Companies Law DIFC Law No. 5 of 2018

Part 1 : GENERAL ......................................................................................................................................................... 1

1. Title and repeal .................................................................................................................................................... 1

2. Legislative authority ............................................................................................................................................ 1

3. Application of this Law ..........................................................................................................................................1

4. Date of enactment and commencement ...............................................................................................................1

5. Effect of Regulations made under the Previous Law ........................................................................................... 1

6. Schedules ............................................................................................................................................................. 1

Part 2 : ADMINISTRATION OF THIS LAW .........................................................................................................................3

7. The role of the Registrar ....................................................................................................................................... 3

Part 3 : INCORPORATION AND REGISTRATION OF COMPANIES .........................................................................................4

8. Types of companies................................................................................................................................................4

9. Legal personality....................................................................................................................................................4

Part 4 : COMPANY FORMATION AND INCORPORATION ......................................................................................................5

10. Method of forming a Company..............................................................................................................................5

11. Articles of Association.........................................................................................................................................5

12. Incorporation........................................................................................................................................................5

13. Effect of incorporation ........................................................................................................................................6

14. Licence ................................................................................................................................................................6

15. Effect of Articles of Association..........................................................................................................................6

16. Alteration of Articles of Association....................................................................................................................6

17. Copies of Articles of Association for Shareholders .............................................................................................7

18. Conduct of business in the DIFC ..........................................................................................................................7

19. Filing of Special Resolutions and certain other resolutions and agreements ...................................................7

Part 5 : CORPORATE CAPACITY AND TRANSACTIONS.......................................................................................................9

20. Capacity of Company............................................................................................................................................9

21. Form of contracts ................................................................................................................................................9

22. Pre-incorporation contracts.................................................................................................................................9

23. Participation in a Holding Company .....................................................................................................................9

Part 6 : CLASS RIGHTS.................................................................................................................................................10

24. Variation of class rights.....................................................................................................................................10

25. Shareholders’ right to object to variation or abrogation....................................................................................10

Part 7 : PRIVATE COMPANIES AND PUBLIC COMPANIES ................................................................................................11

CHAPTER 1 – FEATURES OF A COMPANY.....................................................................................................................11

26. Limited Liability .................................................................................................................................................11

27. Definitions of Public and Private Companies .....................................................................................................11

28. Name of a Private Company ...............................................................................................................................11

29. Name of a Public Company .................................................................................................................................11

30. Access to the Confirmation Statement of a Public Company ............................................................................11

CHAPTER 2 –ALTERATION OF COMPANY TYPE..............................................................................................................12

31. Re-registration of a Public Company as a Private Company ..............................................................................12

32. Re-registration of a Private Company as a Public Company ..............................................................................13

CHAPTER 3 – SHAREHOLDERS AND SHARES GENERALLY.............................................................................................14

33. Shareholders......................................................................................................................................................14

34. Nature of Shares.................................................................................................................................................14

35. Minimum share capital........................................................................................................................................15

36. Alteration of share capital .................................................................................................................................15

37. Non-cash consideration for Shares in a Private Company .................................................................................15

38. Non-cash consideration for Shares in a Public Company ..................................................................................16

39. Bearer Shares ....................................................................................................................................................17

40. Shareholders’ pre-emption rights......................................................................................................................17

41. Exceptions to the pre-emption right .................................................................................................................18

CHAPTER 4 – PROHIBITION OF PUBLIC OFFERS BY PRIVATE COMPANIES.......................................................................18

42. Prohibition of public offers by Private Companies.............................................................................................18

43. Enforcement of the prohibition in Article 42 .....................................................................................................19

CHAPTER 5 – REGISTERS AND SHARE CERTIFICATES ..................................................................................................20

44. Register of Shareholders ...................................................................................................................................20

45. Register of debentures.......................................................................................................................................21

46. Transfer and registration of Shares and debentures..........................................................................................21

47. Place where the registers are kept ...................................................................................................................22

48. Inspection of registers ......................................................................................................................................22

49. Rectification of registers ...................................................................................................................................23

50. Share certificates...............................................................................................................................................24

51. Right of Public Company to request information about interests in its Shares.................................................24

CHAPTER 6 – REDEMPTION AND PURCHASE OF SHARES..............................................................................................25

52. Power to issue redeemable Shares....................................................................................................................25

53. Power of Company to purchase its own Shares .................................................................................................26

54. Treasury shares..................................................................................................................................................28

55. Prohibition on financial assistance to acquire Shares.......................................................................................29

CHAPTER 7 – REDUCTION OF CAPITAL.........................................................................................................................31

56. Reduction of share capital.................................................................................................................................31

57. Reduction of share capital by a Private Company supported by a solvency statement ....................................31

58. Reduction of share capital by Special Resolution confirmed by a Court order..................................................32

59. Court order confirming reduction of share capital ............................................................................................33

60. Registration of order and statement of capital..................................................................................................34

61. Public Company reducing its share capital below its authorised minimum ......................................................34

62. Liability to Creditors in respect of reduction of share capital by a Court order ................................................34

63. Treatment of reserves arising from reduction of capital....................................................................................35

CHAPTER 8 –DISTRIBUTIONS.......................................................................................................................................35

64. Restrictions on Distributions..............................................................................................................................35

65. Consequences of unlawful Distribution .............................................................................................................36

CHAPTER 9 – DIRECTORS AND SECRETARIES...............................................................................................................36

66. Directors.............................................................................................................................................................36

67. Election, term and removal of Directors ............................................................................................................37

68. Duties of Directors..............................................................................................................................................37

69. Duty to act within powers ..................................................................................................................................38

70. Duty to promote the success of the Company ...................................................................................................38

71. Duty to exercise independent judgement .........................................................................................................38

72. Duty to exercise reasonable care, skill and diligence ......................................................................................38

73. Duty to avoid conflicts of interest .....................................................................................................................39

74. Duty not to accept benefits from third parties...................................................................................................39

75. Duty to declare interest in a proposed transaction or arrangement .................................................................40

76. Contraventions ..................................................................................................................................................40

77. Duty of Directors to declare interest in existing transaction or arrangement ..................................................40

78. Ratification of interest in existing transaction or arrangement........................................................................41

79. Prohibition of financial assistance to Directors.................................................................................................42

80. Validity of acts of Director..................................................................................................................................42

81. Secretary............................................................................................................................................................42

82. Register of Directors and Secretaries................................................................................................................43

83. Assumptions in relation to Directors and Secretary ..........................................................................................43

84. Disqualification orders.......................................................................................................................................44

CHAPTER 10 – MEETINGS...........................................................................................................................................44

85. Participation in meetings...................................................................................................................................44

86. Annual General Meeting .....................................................................................................................................44

87. Requisition of meetings......................................................................................................................................45

88. Registrar’s power to call meeting in default......................................................................................................45

89. Notice of meetings ............................................................................................................................................45

90. General provisions as to meetings and votes....................................................................................................46

91. Representation at meetings...............................................................................................................................46

92. Resolutions in writing of a Company..................................................................................................................47

93. Recording of decisions by sole Shareholder .....................................................................................................47

94. Proxies................................................................................................................................................................47

95. Demand for poll ..................................................................................................................................................48

96. Minutes and examination of minute books .......................................................................................................48

97.Takeover offers....................................................................................................................................................49

98.Right of offeror to buy out minority Shareholders...............................................................................................49

99.Effect of notice under Article .............................................................................................................................50

100.Right of minority Shareholder to be bought out by offeror................................................................................51

101.Effect of requirement under Article ..................................................................................................................52

102.Applications to the Court...................................................................................................................................53

103.Joint offers........................................................................................................................................................53

104.Associates.........................................................................................................................................................54

Part 8 : MERGERS.........................................................................................................................................................56

CHAPTER 1 –GENERAL...............................................................................................................................................56

105.Application and interpretation..........................................................................................................................56

CHAPTER 2 –REQUIREMENTS APPLICABLE TO A MERGER.............................................................................................57

106.Merger agreement..............................................................................................................................................57

107.Resolutions and certificates.............................................................................................................................58

108.Approval of the Merger Agreement....................................................................................................................59

109.Simplified approval of a Group Merger...............................................................................................................60

110.Objection by Shareholders.................................................................................................................................61

CHAPTER 3 –CREDITORS............................................................................................................................................61

111.Notice to Creditors............................................................................................................................................61

112.Company to apply to Court if solvency statement not made.............................................................................62

113.Objection by Creditor if a solvency statement is made.....................................................................................63

114.Consent of Registrar required for mergers involving Foreign Companies.........................................................63

CHAPTER 4 –COMPLETION OF MERGER AND CONTRAVENTIONS....................................................................................66

115.Effect of completion of merger..........................................................................................................................66

116.Contraventions relating to merger.....................................................................................................................67

Part 9 : COMPROMISES AND ARRANGEMENTS...............................................................................................................68

117.Power of Company to compromise with Creditors and Shareholders................................................................68

118.Information relating to compromise to be circulated........................................................................................69

119.Provisions for facilitating company reconstruction or amalgamation..............................................................69

Part 10 : ACCOUNTS, REPORTS AND AUDIT..................................................................................................................70

CHAPTER 1 –GENERAL...............................................................................................................................................70

120.Application of this Part......................................................................................................................................70

121.Waiver and modification of this Part.................................................................................................................70

CHAPTER 2 –ACCOUNTS AND REPORTS.......................................................................................................................70

122.Maintenance of Accounting Records.................................................................................................................70

123.Financial years..................................................................................................................................................71

124.Accounts...........................................................................................................................................................71

125.Provision of copy of accounts to a Shareholder................................................................................................72

126.Directors’ report for Public Companies..............................................................................................................72

CHAPTER 3 –AUDITORS..............................................................................................................................................73

127.Appointment and removal of auditors...............................................................................................................73

128.Auditor’s report to the Company........................................................................................................................75

129.Auditors’ duties and powers..............................................................................................................................75

130.Resignation of an auditor..................................................................................................................................75

131.Co-operation with auditors...............................................................................................................................76

Part 11 : OTHER TYPES OF COMPANY............................................................................................................................77

132.Incorporation of prescribed types of Company..................................................................................................77

Part 12 : RECOGNISED COMPANIES...............................................................................................................................78

133.Foreign Companies............................................................................................................................................78

134.Registration.......................................................................................................................................................78

135.Effect of registration.........................................................................................................................................78

136.Requirements of a Recognised Company..........................................................................................................78

137.Conduct of business in the DIFC........................................................................................................................79

138.Maintenance of Accounting Records.................................................................................................................79

139.Inspection and Remedies..................................................................................................................................80

Part 13 : TRANSFER OF INCORPORATION......................................................................................................................81

140.Transfer of incorporation to DIFC.......................................................................................................................81

141.Certificate of continuation................................................................................................................................81

142.Effect of certificate...........................................................................................................................................81

143.Copy of certificate of continuation...................................................................................................................81

144.Rights and liabilities..........................................................................................................................................82

145.Transfer of incorporation from DIFC to another jurisdiction..............................................................................82

146.Refusal to grant authorisation to transfer incorporation..................................................................................82

Part 14 : POWERS AND REMEDIES................................................................................................................................83

147.Application of Operating Law.............................................................................................................................83

148.Directions issued by the Registrar....................................................................................................................83

149.Orders in event of unfair prejudice....................................................................................................................83

150.Strike off and Restoration.................................................................................................................................83

Part 15 : REGULATIONS................................................................................................................................................84

151.Power to make Regulations...............................................................................................................................84

152.Waivers and Modification of the Law and Regulations......................................................................................85

Part 16 : MISCELLANEOUS............................................................................................................................................86

153.Public Register...................................................................................................................................................86

154.Fees...................................................................................................................................................................86

Schedule 1 ................................................................................................................................................................87

Schedule 2 ................................................................................................................................................................95