

Release of Shareholder

Article (219)

Company Purchases its Shares

Article (220)

In case of omission enter name of any person or number of shares held thereby in company’s shares register, or any failure or unjustifiable delay in entry of the fact that any person loses capacity of shareholder, the damaged person or any shareholder may request the company to amend information of register, and company may reject the amendment request, and in such case damaged party may refer to Courts of Law.

Article (221)

Shareholder Rights

In public joint stock company, the following rights shall be established for shareholder:

Article (222)

Providing a Financial Assistance to Shareholder

Company or any subsidiary may not provide financial aid to any shareholder to enable him to own any shares, bonds or Sukuk issued by the company, and financial assistance shall particularly include the following:

Article (223)

Engagement of Strategic Partner

Article (224)

Conditions for Engagement of Strategic Partner

Company’s board of directors may, within three months from the date of issuance of the decision increasing company’s capital to engage a strategic partner as a shareholder in company, offer all or part the new shares to subscription by the strategic partner, excluding other shareholders, subject to the following conditions:

Article (225)

Transferring Cash Debts to Debt Capital

Article (226)

Urging Company Employees to Own Shares

Article (227)

Share Certificates

Unless upon incorporation, the company’s shares are listed in a Capital Market in the State, its board of directors shall within 3 months from the company’s entry in commercial register with competent authority, issue shares certificates in lieu of any shares allocation notices.

Article (228)

Article (229)

Issuance of Bonds or Sukuk

Article (230)

Conditions for Issuance of Bonds or Sukuk

Subject to provisions of item (5) of Article (229) of this Law, in order for bonds or Sukuk to be issued, following conditions must be met:

Article (231)

Upon issuance of a special decision issuing bonds or Sukuk transferrable to shares and until its date of transfer and payment of its value, the company may not reduce its capital or increase the minimum limit of profits distributable to shareholders, and in case company’s capital is reduced due to losses and through cancelling a number of shares or reducing nominal value of share, the company shall reduce its capital as if holders of such bonds or Sukuk are shareholders.

Article (232)

Shares received by holders of bonds or Sukuk, which was transferred to capital shares, shall be entitled to profits to be distributed for the fiscal year during which such transfer occurred, as from transfer date to end of fiscal year.

Article (233)

Date of Paying Value of Bonds or Sukuk

Company may not advance or delay maturity date of bonds or Sukuk, unless otherwise is provided in bonds or Sukuk issuance decision and prospectus. However, in case the company is dissolved or any reason other than amalgamation, holders of bonds or Sukuk may claim for its value before maturity date, and company may so offer. If their value is paid in any of the foregoing two cases, no interests shall be payable for the remaining term of loan.

Article (234)

Rights of Bonds and Sukuk Holders

Rights of holders of bonds or Sukuk issued by the Company and which are not offered for public subscription shall be determined in the agreement concluded regarding such bonds or Sukuk. Such agreement shall also include procedures necessary for holders of bonds or Sukuk to conclude meetings, appoint committees, and voting rights as well as any other relevant matters, and conditions for transferring the same to shares in company if it is transferrable, and SCA may issue a decision regulating rights of bonds and Sukuk holders.

Section (6)

Finances of Public Joint Stock Company

Article (235)

Preparation of Fiscal Year Accounts

Article (236)

Auditing Fiscal Year

Article (237)

Accounting Standards and Principles

Company shall apply international accounting standards and principles, when preparing interim or annual accounts and determining distributable profits.

Article (238)

Publishing Company’s Annual Budget

Company’s annual budget and profit-and-loss account shall be published in two daily local newspapers, one of them is issued in the Arabic language, within 15 days as from the date of having the same approved by General Assembly, and copy of budget shall be deposited with SCA and competent authority.

Article (239)

Statutory Reserve

Article (240)

Optional Reserve

Company’s AOA of any joint stock company may provide for allocation of a certain percentage of net profits as an optional reserve for the purposes set out in AOA, and such reserve may not be used for any other purposes, save upon a resolution from the General Assembly of the company.

Article (241)

Distribution of Profits

Article (242)

Corporate Social Responsibility

Company may under a special decision, upon lapse of two successive years as from its incorporation and achievement of profits, give voluntary donations, which may not exceed 2% of average net profits of the company during two successive fiscal year preceded the year during which such donations are made, subject however to the following conditions:

Section (7)

Auditors of Public Joint Stock Company

Article (243)

Appointment of Company’s Auditor

Article (244)

Conditions of Company’s Auditor

SCA’s board of directors shall issue a decision determining controls for approving an auditor of public joint stock company, and auditor must particularly meet the following conditions:

Article (245)

Issuance of Auditor’s Report

Article (246)

Duties of Company’s Auditor

Article (247)

Maintaining Confidential Information of Company

Auditor shall maintain confidential information of the company which he accessed due to nature of his job, and may not disclose such information to third parties or shareholders, save at General Assembly Meetings, or otherwise he shall be dismissed without any prejudice to civil and criminal liability if applicable.

Article (248)

Prohibiting Auditor’s Trade in Securities

Auditor and employees thereof may not purchase securities of the company being audited or sell the same directly or indirectly or give any advice to any person regarding such securities. If auditor violates this provision, he shall be dismissed without prejudice to civil and criminal liability if applicable.

Article (249)

Notice of Offenses & Violations

Article (250)

Contents of Auditor’s Report

Auditor shall read out his report in the General Assembly Meeting in which company’s budget is reviewed, provided that he shall indicate in his report whether or not he had accessed the information he sees necessary for satisfactory performance of his tasks, and that accounts were prepared and maintained in accordance of this Law, and that accounts particularly reflect the following:

Article (251)

Dismissal of Auditor

Article (252)

Resignation of Auditor

Meeting within 10 days as from resignation date to consider reasons for such resignation and provide an alternate auditor and determine his remuneration.

Article (253)

Liability of Company’s Auditor

Auditor shall be liable towards the company for control works and validity of information included in his report, and shall also be liable for compensating the damage occurred due to performance of his work. In case of multiple auditors, each of them shall be liable for his own error which inflicted damage.

Article (254)

Liability Claim Against Company’s Auditor

Liability claim filed against company’s auditor shall not be heard upon lapse of one year as from the General Assembly Meeting wherein auditor’s report was submitted. If act attributed to auditor constitutes a criminal offense, liability claim shall only be extinguished upon dismissal of public claim.

Chapter (5)

Private Joint Stock Companies

Article (255)

Definition of Private Joint Stock Company

Article (256)

Company’s Capital

Article (257)

Founders’ Panel

Article (258)

Article (259)

authorities in relation to the application, as per the requirements applicable at the Ministry.

Article (260)

Book-Runner

Article (261)

Company’s Incorporation Certificate

Article (262)

Commercial License of Company

Article (263)

Transfer of Shares Title

Article (264)

Restrictions on Transfer of Shares Title

Article (265)

With the exception of public subscription provisions, private joint stock company shall, where no special provision is made, be subject to all provisions of this law related to public joint stock company, and “Ministry” shall replace the “SCA” wherever mentioned.

Chapter (6)

Companies of Special Regulation

Section (1)

Holding Companies

Article (266)

Definition of Holding Company

Article (267)

Purposes of Holding Company

Article (268)

Accounting Records Maintained by Subsidiaries

Holding company shall take the necessary procedures to ensure that its subsidiaries shall keep necessary accounting records to enable board members or board of managers of the holding company to verify that financial statements and profit-and-loss account are consistent with provisions of this Law.

Article (269)

Subsidiary

Article (270)

Fiscal Year of Holding Company

Holding company shall prepare, by end of each fiscal year, consolidated balance sheet, statements of profits and losses and cash flows for the holding company and all its subsidiaries, and the same shall be submitted the General Assembly together with clarifications and information related to same and as required by internationally recognized accounting and auditing principles.

Section (2)

Investment Funds

Article (271)

Incorporation of Investment Funds

Article (272)

Legal Entity of Fund

Investment Fund shall have special legal entity and form, and shall be financially independent.

Chapter (7)

Transformation, Amalgamation and Takeover

Section (1)

Transformation of Company

Article (273)

Companies Transformation Principle

Any company may be transformed from one form to another, while retaining its corporate entity, in accordance with the provisions of this Law and regulations and resolutions governing transformation of companies, as issued by the Ministry or SCA in this regard in coordination with competent authority.

Article (274)

Transformation of Company into Another Legal Form

Subject to provisions of Article (292) of this Law, public joint stock company may be transformed to private joint stock company, subject to the following conditions:

Article (275)

Transformation of Company into Public Joint Stock Company

Subject to provisions of Article (273) of this Law, in order for a company to be transformed into public joint stock company, following conditions must be met:

Article (276)

Documents Required for Transformation into Public Joint Stock Company

Article (277)

Announcement of Transformation Decision

Article (278)

Objection to Transformation Decision

Partner or shareholder who objected to the transformation decision may withdraw from company and restore value of his stocks or shares by a written application to the company within 15 days as from the publication date, and payment of stocks or shares value shall be made in their market or book value on the transformation date, whichever is greater.

Article (279)

Article (280)

Notice of Transformation Decision

Subject to provisions of Article (274) of this Law, company shall submit a copy of the transformation decision to the Ministry, SCA and competent authority, as the case may be, and enclosed with the following documents:

Article (281)

Consequences of Company’s Transformation

However, if value partner’s or shareholder’s share is less than the minimum limit established for nominal value of stocks or shares, it must be completed in cash, otherwise he shall be deemed as withdrawn from the company. Value of share or stock shall be paid as per its market or nominal value on transformation date, whichever is greater.

Article (282)

Company’s Transformation Mark

Section (2)

Merger

Article (283)

Merger

Article (284)

Merger Contract

Merger contract shall determine conditions and method of such merger, and shall particularly demonstrate the following points:

Article (285)

Referral of Merger Contract to General Assembly

Board members and managers of each acquirer and target company shall submit draft merger contract to the General Assembly or any entity so authorized, to approve the same by majority vote conditioned for amending company’s MOA.

Article (286)

Merger of Holding Companies and Subsidiaries

Article (287)

Restoration of Stock Value

Article (288)

Merger Notice to Creditors

Acquirer and target companies shall notify their respective creditors of merger within 10 working days as from the General Assembly’s approval on merger, provided that:

Article (289)

Objection to Merger

Article (290)

Approval on Merger

Article (291)

Consequences of Merger

Merger shall result in termination of the corporate entity of the target company or companies, and being replaced by the acquirer company in all rights and obligations. Acquirer company shall be a legal successor of the target company or companies.

Article (292)

Acquisition Process

any person or group of associated persons or relevant parties wishing to purchase or carry out any disposal resulting in acquisition of shares or securities transferrable to shares in capital of a public joint stock company incorporated in the State and which offers its shares for public subscription or listed under any Capital Market in the State, shall abide by the provisions and decisions governing rules, conditions and procedures of acquisition issued by SCA.

Article (293)

Violation of Acquisition Rules and Procedures

Without prejudice to the right of damaged party to resort to courts of law, if it is proven that any person has violated the provision of Article (292) of this Law or any decision issued by SCA in this regard, SCA may take one of the following decisions against such person:

Violator shall be penalized by financial penalty of no less than 20% and no more than 100% of the value of the acquisition process, and Article (339) shall apply in relation conciliation arrangements.

Article (294)

Publication of the Acquisition Resolution

The acquisition decision shall, at the acquiring company’s expense, be published in two local daily newspapers issued in the State provided that one of them shall be issued in Arabic Language.

Part Eight

 Expiry of Company’s Memorandum of Association

Chapter One

Reasons for Company Expiry

Article (295)

General Reasons for Expiry

Without prejudice to the provisions governing the expiry of each company, a company shall be dissolved upon occurrence of the following:

Article (296)

Without prejudice to the rights of third party and subject to the provisions of this Law and the contracts concluded between the partners, the general partnership and the limited partnership shall be dissolved if one of the following reasons has occurred:

and the company hasn’t changed its legal status during such period.

Article (297)

Article (298)

Court Order for Company Dissolution

among the remaining partners and the court shall exit the portion of such partner after being estimated according to the last inventory or according to any other method the court may deem fit and appropriate.

Article (299)

Article (300)

The withdrawal or death of a partner in the limited liability company, or issuance of a judgment for sequestration, bankruptcy or insolvency against him shall not result in the dissolution of the company unless otherwise provided for in its memorandum of association. The portion of each partner shall pass to his heirs and the legatee shall have the same conditions as the heir.

Article (301)

Article (302)

Losses Sustained by Joint Stock Company

Article (303)

Writing off the Company

Article (304)

Article (305)

Recoding the Dissolution of the Company

Company managers, board chairman or the liquidator, as the case may be, shall enter the dissolution resolution in the commercial register with the competent authority and the dissolution resolution shall be published in two local daily newspapers, one of which being issued in Arabic. The dissolution resolution may be invoked against third party only form the date of entry in the commercial register.

Chapter Two

Liquidation of Company and Distribution of Assets

Article (306)

Provisions Governing Liquidation

The liquidation of the company shall be governed by the provisions of this Law unless the company’s memorandum or articles of association states the liquidation method or the partners agrees otherwise at the time of liquidating the company.

Article (307)

Upon the liquidation of the company, the authority of managers and the board of directors are expired; however, the managers and board of directors remains responsible for the management of the company and are considered like liquidators’ vis-a-vis third party until a liquidator is appointed. The management of the company shall continue during the liquidation period to the extent and within the powers and authorities the liquidator deems necessary for the liquidation.

Article (308)

Appointment of Liquidator

Article (309)

Multiple Liquidators

If the liquidators are multiple, their acts shall be valid only upon being unanimously issued unless otherwise is stipulated in the appointment letter. This provision shall not be invoked against thirty parties except from the date of entry in the commercial register.

Article (310)

Liquidator Appointment Decision

The liquidator shall effect entry in the Commercial Register of the resolution under which he was appointed and the partners’ agreement or the General Meeting resolution concerning the method of liquidation, or else the court-order related thereto.

Appointment of the liquidator, or the method of liquidation, shall not be invoked against third parties, except after the date of entry in the commercial Register.

The liquidator’s remuneration shall be fixed in his letter of appointment; otherwise it shall be fixed by the court.

Article (311)

Dismissal of Liquidator

Article (312)

The liquidator shall, immediately once appointed, inventory the company assets and liabilities and the company manager or the board chairman shall provide the liquidator with the company’s funds, accounts, records and documents.

Article (313)

List of Assets and Liabilities of the Company

The liquidator shall prepare a detailed list of the company assets and liabilities and a

balance-sheet and the company manager or the chairman of its board or directors shall sign this list, along with him.

The liquidator shall maintain a register for the liquidation process.

Article (314)

Duties of Liquidator

The liquidator shall take all necessary actions to ensure the safeguarding of the company interests and rights, and shall, without delay, collect from others amounts due thereto and shall deposit amounts collected thereby in bank for the account of the company under liquidation. Unless it is a liquidation-requirement, he may not demand the partners to pay the remainder of their respective shares and the partners shall be treated equally.

Article (315)

Representation of the Company by the Liquidator

The liquidator shall assume all functions required for liquidation purposes, particularly to represent the company before courts, settle the company debts and sell its movable or immovable properties either by auction or in any another manner, unless a certain sale procedure is fixed in the liquidator’s appointment-instrument. Except by the consent of the partners or the ordinary general meeting, the liquidator, shall not be allowed to sell the company assets as one lot.

Article (316)

Creditors’ Notification of Liquidation

Upon the dissolution of a company, the terms of all its debts shall lapse. The liquidator shall notify all creditors, by registered mail, of the commencement of liquidation and shall invite them to submit their demands. Notice to this effect may be made by publication in two local Arabic dailies in the event of unknown creditors or if their places of residence are unknown. In all cases, the notice of liquidation shall grant the creditors a grace period of at least forty-five days from the date of such notice for submittal of their demands.

Article (317)

Payment of Company’s Debts

If the company assets fall short of settlement of all the debts, the liquidator shall effect the settlement pro rata to such debts without prejudice to the rights of preferred creditors. Debts arising from the liquidation process shall, with preference against other debts, be paid from the company funds.

Article (318)

Depositing the Debts with the Court Treasury

Should any creditor fail to submit his demand, his debt shall be deposited in the court treasury. Sufficient funds shall also be deposited for the settlement of debts in dispute, unless the creditors concerned had obtained sufficient guarantees, or it was decided to delay distribution of the company monies until dispute with regard to the said debts was settled.

Article (319)

New Transactions of the Company

Unless it is a necessity for the completion of previous transactions, it is not permissible for the liquidator to carry out new transactions. The liquidator shall be liable to the extent of all his assets, and in the event of more than one liquidator, all the liquidators shall be jointly liable with regard to what they perform of new transactions not required for liquidation purposes.

Article (320)

Liquidation Period

The liquidator shall complete his task within the period prescribed in his appointment instrument, and if such period is not fixed therein, each partner shall have the right to ask the court to fix the liquidation period.

Said period may not extend except by resolution of the partners or the General Meeting, as the case may be, following inspection of the liquidator’s report, in which causes delaying the completion of the liquidation in due time are defined. Should such period have been fixed by the court, it may not be extended except by order of the court.

Article (321)

Provisional Account of the Liquidation Process

The liquidator shall provide the partners or the General Meeting with a provisional account on the liquidation-affairs every six months. He shall also provide the partner with any information or data they request with regard to the liquidation affairs. The liquidator shall, within a week from the approval of the general meeting, notify the partners to receive their dues within a period not exceeding (21) days and the notification shall be made by way of advertisement to be published in two local daily newspapers, one of which being issued in Arabic.

Article (322)

Final Accounts of Liquidation

Article (323)

Liquidator’s Conducts

The Company shall be liable for the liquidator’s conducts required for the liquidation as long as the same are within limits of Liquidator’s authority. The liquidator may not be held liable for carrying out the liquidation acts.

Article (324)

Liquidator’s Liability

The liquidator shall be responsible if he has misconducted the company’s affairs during the period of liquidation and he shall also be liable to indemnify any damages suffered by third parties as result of his professional errors.

Article (325)

Distribution of the Company Funds

Article (326)

Limitation on Hearing of Claims

Chapter Nine

Article (327)

Foreign Companies Subject to This Law

Without prejudice to special agreements concluded by the Federal Government, by one of the Local Governments or by the subsidiary authorities thereof, and the foreign companies, the provisions of this Law, except for the provisions governing the incorporation of companies, shall apply to foreign companies that conduct their activity in the State or have their center of management in the State.

Article (328)

Foreign Companies Conduct of Business

Article (329)

Agent of the Foreign Company

The company shall have one of the nationals of the State as its agent. If the agent is a company, it must have the nationality of the State and all partners therein must be nationals. The obligations of the agent towards the foreign company and third parties shall be restricted to the rendering of the services necessary for the company without bearing any financial responsibility or

obligations relating to the business or activity of the company’s branch or office in the State or abroad.

Article (330)

Foreign Company Registration Process

Article (331)

Balance Sheet of Foreign Company

Except for the Representative Offices, foreign companies or their offices or branches must have a separate balance sheet, a separate profit and loss account and shall have an auditor registered in the list of auditors licensed to operate in the State and shall provide the competent authority and Ministry with copy of the balance sheet, final accounts, auditor’s report as well as copy of the final accounts of its holding company, if any, every year.

Article (332)

Representative Offices

Chapter Ten

Inspection and Control Over Companies

Article (333)

Control Over Companies

stock companies, inspect their activities, review their books, papers or records with the branches of such companies or its subsidiaries within or outside the state or with the auditor or any other company related to the company, subject matter of inspection. With the inspection committee, they may appoint one or more technical and financial expert in the subject matter of the inspection to ascertain that the company complies with the provisions of this Law, the executive order thereof or the company’s Articles of Association. Inspectors shall be entitled to request any statements and information from the board of directors, the CEO, the managers or the Auditors, as they may deem fit.

Article (334)

Inspection Regulations

The Minister shall issue the private joint stock companies inspection regulations. The authority shall issue the public private joint stock companies inspection regulations. The regulations shall specify the inspection procedures and the authorities and duties of inspectors.

Article (335)

Company Inspection Application

Article 336

Inspectors’ Work Facilitation

Subject to Article (333), The company’s chairman of the board, CEO, directors, general manager, employees and auditors shall provide the persons in charge of the inspection with all such company’s books, minutes of meetings, (boards, committees, general assemblies) records, documents and papers as well as all such necessary information and clarification as they may require.

Article (337)

Inspection Report

Article (338)

Publishing of Inspection Findings

In case it becomes evident to the Ministry or the Competent Authority, as the case may be, that the allegations made by the inspection applicants against the members of the board of directors or the auditors, are not true, it may order that the findings of the inspection to be published in a local daily Arabic language newspaper and order the applicants to pay the inspection expenses, without prejudice to civil and criminal liability, if applicable.

Chapter Eleven

Penalties

Section One

Penalties that Can Be Reconciled

Article (339)

Reconciliation Regulation

the fine in respect of the daily fine.

Article (340)

Failure to Comply with Registrar’s Decision

A fine of one thousand dirhams per day shall be imposed on the company which fails to comply with the registrar’s decision in respect of the changing the company name. The calculation of such fine shall commence after the expiry of thirty working days as from the decision notice day.

Article (341)

Default in Listing

A fine of one thousand dirhams per day shall be imposed on the public joint stock company which defaults in listing with a capital market in the State. The calculation of such fine for each delay date shall commence after the expiry of the period required for listing pursuant to the provisions of this Law.

Article (342)

Refusal to Inform Stakeholders

A fine of no less than ten thousand dirhams and no more than fifty dirhams shall be imposed on the company which refuses to inform the shareholder or partner with the minutes of the general assembly meetings or the company’s books, documents or any documentation related to a transactions entered by the company with any relevant party.

Article (343)

A fine of no less than fifty thousand dirhams and no more than one hundred dirhams shall be imposed on the chairman of the joint stock company who fails to call on the annual general assembly to convene during the legally stipulated period under this Law or who publishes the meeting invitation before obtaining the publishing approval from the Ministry or the Authority, as the case may be, as well as on each director who intentionally causes the general assembly meeting or invitation thereof to be delayed.

Article (344)

A fine of no less than fifty thousand dirhams and no more than one million dirhams shall be imposed on the chairman of the joint stock company or the chairman of the board of directors of the limited liability company if the losses of the company reaches half of its capital and the board fails to convene the general assembly pursuant to this Law.

Article (345)

Authority

A fine of no less than fifty thousand dirhams and no more than three hundred dirhams shall be imposed on the chairman of the joint stock company or the representative thereof who fails to send the invitation to convene the general assembly after having received a request of the same from the Ministry or the Authority, as the case may be.

Article (346)

Failure to Invite a Director to the Board Meetings

A fine of no less than one thousand dirhams and no more than three hundred dirhams shall be imposed on the chairman of the joint stock company or the representative thereof who fails to invite a director to the board meetings.

Article (347)

A fine of no less than ten thousand dirhams and no more than one hundred dirhams shall be imposed on the chairman, director, CEO, general manager or employee with the company who refuses to provide the company’s auditors or the inspector from the Ministry or authority with documents or information in order to perform their tasks, withhold information or clarifications or provide them with misleading information.

Article (348)

Lack of Accounting Records

Any National or foreign company which does not keep accounting records reflecting its transactions shall be fined an amount no less than fifty thousand Dirhams and no more than five hundred thousand Dirhams.

Article (349)

Any National or foreign company which does not keep the accounting records for the period specified herein shall be fined an amount no less than twenty thousand Dirhams and no more than one hundred thousand Dirhams.

Article (350)

Auditors Not Certified by the Authority

Article (351)

Non-Compliance of Sharia Controller and Members of the Internal Sharia Control

Committee

Each Member of the Internal Sharia Control Committee at the companies complying with the Islamic principles, who does not observe the guidelines of their practices issued by a resolution of the Council of Ministries, shall be fined an amount no less than ten thousand Dirhams and no more than fifty thousand Dirhams.

Article (352)

Non-Return of Extra Funds Remaining after Subscription

Any entity or entities delay to return the extra amounts paid by subscribers along with its consequent revenues which haven’t been used during the period herein specified shall be fined an amount no less than five hundred thousand Dirhams and no more than ten million Dirhams.

Article (353)

Non-Compliance with the Percentage of Emeriti Nationals Contributions

Any company fails to comply with the provisions determined in respect of the percentage of Emeriti nationals’ contribution in companies share capital or the percentage of Emeriti nationals in their Boards of Directors shall be fined an amount no less than twenty thousand Dirhams and no more than two hundred thousand Dirhams.

Article (354)

Any person disposes of shares in contradiction to the provisions hereof shall be fined an amount no less than twenty thousand Dirhams and no more than two hundred thousand Dirhams.

Article (355)

Non-Registration of the Company by the Registrar or the Competent Authority

Any foreign company, branch or office thereof inside the State which fails to complete its registration procedures before the Registrar or the competent authority shall be fined an amount no less than one hundred thousand Dirhams and no more than five hundred thousand Dirhams.

Article (356)

Any representation office of any foreign company practicing commercial activity inside the State shall be fined an amount no less than one hundred thousand Dirhams and no more than five hundred thousand Dirhams.

Article (357)

Status Adjustment Delay

Any company delays to amend its memorandum and articles of association to be consistent with the provisions of this law shall be fined an amount of two thousand Dirhams per day. This fine shall be calculated from the day following the expiry date of the period determined for status adjustment.

Article (358)

Announcement of Public Subscription without the Approval of the Authority

Any company, entity, or natural or corporate person being inside or outside the State or within the free zones thereof, who does not obtain the approval of the Authority before publishing any announcement calling the public to public subscription in any shares, debentures or other securities whether this has been done through publishing such call in daily newspapers, magazines or any other way of public announcement in the State, shall be fined an amount no less than one hundred Dirhams and no more than ten million Dirhams.

Article (359)

Any entity or company which receives any funds relating to subscription in shares, debentures or other securities without the approval of the Authority shall be fined an amount no less than one hundred thousand Dirhams and no more than ten million Dirhams.

Article (360)

Any person violating any provision hereof which doesn’t include specific penalty for such violation, or breaching such rules, regulations or orders issued in execution hereof, shall be fined an amount no less than ten thousand Dirhams and no more than one hundred thousand Dirhams.

Section 2

Crimes that Can Not Be Compromised

Article (361)

Provision of False or Inconsistent Information

Any person who provides false information or which is inconsistent with the law intentionally in the memorandum of association or articles of association of the company, or its prospectus in shares, debentures or any other documents of the company, as well as any person signed or distributed such documents despite of being aware of the same, shall be punished by imprisonment for a period not less than six months and no more than three years, in addition to a fine amounting not less than two hundred Dirhams and no more than one million Dirham, or by one of these two punishments.

Article (362)

Overestimation of the Capital Paid in Kind

Any person who overestimates in bad faith the capital shares paid in kind by the founders or partners shall be punishable with an imprisonment for a period not less than six months and no more than three years, with a fine of no less than five hundred thousand Dirhams and no more than million Dirhams, or by one of these two punishments.

Article (363)

Any manager or director who distributes profits or benefits on partners or any other persons being inconsistent with the provisions of this law or the provisions of the company’s memorandum or articles of association, as well as any auditor approves such distribution despite he was aware of the same, shall be punishable with an imprisonment for a period not less than six months and no more than three years, with a fine of no less than fifty thousand Dirhams and no more than five hundred thousand Dirhams, or by one of these two punishments.

Article (364)

Hiding the Actual Financial Position of the Company

Any manager, director, auditor or liquidator who provides intentionally false information in the company’s budget, profits and losses account or financial reports, or neglects material incidents in such document in order to hide the actual financial position of the company, shall be punishable with an imprisonment for a period not less than six months and no more than three years, with a fine of no less than one hundred thousand Dirhams and no more than five hundred thousand Dirhams, or by one of these two punishments.

Article (365)

False Facts in Inspection Report

Article (366)

Liquidator’s Intention to Damage the Company

A liquidator who causes damages to the company, shareholders, partners or creditors intentionally shall be punishable with an imprisonment for a period not less than three months and no more than three years, with a fine of no less than fifty thousand Dirhams and no more than five hundred thousand Dirhams, or by one of these two punishments.

Article (367)

Any person who issues shares, subscription receipts, interim certificates or debentures or offers the same for trading in contradiction with the provisions of this law shall be punishable with an imprisonment for a period not less than three months and no more than two years, with a fine of no less than one hundred thousand Dirhams and no more than five hundred thousand Dirhams, or by one of these two punishments.

Article (368)

Provision of Loan, Security or Guarantee

Article (369)

Disclosure of Company’s Secrets

Article (370)

Affecting Securities Prices

The company’s president, chairman or any other employee who participated directly or indirectly with any entity which performs operations in order to affect the prices of such securities issued by the company, shall be punishable with an imprisonment for a period no more than six months, with a fine of no less than one million Dirhams and no more than ten million Dirhams, or by one of these two punishments.

Article (371)

Imposing More Severe Penalty

Imposing the punishments provided for herein shall be without prejudice to any other more serious punishment to be provided for under any other law.

Article (372)

Criminal Claim

Criminal claim in respect of the crimes provided for herein to be committed by the company shall be filed against its legal representative.

Article (373)

Judicial Officers

Employees appointed by a resolution from the Minister of Justice in association with the Minister and in coordination with the Authority or the other competent authority – as the case may be – shall have the capacity of judicial officers with regard to examine any violations of the provisions of this law, and its executive regulations and orders as per the competencies of each of them.

Chapter 12

Transitional and Closing Provisions

Article (374)

Status Adjustment

Article (375)

Companies Stimulation Regulations

The Council of Ministers shall issue the regulations necessary to stimulate the companies to assume its community responsibility and regulate its application.

Article (376)

Revocation of Contradicting Provisions

This law shall supersede and revoke any provisions contradicting or breaching it, as well as the federal law No. (8) of 1984 on the commercial companies and its amending regulations.

Article (377)

Issuing Executive Regulations and Orders

Regulations and orders issued in execution of the federal law No. (8) of 1984 on the commercial companies shall remain in force to the extent that they do NOT contradict with the provisions of this law till the Ministry and the Authority – as per their competencies – issue all regulations, rules and orders needed for its execution.

Article (378)

Law Publication and Application

This Law shall be published in the Official Gazette and shall come into force after three months from publication date.

Khalifa bin Zayed Al Nahyan President of United Arab Emirates Issued by us in Abu Dhabi:

Date: 5 Jumada II 1436 AH

Corresponding to: 25 March 2015 AD