DIFC New Laws - Short View
The recent release of new laws by the DIFC have led to a somewhat revised Companies Law, Trust Law, Foundation Law and a number of operating laws. They go some way towards bridging gaps, clarifying some issues, and becoming a little more in tune with international practices, but be aware that there are still some significant deviations from what international business may be used to in other jurisdictions.
Removing the clumsy and somewhat abused LLC option was necessary and will have little negative impact in the zone. Expanding the Directors Duties also fills a significant gap, and it was a relief that the full UK s172 stakeholder model was not copied, as this would be legally tricky to apply due to the scope (see discussion on this in the media). Reduction to single Director/no Company Secretary is suitable for a wide range of unregulated companies, although the DFSA is not likely to accept this governance structure for most of its regulated population, and the Company Secretary function still exists in operation. We also have seen a number of the Funds have benefited from the Investment Company provisions that exclude Company Law provisions through their own Articles (and reference to PPMs), although in my mind this ability is too broad and will expose the regulator/managers to risks from poor investor documents and disclosures. We will wait to see on that...
However, a number of issues remain. In particular, retaining the notion of "nominal value" for shares and not allowing discounts on issuance does not reflect the reality of our economic environment (although the UK retains this, most common law countries allow discounted share issuance as shareholder approval for capital change is required in most cases). The Companies Law is still not entirely suitable for listed companies, although Nasdaq Dubai is vastly under-utilised as an exchange by the markets. And the need to revise and approve the Articles of Association will catch a few companies by surprise and provide an overkill opportunity by your friendly law firm.
There are a range of other changes which are well documented/summarised by the various large law firms in the UAE, which we also encourage parties to read.
Overall, it has been an overdue step forward (it has been over 18 months since the last consultation period closed), and we will continue to encourage the DIFC and its firms to consider a few more advances/benchmarks to keep in on a competitive international foothold. Happy Governance!