In November 2022, the UAE Cabinet issued Decision No. 102 of 2022 On the Issuance of the Regulations on Administrative Penalties for Acts Committed in Violation of the Commercial Companies (the “Decision”) with regard to the imposition of administrative penalties for acts committed in violation of the provisions of the Federal Commercial Companies Law of 2021 (the “CCL”). The Decision enables the UAE government to monitor companies to ensure adequate compliance with CCL.
The Decision applies to all commercial companies that are established in the State, and to foreign companies and its branches, representative offices, and investment funds, unless exempted by CCL. The Decision was issued on 2nd November 2022 and recently went into force.
The Decision provides a table of violations under the CCL which relates to governance, the percentage of national ownership, Sharia supervision, record keeping, Board of Directors invitation, the formation of the board regarding the appointment and resignation, and the procedures of the General Assembly, with corresponding administrative penalties for each violation. The fines range from AED 1,000 to AED 500,000 depending on the violation committed by a company.
The imposed administrative penalties were in accordance with the following scale:
First-time violation – a written warning notice addressed to the offender and a period of not more than thirty (30) days to remedy the violation.
Second-time violation – administrative penalty imposed in accordance with the amounts for corresponding violations.
Third-time violation – administrative penalty imposed could be doubled.
Fourth-time violation – administrative penalty imposed could be increased threefold.
Cancellation of license and the offender could also be responsible for the costs and expenses for remedying any damages resulting from the violation.
The Decision does grant an incumbent the right to be notified of any violations, and the right to file a grievance against each administrative penalty. The enactment of this Decision is a positive outcome as it sets out the level of penalties involved and formally grants each incumbent company the right to object while also empowering the state authorities in ensuring corporate governance and company filings are adhered to under the recent flurry of legislative developments and relaxation on full foreign ownership of businesses in the UAE.