Out-Law News | 23 Jan 2020 | 11:52 am | 2 min. read
The new regulations (90-page / 1.2MB PDF) came into force on 2 January 2020, and aim to update DMCC's existing company law framework in line with international best practice. Changes include increased flexibility around a company's articles of association, the introduction of different classes of share, and a new 'dormant' company status.
DMCC is a Dubai free zone focused on commodities trade and enterprise. Almost 2,000 new companies registered in the DMCC in 2019, taking the total number of companies registered in the free zone up to over 16,000, according to official figures.
Ahmad Hamza, executive director of the DMCC, said: "The new rules and regulations are indicative of our commitment to providing companies with a seamless ability to set up and grow their operations. We are confident that these enhancements will attract even more companies to do business in DMCC".
The new regulations are a step in the right direction in terms of the DMCC bringing its regulations in line with best practice.
Dubai-based corporate law expert Christopher Neal of Pinsent Masons, the law firm behind Out-Law, described the new regulations as "a step in the right direction in terms of the DMCC bringing its regulations in line with best practice".
"Some of the changes are going to be welcome to individuals and companies looking to set up in the DMCC and also existing DMCC businesses: potentially less onerous share capital requirements, greater flexibility around preparing a company's articles of association and the ability to apply for 'dormant' status," he said.
"On the flip side, DMCC companies will need to be aware of, and ensure compliance with, the changes to auditing requirements, and more onerous provisions around paying dividends," he said.
Under the new regulations, companies may adopt model 'standard articles' of association as prescribed by the DMCC Authority or can choose to modify the standard articles or adopt their own. Companies that do not use the standard articles must provide the DMCC Registrar with a legal opinion that its articles do not contradict and are consistent with the regulations.
The DMCC's previous minimum share capital requirement has been repealed, although the regulations state that the DMCC Registrar may specify a minimum amount of share capital for a particular company. Companies may now issue different classes of shares provided that the rights associated with each share class is stipulated in the articles of association, and may hold shares in treasury. The regulations also contain new rules around payment of dividends and unlawful distributions.
The regulations contain new provisions to make it easier to transfer company incorporation to the DMCC, as well as provisions around winding up. They also state that the provisions of the UAE Federal Bankruptcy Law and any replacement or amending legislation are applicable to DMCC companies, although it remains to be seen how the Federal Bankruptcy Law will work alongside the regulations in practice.
The regulations also introduce detailed requirements around accounts, record-keeping and auditing, including a requirement for auditors to be registered with the DMCC Authority as an approved auditor.