Commercial laws and regulations

Commercial laws and regulations

Federal Law No. (7) of 2017 on Tax Procedures - Dubai - UAE

 

 

Federal Law No. (7) of 2017 on Tax Procedures

 

 

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

 

Having reviewed the Constitution,

-

Federal Law No. (1) of 1972 on the Competencies of the Ministries and Powers of the Ministers and its amendments,

-

Federal Law No. (5) of 1975 on Commercial Records,

-

Federal Law No. (11) of 1981 on the Imposition of a Federal Customs Tax on Imports of Tobacco and its derivatives and its amendments,

-

Federal Law No. (5) of 1985 promulgating the Civil Transactions Law and its amendments,

-

Federal Law No. (3) of 1987 promulgating the Penal Law and its amendments,

-

Federal Law No. (10) of 1992 promulgating the Law of Evidence in Civil and Commercial Transactions and its amendments,

-

Federal Law No. (11) of 1992 promulgating the Law on Civil Procedures and its amendments,

-

Federal Law No. (35) of 1992 promulgating the Penal Procedures Law and its amendments,

-

Federal Law No. (18) of 1993 promulgating the Commercial Transactions Law,

-

Federal Law No. (17) of 2004 on the combat of Commercial Concealment,

-

Federal Law No. (1) of 2006 on Electronic Transactions and Trading,

-

Federal Decree-Law No. (11) of 2008 on Human Resources in the Federal Government and its amendments,

-

Federal Law No. (1) of 2011 on the State’s Public Revenues,

-

Federal Law No. (6) of 2012 on the Organization of the Translation Profession,

-

Federal Law No. (12) of 2014 on the Organisation of the Auditing Profession,

-

Federal Law No. (2) of 2015 on Commercial Companies;

-

Federal Decree-Law No. (9) of 2016 on Bankruptcy,

-

Federal Decree-Law No. (13) of 2016 on the Establishment of the Federal Tax Authority,

-

Pursuant to the presentation of the Minister of Finance and the approval of the Cabinet, Federal National Council and Federal Supreme Council,

 

 

We hereby issue the following Law:

 

 

Chapter One

Definitions and Scope of Application of the Law

 

Article (1)

Definitions

 

In the application of the provisions of this law, the following words and phrases shall have the meanings set out against each of them, unless the context otherwise requires:

 

State: United Arab Emirates

 

 

 

Minister: Minister of Finance.

Authority: Federal Tax Authority.

Director General: Director General of the Authority.

Committee: Tax Disputes Resolution Committee.

Competent Court: the federal court within whose jurisdiction the Authority’s Head Office or Branch is located.

Tax: any federal tax administered, collected and enforced by the Authority.

Tax Law: any federal law pursuant to which a Federal Tax is imposed.

Person: a natural or legal person.

Business: any activity conducted in an ongoing, regular and independent manner by any Person and in any location, such as industrial, commercial, agricultural, professional, vocational or service activity, drilling activities or anything related to the use of material or non-material property.

Taxable Person: a Person who is subject to Tax under the provisions of the relevant Tax Law.

Taxpayer: any Person who is obligated to pay Tax in the State under the Tax Law whether a Taxable Person or an end consumer.

Tax Return: information and data specified for Tax purposes, submitted by a Taxable Person in accordance with the form prepared by the Authority.

Tax Period: a specified period of time in respect of which Payable Tax must be calculated and paid.

Tax Registration: a procedure by which a Taxable Person or his Legal Representative registers for Tax purposes with the Authority.

Tax Registration No. (TRN): a unique number issued by the Authority for each Person registered for Tax purposes.

Registrant: a Taxable Person holding a TRN.

Legal Representative: the manager of a company or a guardian or custodian of a minor or incapacitated person, or the bankruptcy trustee appointed by court for a company that is in bankruptcy, or any other Person appointed legally to represent another Person.

Due Tax: Tax that is calculated and charged under the provisions of  any Tax Law.

Payable Tax: Tax that has become due for payment to the Authority.

Administrative Penalties: monetary amounts imposed on a Person by the Authority for a breaching provisions of this Law or the Tax Law.

Refundable Tax: amounts that have been paid and that the Authority can refund in whole or in part to the Taxpayer pursuant to the relevant Tax Law, require to use for the payment of amounts due or Administrative Penalties or require to carry forward to future Tax Periods depending on the nature of the refund, according to the Tax Law.

Tax Assessment: a decision issued by the Authority relating to Payable Tax or Refundable Tax.

Administrative Penalties Assessment: a decision issued by the Authority concerning Administrative Penalties due.

Notification: notification to the concerned Person or his Tax Agent or Legal Representative of decisions issued by the Authority through the means stated in this Law and its Executive Regulations.

Voluntary Disclosure: a form prepared by the Authority pursuant to which the Taxpayer notifies the Authority of an error or omission in the Tax Return, Tax Assessment or Tax refund application in accordance with the provisions of the Tax Law.

Register: the Register of Tax Agents.

Tax Agent: any Person registered with the Authority in the Register, who is appointed on behalf of another Person to represent him before the Authority and assist him in the fulfilment of his Tax obligations and the exercise of his associated tax rights.

 

 

 

 

Tax Audit: a procedure undertaken by the Authority to inspect the commercial records or any information or data related to a Person carrying on Business.

 

Tax Auditor: any member of the Authority’s staff appointed as a Tax Auditor.

 

Tax Evasion: the use of illegal means resulting in lowering the amount of tax due, non-payment of the tax due or a refund of tax that he does not have the right to have refunded under any Tax Law.

 

 

Article (2)

Scope of Application of the Law

 

The provisions of this Law apply to tax procedures related to the administration, collection and enforcement of Tax by the Authority.

 

Article (3) Objectives of the Law

 

This Law aims to achieve the following:

1.

regulation of the rights and obligations between the Authority and the Taxpayer and any other Person dealing with the Authority;

2.

regulation of the common procedures and rules applicable to all Tax Laws in the State.

 

Chapter Two Tax Obligations

 

Part One

Keeping of Accounting Records and Commercial Books

 

Article (4)

Record Keeping

 

Any Person conducting any Business must keep Accounting Records and Commercial Books of his Business and any Tax related information as determined by Tax Law and maintain the same according to the controls that will be specified by the Executive Regulations of this Law.

 

Article (5) Language

1.

Each Person must submit the Tax Return, data, information, records and documents related to Tax that he is required to submit to the Authority in Arabic as determined by the provisions of the Tax Law.

2.

The Authority may accept data, information, records, and documents related to Tax in any other language, provided that the Person provides the Authority with a translated copy of any of them into Arabic at his expense and responsibility if so requested, and in accordance with the Executive Regulations to this Law.

 

Part Two Tax Registration

 

Article (6)

Tax Registration, Tax De-registration and Amendments of Data related to Tax Registration

 

 

 

1.

A non-registered Taxable Person or any other Person who has the right to register must apply for registration under the relevant provisions of the Tax Law.

2.

A Registrant must:

 

a. Include his TRN in all correspondence and transactions with the Authority or with others in accordance with the provisions of the Tax Law.

 

b. Inform the Authority, in the form prepared by it, of the occurrence of any circumstance that might require the amendment of information related to his Tax record kept by the Authority, within 20 business days from the occurrence of such circumstance.

 

c.  Apply for  de-registration in accordance with the relevant provisions of the Tax Law.

3.

The Executive Regulations of this Law will specify the procedures for Tax Registration, de-registration, and amending Tax registration data with the Authority.

4.

Government bodies that licence businesses shall notify the Authority within a time limit of (20) business days from the date of issuing any licence of the fact and according to the provisions of the Executive Regulations of this Law.

 

 

Article (7)

The Legal Representative

 

Any Person appointed as a Legal Representative of a Taxable Person or his funds or his inheritance must inform the Authority within 20 business days from the date of the appointment, and according to the procedures that will be specified in the Executive Regulations of this Law.

 

Part Three Tax Obligations

 

Article (8)

Tax Return Preparation and Submission

1.

Each Taxable Person shall:

 

a) Prepare the Tax Return for each Tax Period for each Tax within the time limit of registration in accordance with the Tax Law.

 

b) Submit the Tax Return to the Authority in accordance with the provisions of this Law and the Tax Law.

 

c) Settle any Payable Tax as specified in the Tax Return or any Tax Assessment within the timeframespecified in this Law and the Tax Law.

2.

Any incomplete Return submitted to the Authority shall be treated as not having been accepted by it if it does not include the basic information determined by the Tax Law.

3.

Each Taxable Person is responsible for the accuracy of the information and data in the Tax Return and in all his correspondence with the Authority.

4.

Each Taxpayer shall settle any Administrative Penalties prescribed within the period of time specified in this Law and the Tax Law.

 

 

Article (9)

Specifying Payable Tax when Settling

1.

A Taxable Person must, when paying any amount to the Authority, specify the type of Tax and the relevant Tax Period to which the amount relates; the Authority shall allocate the payment accordingly.

 

 

 

2.

If a Taxable Person makes any payment without specifying the type of Tax or the Tax Period, the Authority shall have the right to allocate the full amount or part thereof according to the mechanism that will be specified in the Executive Regulations of this Law.

3.

If a Taxable Person pays more than the Payable Tax amount, the Authority shall have the right to allocate the difference to a later Tax Period, unless such Taxable Person submits a refund application in accordance with the provisions of this Law.

4.

If a Taxable Person pays less than the Payable Tax amount, the provisions of Chapter Three, Part Four of this Law shall apply.

 

Part Four Voluntary Disclosure

 

Article (10)

Voluntary Disclosure

1.

If a Taxable Person becomes aware that a Tax Return submitted by him to the Authority or a Tax Assessment sent to him by the Authority is incorrect, resulting in a calculation of Payable Tax according to the Tax Law being less than it should have been, the Taxable Person must in that event apply to correct such Tax Return by submitting a Voluntary Disclosure within the time limit specified in the Executive Regulations of this Law.

2.

If a Taxpayer becomes aware that a Tax refund application that he has submitted to the Authority is incorrect, resulting in a calculation of a refund to which he is entitled according to the Tax Law being more than it should have been, he must in that event apply to rectify the Tax refund application by submitting a Voluntary Disclosure within the time limit specified in the Executive Regulations of this Law.

3.

If a Taxable Person becomes aware that a Tax Return submitted by him to the Authority or a Tax Assessment sent to him by the Authority are incorrect, resulting in the calculation of Payable Tax according to the Tax Law being more than it should have been, he may in that event apply to rectify such a Tax Return by submitting a Voluntary Disclosure.

4.

If a Taxpayer becomes aware that a Tax refund application that he has submitted to the Authority is incorrect, resulting in the calculation of a refund amount to which he is entitled according to the Tax Law being less than the it should have been, he may in that event apply to rectify the Tax refund application by submitting a Voluntary Disclosure.

 

Chapter Three Tax Procedures

 

Part One

Notification

 

Article (11)

Methods of Notification

1.

The Authority shall notify a Person of any decisions or procedures through the address stated in the correspondence between the Authority and that Person.

2.

The Authority shall notify a Taxable Person through the address stated in the Tax Return, unless the Authority is informed of a change in address by the Taxable Person, his Legal Representative or his Agent.

3.

In all cases, a Person shall be treated as having been notified of any decision and as having received any correspondence if it appears that the Authority has sent the notification and correspondence according to the provisions of sections (1) and (2) of this Article.

4.

The Executive Regulations of this Law shall specify the means used for Notifications and correspondence.

 

 

 

 

 

 

Part Two

Tax Agent

 

Article (12)

Register of Tax Agents

 

A Register of Tax Agents shall be established at the Authority. For each Tax Agent there will be a file in which all matters related to his professional conduct shall be lodged.

 

 

Article (13)

Tax Agents Registration

 

It is not permitted for any Person to practise the profession of a Tax Agent in the State unless he is listed in the Register and licensed for this purpose by the Ministry of Economy and the competent local authority.

 

 

Article (14)

Conditions of Registration in the Register

1.

Anyone listed in the Register must satisfy the following conditions:

 

a. be of good conduct and behaviour and never have been convicted of a crime or misdemeaour prejudicial to honour or honesty, notwithstanding that he may have been rehabilitated.

 

b. hold an accredited qualification from a recognised university or institute showing his specialisation and practical experience as specified in the Executive Regulations of this Law.

 

c.  be medically fit to perform the duties of the profession.

 

d.  hold professional indemnity insurance.

2.

A Tax Agent must notify the Authority of any period during which he ceases to practise his profession as a Tax Agent if he is hindered from practicing, and he can request to resume his practice when such hindrance ceases to exist.

3.

The Executive Regulations of this Law shall specify the procedures for listing a Tax Agent in the Register and the rights and obligations of the Tax Agent before the Authority and the Person.

 

Article (15) Appointment of a Tax Agent

1.

A Person may appoint a Tax Agent to act in his name and on his behalf with regard to his tax affairs with the Authority without prejudice to that Person’s responsibility to the Authority.

2.

It is not permitted for the Authority to deal with any Tax Agent regarding any Person if such Person informs the Authority that his agency engagement has ended or that the Tax Agent has been dismissed.

 

 

Article (16)

Person’s Records with the Tax Agent

1.

The Tax Agent must, upon the Authority’s request, provide it with all the information, documents, records and data required for any Person represented by the Tax Agent.

2.

The Authority may review the records of any Person available with his Tax Agent and may rely on them for the purposes of a Tax Audit, even after the expiry of the agency engagement or the dismissal of the Tax Agent.

 

 

 

 

 

 

Part Three

Tax Audits

 

Article (17)

The right of the Authority to perform a Tax Audit

1.

The Authority may perform a Tax Audit on any Person to ascertain the extent of that Person’s compliance with the provisions of this Law and the Tax Law.

2.

The Authority may perform the Tax Audit at its office or the place of business of the Person subject to the Tax Audit or any other place where such Person carries on Business, stores goods or keeps records.

3.

If the Authority decides to perform a Tax Audit at the place of Business of the Person subject to the Tax Audit or any other place where such Person carries on his Business, stores goods or keeps records, the Authority must inform him at least five business days prior to the Tax Audit.

4.

By way of exception to section (3) of this Article, the Tax Auditor has the right of entry to any place where the Person subject to the Tax Audit carries on his Business, stores goods, or keeps records, and as the case may be it will be temporarily closed in order to perform the Tax Audit for within a time limit not exceeding 72 hours without prior notice in any of the following cases:

 

a. if the Authority has serious grounds to believe that the Person subject to the Tax Audit is participating or involved in Tax Evasion whether related to this Person or another Person;

 

b. if the Authority has serious grounds to believe that not temporarily closing the place where the Tax Audit is conducted will hinder the conduct of the Tax Audit;

 

c. if the Person who has been given advance notice of the Tax Audit under section (3) of this Article attempts to hinder the Tax Auditor’s access to the place where the Tax Audit is to be performed.

5.

In all cases stated in section (4) of this Article, the Tax Auditor must obtain the prior written consent of the Director General; and if the place to be accessed is a place of residence then a permit from the Public Prosecutor must also be obtained.

6.

Places closed under this Article must be reopened upon the expiration of 72 hours, unless the Authority obtains a permit from the Public Prosecutor to extend the closure time limit for a similar period prior to the expiry of the preceding 72 hours.

7.

A criminal case can be initiated only upon an application from the Director General.

8.

The Executive Regulations of this Law shall specify the necessary procedures related to the Tax Audit.

 

 

Article (18)

The Right of the Authority to Access the Original Records or Copies Thereof During a Tax Audit

 

While conducting a Tax Audit, the Tax Auditor may obtain original records or copies thereof, or take samples of the stock, equipment or other assets from the place at which the Person subject to the Tax Audit carries on his business or which are in his possession, or may seize them in accordance with the rules that shall be specified in the Executive Regulations of this Law.

 

Article (19) Timing of the Tax Audit

 

A Tax Audit will be conducted during the official working hours of the Authority. In cases of necessity, a Tax Audit may be exceptionally conducted outside such hours by decision of the Director General.

 

 

 

 

 

 

Article (20)

New Information Surfacing after a Tax Audit

 

The Authority may audit any issue previously audited if new information surfaces that might impact the outcome of the Tax Audit, provided that the Tax Audit procedures shall apply in accordance with the provisions of this Law and its Executive Regulations.

 

Article (21)

Cooperation during the Tax Audit

 

Any Person subject to a Tax Audit, his Tax Agent or Legal Representative must facilitate and offer assistance to the Tax Auditor to enable him to perform his duties.

 

 

Article (22)

The Audited Person’s Rights

 

The audited Person has the right to:

1.

request the Tax Auditors to show their job identification cards.

2.

obtain a copy of the Tax Audit Notification.

3.

attend the Tax Audit which take place outside the Authority.

4.

Obtain copies of any original paper or digital documents seized or obtained by the Authority during the Tax Audit, according to what is specified in the Executive Regulations of this Law.

 

 

Article (23)

Notification of the Tax Audit Results

1.

The Authority must inform the Person subject to Tax Audit of the final results of the Tax Audit within the time limit and according to the procedures specified in the Executive Regulations of this Law.

2.

The Person subject to the Tax Audit may view or obtain the documents and data on which the Authority based its assessment of Due Tax according to the provisions specified in the Executive Regulations of this Law.

 

 

Part Four

Tax Assessments and Administrative Penalties Assessment

 

Article (24)

Tax Assessments

1.

The Authority shall issue a Tax Assessment to determine Payable Tax and notify the Taxable Person within five business days of its issuance, in any of the following cases:

 

a.  the Taxable Person failing to apply for registration within the timeframe specified by the Tax Law.

 

b.  the Registrant failing to submit a Tax Return within the timeframe specified by the Tax Law.

 

c. the Registrant failing to settle the Payable Tax stated as such on the Tax Return that was submitted within the time limit specified by the Tax Law.

 

d.  the Taxable Person submitting an incorrect Tax Return.

 

e. the Registrant failing to account for Tax on behalf of another Person when he is obligated to do so under the Tax Law.

 

 

 

 

f. there being a shortfall in Payable Tax as a result of a Person’s Tax Evasion, or as a result of a Tax Evasion in which such Person was involved.

2.

The Authority shall issue an estimated Tax Assessment if it has not been possible to determine the amount of Tax deemed to be Payable Tax or the Refundable Tax that has not been due to be refunded, as the case may be.

3.

The Authority may amend an estimated Tax Assessment based on new information that surface after the issue of the estimated Tax Assessment. It must notify the concerned Person of these amendments within (5) five business days from the date of amendment.

4.

The Executive Regulations of this Law shall specify the information or data that must be included in the Tax Assessment.

 

Article (25) Administrative Penalties Assessment

1.

The Authority shall issue an Administrative Penalties Assessment for a Person and notify him within (5) five business days for any of the following violations:

 

a.     the Person carrying on a Business failing to keep the required records and other information specified in this Law and the Tax Law.

 

b.     the Person carrying on Business failing to submit the data, records and documents related to Tax in Arabic to the Authority when requested.

 

c.     the Taxable Person failing to submit a registration application within the timeframe specified in the Tax Law.

 

d.     the Registrant failing to submit a deregistration application within the timeframe specified in the Tax Law.

 

e.     the Registrant failing to inform the Authority of any circumstance that requires the adjustment of the information pertaining to his tax record kept by the Authority.

 

f.     the Person appointed as a Legal Representative for the Taxable Person failing to inform the Authority of his appointment within the specified timeframe, in which case the penalties will be due from the Legal

Representative’s own funds.

 

g.     the Person appointed as a Legal Representative for the Taxable Person failing to file a Tax Return within the specified timeframe, in which case the penalties will be due from the Legal Representative’s own funds.

 

h.     the Registrant failing to submit the Tax Return within the timeframe specified in the Tax Law.

 

i.      the Taxable Person failing to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax Law.

 

j.      the Registrant submitting an incorrect Tax Return.

 

k.     the Person voluntarily disclosing errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this Law.

 

l.      the Taxable Person failing to voluntarily disclose errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this Law before being notified that he will be subject to a Tax Audit.

 

m. the Person carrying on a Business failing to offer the facilitation and assistance to the Tax Auditor in violation of the provisions of Article (21) of this Law.

 

n.     the Registrant failing to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law.

 

o.     any other violation for which a resolution is issued by the Cabinet.

2.

The Executive Regulations of this Law shall specify the information and data that must be included in the Administrative Penalties Assessment.

 

 

 

3.

The Cabinet shall issue a resolution that specifies the Administrative Penalties for each of the violations listed in section (1) of this Article. Such Administrative Penalties shall be no less than 500 Dirhams for any violation and shall not exceed three times the amount of Tax in respect of which the Administrative Penalty was levied.

4.

The imposition of any Administrative Penalty pursuant to the provisions of this Law or any other law shall not exempt any Person of his liability to settle the Due Tax in accordance with the provisions of this Law or the Tax Law.

 

Part Five Penalties

 

Article (26)

Tax Evasion Penalties

1.

Without prejudice to any more severe penalty applicable under any other law, a prison sentence and monetary penalty not exceeding five times the amount of evaded Tax or either of the two, shall be imposed on:

 

a.    a Taxable Person who deliberately fails to settle any Payable Tax or Administrative Penalties.

 

b. a Taxable Person who deliberately understates the actual value of his Business or fails to consolidate his related Businesses with the intent of remaining below the required registration threshold.

 

c.    a Person who charges and collects amounts from his clients claiming them to be Tax without being registered.

 

d.   a Person who deliberately provides false information and data and incorrect documents to the Authority.

 

e. a Person who deliberately conceals or destroys documents or other material that he is required to keep and provide to the Authority.

 

f.     a Person who deliberately steals, mis-uses or causes the destruction of documents or other materials that are in the possession of the Authority.

 

g.   a Person who prevents or hinders the Authority’s employees from performing their duties.

 

h.   a Person who deliberately decreases the Payable Tax through Tax Evasion or conspiring to evade Tax.

2.

The imposition of a penalty under the provisions of this Law or any other Law shall not exempt any Person from the liability to pay any Payable Tax or Administrative Penalties under the provisions of this Law or any Tax Law.

 

 

3.

 

 

The competent court shall impose Tax Evasion penalties against any Person who is proven to have been directly involved or instrumental in Tax Evasion pursuant to Federal Law No. (3) of 1987 referred to.

4.

Without prejudice to section (2) of this Article, any Person who is proven to have been directly involved or instrumental in Tax Evasion pursuant to section (3) of this Article shall be jointly and severally liable with the Person whom he has assisted, to pay the Payable Tax and Administrative Penalties pursuant to this Law or any other Tax Law.

 

Chapter Four Objections

 

Part One

Application for Reconsideration

 

Article (27)

Procedures for Application for Reconsideration

 

 

 

1.

Any Person may submit a request to the Authority to reconsider any of its decisions issued in connection with him in whole or in part provided that reasons are included, within 20 business days from him being notified of the decision.

2.

The Authority shall review a request for reconsideration if it has fulfilled the requirements and issue its decision with reasons within 20 business days from receipt of such application. The Authority must inform the applicant of its decision within five business days of issuing the decision.

 

Part Two Objections to the Committee

 

Article (28)

Tax Disputes Resolution Committee

1.

One or more permanent committee shall be formed known as the “Tax Disputes Resolution Committee”, chaired by a member of the judicial authority and two expert members being persons registered on the register of Tax experts to be appointed by a decision by the Minister of Justice in coordination with the Minister.

2.

A decision shall be issued by the Cabinet regarding the Committee’s code of practice rules, the remuneration of its members, and the procedures it shall follow.

 

Article (29) Jursidictions of the Committee

 

The Committee shall have jurisdiction to:

1.

decide in respect of objections submitted regarding the Authority’s decisions on reconsiderations requests.

2.

decide in respect of reconsideration requests submitted to the Authority where the Authority has not made a decision according to the provisions of this Law.

3.

any other jurisdictions entrusted to the Committee by the Cabinet.

 

 

Article (30)

Procedures for Submitting Objections

1.

An objection regarding the Authority’s decisions on areconsideration request shall be submitted within 20 business days from the date of Notification.

2.

An objection submitted to the Committee shall not be accepted in the following instances:

 

a.  if a reconsideration request has not been previously submitted to the Authority.

 

b.  if the Tax and Penalties subject of the objection have not been settled.

 

Article (31) Procedures of the Committee

1.

The Committee shall review the objection submitted and make a decision within 20 business days from receipt of the objection.

2.

The Committee may extend the time for making its decision for no more than additional 20 business days after the end of the time limit specified in section (1) of this Article if it sees that there are reasonable grounds for that extension in order to make a decision regarding the objection.

3.

The Authority shall inform the Person submitting the objection of its decision within five business days of its issuance.

 

 

 

4.

The Committee’s decision on the objection shall be treated as final if the total amount of the Tax and Administrative Penalties due is not more than 100,000 Dirhams.

5.

In no case may Tax disputes may be brought before the Competent Court if an objection has not been first submitted to the Committee.

 

 

Article (32)

Enforcement the Committee’s Decision

 

Final decisions issued by the Committee regarding disputes which do not exceed 100,000 Dirhams shall be treated as executory instruments pursuant to this Law, while final decisions of disputes exceeding 100,000 Dirhams shall be treated as executory instruments if they are not challenged before the Competent Court within 20 business days from the date of rejection of the objection and shall be enforced through the execution judge at the Competent Court pursuant to the Civil Procedures Law in the State.

 

Part Three Challenges before Courts

 

Article (33)

Challenge Procedures before Courts

1.

Without prejudice to the provisions of Article (32) of this Law, the Authority and a Person may challenge any of the Committee’s decisions before the Competent Court within 20 business days from the objector being notified of the Committee’s decision.

2.

Challenges may be made to the Competent Court in the following instances:

 

a.     There being an objection to the whole or part of the decision of the Committee.

 

b.     A decision not having been issued by the Committee regarding an objection submitted to it in accordance with the provisions of this Law.

 

 

Chapter Five

Refund and Collection of Tax

 

Part One

Refund of Tax

 

Article (34)

Application for Tax Refunds

 

A Taxpayer may apply for a refund of any Tax he has paid if he is entitled to a refund under the Tax Law and it appears that the amount he has paid is in excess of the Payable Tax and Administrative Penalties, pursuant to the procedures specified in the Executive Regulations of this Law.

 

 

Article (35)

Tax Refund Procedures

1.

The Authority shall set-off the amount applied to be refunded against any other Payable Tax or Administrative Penalties due from the Taxpayer who has applied for the refund pursuant to the Tax Return or Tax Assessment issued by the Authority before refunding any amount relating to a particular tax.

2.

The Authority may decline to refund the amounts mentioned in section (1) of this Article if it finds that there are other disputed Tax amounts that are due in relation to that Person or according to a decision of the Competent Court.

 

 

 

3.

The Authority shall issue a Tax refund under this Article pursuant to the procedures and provisions specified in the Executive Regulations of this Law.

 

Part Two Tax Collection

 

Article (36)

Collection of Payable Tax and Administrative Penalties

 

If a Taxable Person fails to settle any Payable Tax or Administrative Penalties within the specified timeframe under this Law and the Tax Law, the following measures shall be taken:

1.

the Authority shall send the Taxable Person a notice to pay Payable Tax and Administrative Penalties within 20 business days of the date of Notification.

2.

If the Taxable Person fails to make payment after the being notified pursuant to section (1) of this Article, the Director General shall issue a decision obligating the Taxable Person to settle the Payable Tax and Administrative Penaltieswhich shall be communicated to him within five business days from the issueance of the decision accompanied by the Tax Assessment and Administrative Penalties Assessments.

3.

The decision of the Director General regarding the Tax Assessment and Administrative Penalties Assessments shall be treated as an executory instrument for the purposes of enforcement through the execution judge at the Competent Court.

 

 

Part Three

Settlement and Collection of Tax and Administrative Penalties in Special Cases

 

Article (37)

Obligations of the Legal Representative

 

The Legal Representative must continue to submit the required Tax Returns to the Authority on behalf of the Taxable Person.

 

 

Article (38)

Responsibility of Settlement in the Case of a Partnership

 

If multiple Persons participate in a Business that does not have independent legal personality, each of them shall be jointly and severally liable towards the Authority for any Payable Tax and Administrative Penalties related to such Business.

 

 

Article (39)

Tax and Administrative Penalties Settlement in Special Cases

1.

In cases of death, Payable Tax shall be paid as follows:

 

a. for Payable Tax due from a natural Person prior to the date of death, payment shall be made from the value of the elements of the inheritance or income arising thereof prior to distribution among the heirs or legatees.

 

b. if it transpires after the distribution of the inheritance that there is Payable Tax still outstanding, recourse shall be had against the heirs and legatees for payment of such outstanding tax, unless a Clearance Certificate has been obtained from the Authority for the inheritance representative or any of the heirs.

 

 

 

2.

Payable Tax and Administrative Penalties due from a Taxable Person of missing capacity, or who is absent or missing, or a person without a known place of residence, or the like, shall be paid by their Legal Representative from the funds and assets of the Taxable Person.

3.

Payable Tax and Administrative Penalties due from a Taxable Person who is an incapacitated person shall be paid by their Legal Representative from the funds and assets of the Taxable Person.

 

 

Article 40

Settlement of Tax in Bankruptcy Case

1.

The appointed Trustee shall communicate with the Authority to notify him of the Due Tax or of its intention to perform a Tax Audit for the specified Tax Period or Tax Periods.

2.

The Authority shall notify the Trustee of the amount of Due Tax or of the Tax Audit within 20 business days after being notified by the Trustee.

3.

The Trustee may object or appeal the estimate of the Authority or settle the Due Tax.

4.

The Executive Regulations shall specify the procedures of communicating with the Authority, objection, appeal and settlement of Due Tax.

 

Chapter Six General Provisions

 

Part One

Confidentiality

 

Article (41)

Professional Confidentiality

1.

Employees of the Authority must not disclose information that they have obtained or to which they have had access to in their capacity as employees or by reason of such capacity while during their employment, save as specified or defined in accordance with the Executive Regulations of this Law.

2.

In all cases provided for in section (1) of this Article, disclosure may be made only with the approval of officers authorised by the Authority’s board of directors, in accordance with the Executive Regulations of this Law.

3.

Employees of the Authority shall, after cessation of their employment, continue to maintain professional confidentiality, and shall not disclose information that they have obtained or to which they have had access to in their capacity as employees or by reason of such capacity, unless otherwise requested by the judicial authorities and in accordance with the Executive Regulations of this Law.

4.

Any person who has obtained information pursuant to the provisions of this Law shall not disclose or use the information for any purposes other than those for which the information was obtained, without prejudice to the obligation arising from judiciary.

5.

The Authority’s board of directors shall issue the regulations and instructions regulating internal procedures to protect confidentiality of information within the Authority, and the obligations of the Tax Agent in this regard.

 

Part Two Timeframes and Lapse of Time

 

Article (42)

Statute of Limitation

 

 

 

1.

Except in cases of proven Tax Evasion or non-registration for Tax purposes, the Authority may not conduct a Tax Assessment after the expiration of five years from the end of the relevant Tax Period.

2.

In case Tax Evasion is proven, the Authority may conduct a Tax Assessment within 15 years from the end of the Tax Period in which the Tax Evasion occurred.

3.

In cases of non-registration for Tax purposes, the Authority may conduct a Tax Assessment within 15 years from the date on which the Taxable Person should have registered.

 

 

Article (43)

The Authority's Right to Claim

 

Payable Tax and Administrative Penalties of which the Taxable Person has been notified do not lapse with time and the Authority may claim them at any time.

 

 

Article (44)

Time Limit for Tax Obligations

 

In case a period of time is not specified for the performance of any obligations or other procedure in this Law or the Tax Law, the Authority shall grant the Taxable Person a period appropriate to the nature of the obligation or procedure of not less than five business days and not exceeding 40 business days from the date of the event resulting in the arising obligation or the conduct of the procedure.

 

Article (45) Calculation of Timeframes

 

In all events, the following rules shall be observed when calculating time limit:

1.

The day of notification or the day of occurrence of the event by reason of which the time limit began shall not form part of it.

2.

If the last day of the time limit coincides with a public holiday, the time limit shall be extended to the first business day thereafter.

 

 

Article (46)

Reduction of or Exemption from Administrative Penalties

 

If the Authority imposes an Administrative Penalty on any Person for a violation of the provisions of this Law or the Tax Law, the Authority may reduce or exempt the Person from such Administrative Penalty if the Person produces evidence justifying the reason for his failure to comply, pursuant to the provisions specified in the Executive Regulations of this Law.

 

Article (47) Calendar

 

Timelimits and due dates provided for in this Law and the Tax Law shall be calculated according to the Gregorian calendar.

 

Part Three Closing Provisions

 

 

 

 

Article (48)

Proof of Accuracy of Data

 

The burden of proving the accuracy of the Tax Return falls upon the Taxable Person, and the burden of proving cases of Tax Evasion falls upon the Authority.

 

Article (49) Conflict of Interest

 

All Authority staff members are prohibited from performing or participating in any tax procedures related to any Person in the following cases:

1.

The member of staff and that Person being related up to the fourth degree.

2.

There being a common interest between the member of staff and Person or between any of their relatives up to the third degree.

3.

The Director General deciding that the member of staff should not perform any tax procedures related to that Person owing to a case of conflict of interest.

 

Article (50) Judicial Officers

 

The Director General and Tax Auditors appointed by a decision from the Minister of Justice in agreement with the Minister shall have the capacity of Judicial Officers in recording violations of the provisions of this Law, the Tax Law or decisions issued in implementation thereof.

 

Article (51) Authority Fees

 

The Cabinet shall, according to a suggestion by the Minister, issue a decision specifying the fees due in implementation of the provisions of this Law and its Executive Regulations.

 

 

Article (52)

Repeal of Conflicting Provisions

 

All provisions contrary to or in conflict with the provisions of this Law are repealed.

 

Article (53) Executive Regulations

 

The Cabinet shall, according to a suggestion by the Minister, issue the Executive Regulations of this Law within 6 months of the issuance of this Law.

 

 

Article (54)

Publication and Coming into Force of this Law

 

This Law shall be published in the Official Gazette and shall come into force 30 days from the date of publication.

 

 

Khalifa bin Zayed Al Nahyan

 

 

 

President of the United Arab Emirates

Issued by us at the Presidential Palace in Abu Dhabi

On: 16 Ramadan 1438H

Corresponding to: 11 June 2017

Commercial companies law - UAE - Dubai

 

 

 Abrogating

 

Federal Law No. 2 of 2015

Issued on 1/04/2015

Corresponding to 17 Dhi Al-Hijjah 1436 H.

ON COMMERCIAL COMPANIES

 

Federal Law No. 8/1983            dated 20/03/1984

 

 

We, Khalifa Bin Zayed Al Nahyan, President of the United Arab Emirates State, Pursuant to the perusal of the Constitution,

Federal Law No. 1 of 1972, on the Competencies of the Ministries and Powers of the Ministers and its amendments;

Federal Law No. 5 of 1975 on the Commercial Register;

Federal Law No. 10 of 1980 on the Central Bank, the monetary system and the regulation of the banking profession and its amendments;

Federal Law No. 8 of 1984 on commercial companies and its amendments;

The Civil Transactions Law promulgated by Federal Law No. 5 of 1985 and its amendments;

Federal Law No. 6 of 1985 on banks, financial institutions and Islamic Investment Companies and its amendments;

Federal Law No. 3 of 1987 on the Penal Law and its amendments; Federal Law No. 22 of 1991 on Notary publics and its amendments;

The Civil Procedures Law promulgated by Federal Law No. 11 of 1992 and its amendments;

The Criminal Procedures Law promulgated by Federal Law No. 35 of 1992 and its amendments;

The Law of Evidence in civil and commercial transactions promulgated by Federal Law No. 10 of 1993 and its amendments;

The Commercial Transactions Law promulgated by Federal Law No. 18 of 1993;

Federal Law No. 22 of 1995 on regulating the Profession of Auditors and its amendments; Federal Law No. 29 of 1999 on the General Authority for Awqaf and its amendments;

Federal Law No. 4  of 2000 on the Emirates Securities & Commodities Authority and Market and  its amendments;

Federal Law No. 7 of 2002 on Author's Rights and Related rights and its amendments; Federal Law No. 8 of 2004 on Financial Free Zones;

Federal Law No. 17 of 2004 on Anti-Commercial Concealment and its amendments;

Federal Law No. 1 of 2006 on Electronic Transactions and Commerce;

Federal Decree-Law No.4 of 2007 on the Establishment of the Emirate Investment Authority;

Federal Law No. 6 of 2007 on the Establishment of the Insurance Authority and the Regulation of its

Operations;

Federal Law No. 4 of 2012 on the regulation of Competition;

And based on the proposal made by the Minister of Economy and the approval of the Cabinet and the

Federal National Council and as ratified by the Federal Supreme Council, Have promulgated the following Law:

Title 1

General Provisions for Companies

 

Chapter 1

Definition of a Company

 

Article 1 - Definitions

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

State: The United Arab Emirates.

Federal Government: The Government of the United Arab Emirates.

Local Government: Any of the Governments of the Member Emirates of the Federation.

 

 

Ministry: Ministry of Economy; Minister: Minister of Economy.

Central Bank: The Central Bank of the United Arab Emirates. Authority: The Securities & Commodities Authority.

Competent Authority: The local authority having competence with regards to the affairs of companies in the relevant Emirate.

Company: The commercial company.

Diligent Person: The person having sufficient experience and commitment required in the performance of his work.

Governance:  A  set  of  criteria,  standards  and  procedures  that  achieve  corporate  Governance  at  the management level of the company in accordance with the international standards and

practices, by determining the duties and responsibilities of the Directors and the executive management of the company, taking into account the protection of shareholders and stakeholders rights.

Working Day: The  official working days in  the  Ministries, the  Governmental Authorities and  the  local departments.

Special Resolution: Resolution issued by the majority votes of shareholders holding at least 75% of the shares represented at the General Assembly of the joint stock company.

Registrar: Companies Registrar appointed by the Minister, who performs his duties through the Companies

Department of the Ministry.

Markets: The securities and commodities Markets licensed by the Authority to operate in the State. Securities:

- Shares issued by joint stock companies;

- Derivatives and investment units as approved by the Authority;

- Bonds, deeds and bills issued by the Federal Government or the Local Governments or by the public authorities or establishments in the State.

- Bonds, deeds or any debt tools issued by companies in accordance with such regulation issued by the

Central Bank and the Authority.

- Any other local or foreign Securities acceptable to the Central Bank and the Authority.

Public Subscription: The invitation for any natural or juristic person or class or classes of persons to purchase any Securities.

Securities Book Building: The process under which the price of the security is determined upon its issue or sale in a Public Subscription, in accordance with the provisions of the Decision issued by the Authority in this respect.

Strategic  Partner:  The  partner  whose  contribution  to  the  company  provides  technical,  operational  or marketing support to the company, for the good of the company.

Related Parties: The  Chairman and  other  members of  the  board  of  directors and  the  senior  executive management of the company and working therein, and the companies in which any of such persons holds at least 30% of their share capital and subsidiary, associated or sister companies.

Share Register: The register that shows the shares held by shareholders in Joint Stock Companies and the rights attached to such shares.

Share Register Secretariat: The body or bodies licensed by the Authority to keep the Share

Register of Private Joint Stock Companies.

Member of the Board of Directors: Any member among the members of the company’s board of directors,

including the Chairman.

 

Article 2- Objectives of the Law

The Law has for objective to contribute to the development of the working environment and capacities of the State and its economic position in regulating companies according to the various international norms related to governance rules and the protection of shareholders and supporting foreign investment and promoting the corporate social responsibility of companies.

 

Article 3- Companies Governed by the Provisions of this Law

 

 

The provisions of this Law and the Regulations, Instructions and Decisions issued in execution hereof shall apply to such companies established in the State. The provisions of this Law concerning foreign companies and the Regulations, Instructions and Decisions issued in execution hereof shall apply to foreign companies that have established in the State a based to conduct any activity therein or established a branch or representative office in the State.

 

Article 4- Companies Exempted from the Provisions of This Law

1- Other than the registration and renewal in the exempted companies register at the Ministry, the Authority and the competent authority, each according to its jurisdiction, the provisions of this Law shall not apply to:

a- Companies exempted under a Cabinet Decision and each of those whereby a special provision to that effect is contained in the Memorandums of Association or Articles of Association of such companies according to the controls issued by a Cabinet Decision;

b- Companies held in full by the Federal Government or the Local Government, and any other companies held in full  by such companies if  a  special provision to  that  effect is  contained in  the Memorandum of Association or Articles of Association of such companies.

c- Companies in which the Federal Government, the Local Government or any of

the establishments, authorities, departments or any companies controlled or held by any of them directly or indirectly, and having at least 25% of the shares of such companies, which operate in oil exploration, drilling, refining, manufacturing, marketing and transportation or operating in the energy sector of all kinds or in the electricity generation, gas production or water desalination, transmission and distribution, if a special provision to this effect is contained in the Memorandum of Association or Articles of Association of such companies.

d- Companies exempted from the provisions of Federal Law No. 8 of 1984

on Commercial Companies and its amendments, prior to the effective date of this Law. e- Companies exempted from the provisions of this Law under special Federal

Laws.

2- The companies referred to in the sub sections 1/b,c,d of this provision shall adjust their position in accordance with the provisions of this Law if such company sells or publicly offers any percentage of its share capital or lists its shares in any of the financial Markets in the State.

 

Article 5- Companies Operating in Free Zones

1- The provisions of this Law shall not apply to companies established in the free

zones of the State if a special provision to this effect is contained in the Laws or regulations of the relevant free zone. Notwithstanding the foregoing, such companies shall be governed by the provisions of this Law if such Laws or regulations permit to conduct the activities of such companies outside the free zone in the State.

2- In accordance with sub section 1 of the present provision, the Cabinet shall issue a Decision determining the applicable conditions to enter and register companies operating in the free zones of the State and willing to conduct their activities in the State outside the free zones.

 

Article 6- Corporate Governance

1- With the exception of banks, financing companies, financial investment companies,

exchange and money brokerage companies, the Minister shall issue the decisions which set the general framework regulating Governance in connection with private joint stock companies where the number of the shareholders therein exceeds 75- As for the Public Joint Stock Companies, the Chairman of the

Authority shall issue the relevant Governance Decisions.

2- The Board of Directors of a company or its managers, depending on the circumstance, shall be responsible for the application of the rules and criteria of Governance.

 

Article 7- Breach of the Rules of Governance

1- The Decisions regulating Governance as provided by Clause 1 of Article 6 shall include fines to be imposed by the Ministry or, as applicable, the Authority to the companies and their Chairmen, Directors, managers and auditors in the event of contravention of such Decisions, provided that the fine amount shall not exceed AED ten million.

2- The imposition of the fines referred to in Clause 1 of the present Article shall be subject to the provisions of Article 339 hereof in regards to the regulation of reconciliation.

 

 

Article 8- Definition of a Company

1- A company is a contract under which two or more persons are committed to participate in an economic enterprise with the objective of profit realization by contributing a share in capital or work and dividing between themselves the profit or loss resulting from the enterprise.

2- An economic enterprise as provided for in Clause 1 of this Article shall include every commercial, financial, industrial, agricultural, real estate or other kinds of economic activity.

3- Notwithstanding the provision of Clause 1 of this Article, a company may be incorporated or held by a single person in accordance with the provisions of this Law.

 

Article 9- Forms of Companies

1- The company shall take one of the following forms:

a- Joint Liability Company.

b- Simple Commandite Company. c- Limited Liability Company.

d- Public Joint Stock Company. e- Private Joint Stock Company.

2- Any company which does not adopt one of the forms referred to in the preceding Article shall be considered null and void, and the persons concluding contracts in its

name shall be individually and jointly liable for the obligations arising from such contracts.

3- Every company established in the State shall bear the nationality thereof, but this does not entail that said company shall necessarily enjoy the rights exclusive to UAE

nationals.

 

 

Chapter 2

Formation and Management of the Company

 

Article 10- Rate of National Contribution

1- With the exception of Joint Liability Companies and Simple Commandite Companies where all the joint partners of any of such companies shall be UAE nationals, any company established in the State shall have one or more UAE partners holding at least 51% of the share capital of the company.

2- Notwithstanding the provisions of Clause 1 of this Article, the Cabinet may, based on

the proposal made by the Minister  in coordination with the competent authorities, issue a Decision setting the class of activities to be exclusively exercised by UAE nationals.

3- Any transfer of the title to any share of a partner that may affect the percentage as set out in Clauses 1 and 2 of this Article shall be invalid.

 

Article 11- Practice of Activity

1- The company shall obtain all the approvals and licences as required for the activity to be conducted by the company in the State prior to commencement of its activity.

2- A company incorporated inside the State shall commence its main activities in

the State, and may conduct its activity outside the State if such is provided for by its Memorandum of

Association.

3- The Cabinet shall issue a Decision determining the formation and qualifications of the members of the Internal Shariah Control Committees and the Shariah

Controller of companies incorporated inside the State and which conduct their activities in accordance with the provisions of the Islamic Shariah. The Decision shall

determine the conditions of operation of such committees.

 

 

Such companies must, following their incorporation and prior to the commencement of activities, obtain the approval of the Internal Shariah Control Committees.

4- Only Public Joint Stock Companies may conduct banking and insurance activities. Only Joint Stock Companies may invest money for the account of third parties.

 

Article 12- Name of the Company

1- The company shall have a trade name, without contravention of the public order of the State. The name shall be followed by the legal form of the company. No company may be registered in a name previously registered in the State or in any similar name to the extent that it may lead to confusion.

2- The company may change its name to another name by virtue of a special Resolution issued by its General Assembly and the like, as approved by the competent authority and as acceptable to the registrar. The change of the name of the company shall not prejudice its rights or obligations or the legal proceedings initiated by or against the company. Any legal proceedings that have already been initiated by or against the company shall also continue in the amended name of the company.

 

Article 13- Address and Correspondences of the Company

1- Every company shall have a registered address in the State to which notices and correspondences shall be dispatched.

2- All contracts, documents, correspondences and forms of applications issued by the company shall bear its name, legal form, registration number and address

and, if the share capital of the company is added to such particulars, the amount

of the paid share capital shall be stated.

3- If the company is under liquidation, the papers of the company shall be marked accordingly.

 

Article 14- Drafting of the Memorandum

1- The Memorandum of Association of a company and each amendment thereto shall be made in Arabic and attested by the Notary Public, failing which the Memorandum of Association or the amendment thereto shall be invalid. If the Memorandum is issued in a foreign language in addition to Arabic, the Arabic text shall be the applicable text in the State.

2- The partners may hold against each other to the invalidity arising from not writing or attesting the

Memorandum or the amendment. However, the partners may not hold against third parties to such invalidity.

3- If the invalidity of the company is adjudicated based on the request of a partner, such invalidity shall have no effect other than from the date on which such ruling becomes final.

 

Article  15-  Registration  of  the  Memorandum  of  Association  of  the  Company  with  the

Competent Authority

1-  A  Company's  Memorandum of  Association  and  any  amendment  thereto  shall  be  registered  in  the

Commercial Register with the competent authority to be effective.

2- If the Memorandum of Association is not registered as set out in Clause 1 of this

Article, it shall be ineffective against third parties. If the non-registration is limited to one or more of the details that should be registered, only such nonregistered information shall have no effect against third parties.

3- The companies shall notify the competent authority and the Registrar in writing within 15 (fifteen) working days upon the occurrence of any amendment or change in the registered particulars of the company, including its name, address, share capital, number of shareholders or legal status.

4- The Managers, or Directors of the Company, as the case may be, shall be jointly liable to indemnify the damage suffered by the company, the shareholders, or

third parties due to the non registration of the Memorandum or any amendments

thereto in the Commercial Register with the competent authority.

 

Article 16- Evidencing the Memorandum of the Company by Third Parties

 

 

1- A third party may prove the presence of the Memorandum of the Company or any amendment thereto by all means of proof. Such third party may hold to the existence or the invalidity of the company against the shareholders.

2- If the invalidity of the company is ruled based on third party request, the company shall be deemed void ab initio as against such third party. Persons who have contracted with such third party in the name of the company shall be personally and jointly liable for the obligations arising from such Contract.

3- In all cases where the invalidity of the company is ruled, the conditions set forth in the Memorandum shall apply to the liquidation of the company and the settlement of the rights of the shareholders against each other. The debtors of the company may not request the invalidity or hold thereto in order to be discharged from their debts to the company.

 

Article 17- Nature of the Share Provided by a Partner

1- The capital of the company shall be composed of either a contribution in cash or equivalent in contribution in kind

2- The partner may not contribute in work rendered, unless he is a joint partner. The contribution of the partner may not consist of his having reputation or influence.

 

Article 18- Rules Governing Contribution to the Company

1- If the contribution of a partner is a title to a property or any other real right, such partner shall be liable in accordance with the applicable provisions concerning a

Contract of Sale regarding the transfer of a property and the guarantee of the share in the cases of loss, maturity or the emergence of a defect or deficiency in such payment for the share, unless agreed otherwise.

2- If the contribution consists of benefiting from the revenues from assets only, the provisions applicable to the lease contract shall apply to such issues as set out in Clause 1 of this Article, unless agreed otherwise.

3- If a contribution of a partner consists of debts payable by third parties or other rights in kind, such partner's liability shall not be discharged until such debts are settled.

Moreover, the partner shall be liable to indemnify the damage to the company if such debts are not repaid when they become due.

4- Taking into account the provisions of the Law concerning Author’s Rights and their Related Rights and the Law on the Regulation and Protection of Industrial Property Rights for Patents and Industrial Designs and Models, should the partner’s contribution be his work, any gain from the work shall be the right of the company unless the partner has acquired rights to this gain as a patent right, unless agreed otherwise with the Company.

 

Article 19- Failure to Provide a Contribution to the Company

1- If a partner undertakes to contribute an amount of money, and such amount is not paid or the share is debts payable  by  third  parties  not  repaid,  such  partner  shall  be  liable  to  the  company for  any  obligations  in consideration of his contribution to the company.

2- A partner shall be liable to the company for the difference, if any, between the amount of money or value of the contribution actually contributed by him to the company and the amount of money or value of such other contribution as set out in the register of shareholders, which the partner should have provided in accordance with the provisions of this Law.

 

Article 20- Enforcement upon Anything in Lieu of the Share

1- A creditor of a partner may not claim his right from the share of his debtor in the capital of the company, but he may claim his right from his debtor's portion of the profits. If the company is dissolved, the creditor may collect his right from the share of his debtor upon the liquidation of the company.

2- If the share of a partner in the company is represented by shares, then its creditor may, in addition to the rights as set out in Clause 1 of the present Article, file a suit before the competent court for the sale of such shares to apply the sale proceeds to collect his right.

 

Article 21- Corporate Personality of the Company

1- The company shall, from the date of entry in the Commercial Register with the competent authority, acquire a corporate personality in accordance with the provisions of this Law and the Resolutions issued hereunder.

2- During the incorporation period, the company shall have a corporate personality to the extent necessary for its incorporation. The company shall be bound by the acts of the founders in connection with the incorporation

 

 

procedures and requirements in such period, provided that such incorporation shall be completed in accordance with the provisions of this Law.

3- Upon its dissolution, the company shall be considered under the liquidation phase. During the period of liquidation, the company shall maintain its corporate personality to the extent as required for the liquidation process. The expression "Under

4-  Subsidiaries  of  the  holding  company  shall  enjoy  a  corporate  personality  and  shall  have  its  own independent financial liability.

 

Article 22- Duties of the Managing Director of the Company

A person authorized to manage the company shall preserve its rights and extend such care as a diligent person. Such person shall do all such acts in agreement with the objective of the company and the powers granted to such person by virtue of an authorization issued by the company in this respect.

 

Article 23- Liability of the Company for the Acts of its Managing Director

The company shall be bound by any act or behaviour arising out of its Managing Director upon conducting the affairs of management in a usual manner. The company shall also be bound by any act of any of its employees or agents authorized to act on behalf of the company, and whereby a third party relies thereon in its transaction with the company.

 

Article 24- Exemption from Liability

Subject to the provisions of this Law, any provision in the Memorandum of Association or Articles of Association of the company authorizing it or any of its subsidiaries to agree to exempt any person from any personal liability that such person bears in his capacity as a current or former officer of the company shall be void.

 

Article 25- Protection of Those Dealing with the Company

1- The company shall not claim lack of liability towards those dealing with it, on the ground that the management authority was not duly appointed in accordance with the provisions of this Law or the Articles of Association of the company, so long as the acts of such authority is within the usual limits with respect to persons in the same position in companies that conduct the same type of activity as the company.

2- To protect a person dealing with the company, he shall be a bona fide party. A person

shall not be deemed as acting in good faith if he actually knows or could have known, based on his relationship with the company, the aspects of deficiency in the act or work proposed to be held thereto against the company.

 

Article 26- Accounting Records

1- Every company shall keep accounting records showing its transactions to accurately reveal at any time the financial position of the company and enabling the partners or shareholders to confirm that the accounts of the company are properly kept in accordance with the provisions of this Law.

2- Every company shall keep its accounting books in its head office for a period of at least 5 (five) years from the end of the financial year of the company.

3- The company may keep an electronic copy of the original of the documents and records kept and deposited therein in accordance with the controls issued by a Ministerial Decision.

 

Article 27- Accounts of the Company

1- Every Joint Stock Company or Limited Liability Company shall have one or more auditors to audit the accounts of the company every year. The other types of companies may appoint an auditor in accordance with the provisions of this Law.

2- The company shall prepare annual financial accounts including the balance sheet and the profit and loss account.

3-  The  company shall  apply  the  International  Accounting Standards  and  Practices  upon  preparing  its periodical and annual accounts, to give a clear and accurate view of the profits and losses of the company.

4- Every partner or shareholder in any company may, based on a written request presented, obtain a free copy of the last audited accounts and of the last report of its auditor and a copy of the accounts of the group if it is a holding company. The company shall respond to such request within 10 (ten) days from the date of submittal thereof.

 

 

Article 28- Financial Year of the Company

1- Every company shall have a financial year as determined in its Articles of Association, provided that the first financial year of the company shall not exceed 18 (eighteen) months, but at least 6 (six) months, to be calculated from the  date  of  registration of  the  company in  the  Commercial Register with  the  competent authority.

2- The subsequent financial years shall consist of consecutive periods, each of 12 months commencing directly upon the expiry of the preceding financial year.

 

Article 29- Distribution of the Profits and Losses

1- If the company's Memorandum of Association does not stipulate the proportion of a partner in the profits or losses, his share thereof shall be pro rata to his stake in the capital. If the Memorandum of Association is limited to specifying a partner's share in the profits, his share in the losses shall be equivalent to his share in the profits and vice versa.

2- If a partner's stake is limited to his work, the company's Memorandum of Association shall specify his share in the profits and losses. If the partner has contributed a share in cash or in kind in addition to his work, he shall have a portion of the profits and losses for his share contributed by work and another portion for his share in cash or in kind.

3- If it is agreed in a company's Memorandum of Association that one of the partners is to be deprived of the profits or exempted from loss, or to receive a fixed percentage of profits, such Memorandum shall be deemed void.

4- It may be agreed to exempt a partner who has contributed only by his work from sharing in the loss, provided that a wage for such work is not determined.

 

Article 30- Distribution of Profits

1- No fictitious profits may be distributed to the partners or shareholders. The Board of Directors or any similar body shall be liable towards the partners or shareholders and the creditors of the company for such procedure.

2- If the company distributes any profits in violation to the provisions of this Law and the Decisions issued hereunder, such partner or shareholder shall return any profits received by him in violation to such provisions. The company's creditors may request such partner or shareholder to return what he has received thereof, even if done in good faith.

3- Partners or shareholders shall not be deprived of the true profits that they have received even if the company sustains losses during the following years.

 

Article 31- Issuing Securities

Subject to the provisions of Article 4 of this Law, only the Joint Stock Company may issue negotiable shares, bonds or Sukuk.

 

Article 32- Public Offering of the Securities

No company other than a public Joint Stock Company may offer any Securities for public subscription. In all events, no company, entity, natural or corporate person incorporated or registered inside the State or in the free zones or abroad may publish any advertisements in the State, including the invitation for public subscription in Securities without the prior consent of the authority.

 

 

Chapter 3

Companies Registrar

 

Article 33- Regulation of the Activities of the Registrar

The Minister shall, in coordination with the competent authority, issue the regulation for the activities of the

Registrar.

 

Article 34- Supervision of the Trade Names Register

1- The registrar shall, in addition to his duties as assigned by the Minister, supervise the Trade Names

Register for the various types of companies registered in any of the Emirates to avoid double registration.

 

 

2- The competent authorities shall provide the registrar with the names of all the companies and all the trade names licensed by the competent authorities and shall refer to the registrar to avoid name repetition prior to granting any new licence.

 

Article 35- The Role of the Registrar in the event of Similar Trade Names

1- If the registrar finds any similarity between the names of two or more companies registered in the State to an extent that may cause confusion, the registrar may issue a justified Decision demanding thereunder that the relevant parties take the required steps to change the name so as to remove such confusion, within 30 (thirty) working days to be counted from the date of the notification of the Decision. The registrar may, upon the expiry of such period issue another Decision of such change.

2- A company that has been entered with the registrar may request the latter to oblige the company that took up its own name or a name similar to its name to change such name. The registrar may issue a justified Decision under which he demands the latter company to take such steps as required to change the name, within 30 (thirty) working days, to be counted from the date of notification of the Decision. Upon expiry of such period, the registrar may issue another Decision to change the trade name of the company.

3- A grievance against the Decision of the registrar may be filed before the Minister within 15 (fifteen)

working days from the date of notification of such Decision. If such grievance is rejected or not settled within

15 (fifteen) working days from the date of filing thereof, the concerned persons may appeal such Decisions before the competent Court within 30 (thirty) days from the date of rejecting the grievance or the expiry of such period, as the case may be.

 

Article 36- Registrar to Keep the Documents of Companies

The Minister shall issue a Decision determining:

1- The period of time during which the registrar has to keep documents, so that such documents may be destroyed after the expiry of such period.

2- To organize the submission of documents to the registrar by the electronic means of communication and other means. The Decision shall include provisions to ensure effective connection between the records kept by the registrar and those kept by the competent authority.

 

Article 37- Perusal of the Records kept by the Registrar

Subject to the provisions of this Law, the concerned parties may request the registrar to issue:

1- A copy of the particulars as set out in the records kept by the registrar.

2- A certificate by the registrar or the competent authority, including some of the particulars as contained in such records.

 

Article 38- Fees Payable to the Ministry and the Authority

On a proposal made by the Minister and in coordination with the Ministry of Finance, the Cabinet shall issue a Decision of the fees payable by the companies for such activities conducted by the Ministry and the Authority within the scope of application of the provisions of this Law.

Title 2

Partnerships

 

 

Chapter 1

Joint Liability Company

 

Article 39- Definition of the Company

A Joint Liability Company is a company which consists of two or more partners who are natural persons, to be jointly responsible in all their monies for the obligations of the company.

 

Article 40- Capacity of the Partners

A joint partner shall have the capacity of a trader. Such partner shall be deemed to conduct the commercial activities in person in the name of the company. The declaration of the bankruptcy of a Joint Liability Company means the declaration of bankruptcy of all the partners by the power of the Law.

 

Article 41- Name of the Company

 

 

1- The name of a Joint Liability Company shall consist of the name (s) of one or more partners in addition to the expression "and partners" or any similar meaning, provided that the name of the company shall end with the expression "Joint Liability Company". In addition, the company shall have its own trade name, provided that the name of the company shall be accompanied by such trade name.

2- If the name of a Joint Liability Company contains the name of a person other than a partner in the company and that person is aware of this, that person shall be jointly responsible for the company's obligations against any person that deals with such company in good faith.

 

Article 42- Memorandum of Association of the Company

1- A Joint Liability Company's Memorandum of Association shall include the following particulars:

a- The full name of each partner, his nationality, date of birth and domicile;

b- The name, address and trade name, if any, of the company and the objective for which it was established;

c- The head office of the company and its branches, if any;

d- The capital of the company and the shares of every partner and the estimated value of such shares, the means by which they are assessed and the date of their falling due;

e- The commencement date of the company and the date of termination, if applicable;

f- The method by which the company is to be managed, with particulars of the names of those persons who may sign on behalf of the company and the extent of their authority;

g- The commencement date and the expiry date of the financial year;

h- The rate of distributing profits and losses.

i- The conditions of assignment of shares in the company, if any.

2- If the Memorandum of Association of the company contains the name (s) of the manager(s), the full name, nationality, place of residence and authority of each such manager shall be stated.

 

Article 43- Incorporation Procedures

The joint liability company shall be incorporated and registered as follows:

1- The competent authority shall determine the information and documents required for the incorporation of the company, and shall issue a form of the application for incorporation in accordance with the provisions of this Law.

2-To submit the application for incorporation, together with the required documents for the licence and registration procedures to the competent authority.

3-  The  competent  authority shall  demand  the  applicant  to  complete  the  statements and  documents  as necessary to be submitted or to make such amendments to the Memorandum of Association of the company to be compliant with the provisions of this Law and the Decisions issued hereunder.

4- The competent authority shall issue its Decision in the application for incorporation of the company within no later than 5 (five) working days from the date of the application, completion of the statements and documents or making the required amendments. If the application is rejected, such rejection shall be justified.

5- If the competent authority rejects the application or the period as set forth in clause 4 of this Article expires without decision of the application, the applicant may file a grievance before the General Manager of the competent authority or his representative within 15 (fifteen) working days. If the grievance is rejected or not decided within 15 working days from the date of filing the same, the applicant may file an appeal before the competent Court within 30 (thirty) days from the date of his notification of the rejection or the expiry of the above period, as the case may be.

6- If the application for incorporation is accepted, the competent Court shall enter the company in the Commercial Register and issue a trade licence for the company.

7- The company shall, within 5 (five) working days from the date of the trade licence, provide the registrar with a copy of the trade licence and Memorandum of Association of the company to be published in accordance with the conditions issued by the Minister in this respect.

 

Article 44- Statements and Documents required to be kept

The Joint Liability Company shall keep at its head office:

1- A register including the names and addresses of the partners;

2- A copy of the Memorandum of Association of the company and any amendments thereto;

 

 

3- A statement of the cash amounts and the nature and value of any assets contributed by each partner and the dates of such contributions; and

4- Any statements, documents or other records imposed under the provisions of this Law and the Decisions issued in execution hereof.

 

Article 45- Management of the Company

1- The management of the company shall be undertaken by all the partners. Every partner in a joint liability company shall be deemed as the agent of such company and the other partners in connection with the business of the company, unless such management is delegated under the Memorandum of Association of the company or an independent contract to one or more partners or to any person who is not a partner.

2- A partner who is not a manager may not interfere in the management affairs unless agreed otherwise. However, such partner may demand to inspect the works of the company and its books and documents and to make notes thereon to the manager of the company.

3- Decisions in connection with the business of the company shall be issued with the unanimous consent of the partners, unless the Memorandum of Association of the company provides otherwise.

 

Article 46- Works in Competition of the Activity of the Company

1- A joint partner shall not, without the written consent of the other partners, carry out for his own account or for the account of third parties an activity competing with the activity of the company, or be a joint partner in another company.

2- If a partner in a Joint Liability Company carries out, without the consent of the other partners, an activity of a similar nature and in competition with the activity of the company, such partner shall pay to the company all such profits made by him from such activity.

 

Article 47- Dismissal of the Manager

1- Where the Manager is a partner appointed in the Memorandum of Association of the company, he shall not be dismissed except by the unanimous consent of the other partners or under a judgment by the competent court.

2- If the Manager is a partner and appointed under an independent contract, or if he is not a partner, whether appointed under the Memorandum of Association or under an independent contract, he may be dismissed under a Decision passed by the majority of the partners or under a judgment by the competent court.

3- The dismissal of the Manager in the events as set out in the above two Clauses shall not result in the dissolution of the company, unless the Memorandum of Association provides otherwise.

 

Article 48- Resignation of the Manager

If the Manager is a partner or not, he may resign from the management, provided that he notifies the partners in writing of his resignation at least 60 days from the effective date of such resignation, unless his contract provides otherwise, failing which he shall be liable to pay compensation, and his resignation shall not bring about the dissolution of the company unless the Memorandum of Association specifies otherwise.

 

Article 49- Prohibited Acts by the Manager

A director may not conduct the tasks exceeding the ordinary management tasks unless upon the consent of all the partners or by virtue of an express provision in the Memorandum of Association; this restriction shall apply to the following tasks in particular:

1- Donations other than small customary ones governed by the commercial practice;

2- The sale of the company's real estates unless such transaction falls within the objectives of the company;

3- Mortgaging the company's real estates or assets, even if the Manager was authorized to sell its real estates under the company's Memorandum of Association;

4- Securing the obligations of third parties; or

5- The sale, mortgage or lease of the company's store.

 

Article 50- Contracting by the Manager for his own Account

1- The Manager may not conclude a contract for his own behalf or on behalf of his relatives up to the second degree with the company without the written permission of all the partners to be given for each case separately.

2- The Manager may not carry out an activity of the same kind as that of the Company except with the written permission by all the partners to be renewed annually.

 

 

Article 51- Liability of the Manager

The Manager shall be liable for the damage suffered by the company, the partners or third parties due to the breach of the provisions of the Memorandum of Association of the company or the contract appointing the manager or due to any negligence or errors committed by the manager upon performance of his job or his failure to carry out his work with due diligence. Any condition to the contrary shall be void.

 

Article 52- Liability of Multiple Managers

1- Where there is more than one Manager and particular jurisdiction has been determined for each of them, each Manager shall be liable only for those works which are within his jurisdictions. Where there is more than one director and it is provided that they undertake the management collectively, their Decisions shall not be valid unless taken unanimously or by the majority specified in the Memorandum of Association. However, it may be stipulated in the Memorandum of Association that each Manager may individually carry out urgent works, the omission of which would cause substantial losses or considerably missed profits of the company.

2- Where there is more than one Manager and no particular jurisdictions are specified for each of them in the Memorandum  of  Association  and  it  is  not  stipulated  that  they  operate  collectively,  each  of  them  may individually undertake any of the management operations, provided that the other managers may object to such operations before they are completed. In such event, significance should be given to the majority votes and in the event of parity, the matter shall be referred to the partners for conclusion and their decision shall be final.

3- The multi Managers shall exercise due care in their works.

 

Article 53 - Liability of the Company

The Joint Liability Company shall be liable against third parties to indemnify the damages arising from the acts of any partner with the consent of the other partners or upon carrying on the usual business of the company.

 

Article 54- Joining Partner

Where a partner joins the company, he shall be jointly liable with the other partners and in all his assets for all the former obligations of the company prior to his joining the company, provided that the company has already disclosed such obligations to that partner, and shall be jointly liable with the other partners for the obligations of the company after to his joining the same. Any agreement between the partners to the contrary shall not be effective as evidence against third parties.

 

Article 55 - Withdrawing Partner

1- Unless the Memorandum of Association of the company stipulates otherwise, a partner may withdraw from a Joint Liability Company by written agreement with the other partners. In the event of disagreement, the partner may file a lawsuit before the competent court to obtain a withdrawal judgment, provided that the other partners are notified thereof by registered mail at least sixty days from the date proposed for withdrawal. The company shall be entitled to demand the withdrawing partner to pay any compensation, as applicable.

2- The withdrawing partner shall remain jointly liable with the other partners in the company for the debts and obligations of the company prior to his withdrawal and shall be liable for such debts and obligations in his own assets with the other partners.

3- A partner withdrawing from the company shall not be discharged from the obligations borne by the company upon his withdrawal, unless such withdrawal is entered in the Commercial Register and announced in two daily newspapers, one of them issued in Arabic, after thirty days from the date of the last procedure.

4- If the company consists of two partners and one of them withdraws, the other partner may, within six months from the date of entering the withdrawal in the Commercial Register, join one or more new partners to the company instead of the withdrawing partner; otherwise the company shall be deemed legally dissolved.

 

Article 56- Assignment of Shares

1- Shares may not be assigned in a joint liability company without the consent of all the partners, subject to the limitations as set out in the Memorandum of Association of the company. The assignee shall not become a partner in the company until the registration of the assignment with the competent authority and the notification of the registrar thereof.

2- Any agreement stating that shares may be assigned without limitation shall be void.

However, a  partner may transfer to  third  party the rights attached to  his share in  the  company. Such agreement shall have no effect other than between the contracting parties.

 

Article 57- Rights of the Deceased Partner

 

 

Unless the partners agree otherwise, the amount payable by the other partners in the share of the deceased partner shall be a debt payable from the date of dissolution of the Joint Liability Company or from the date of death of the partner, whichever is earlier.

 

Article 58- Transactions of the Company upon Expiry of its Term or Completion of its

Objective

1- The rights and obligations of the partners in a Joint Liability Company shall remain valid if the company continues upon the expiry of its term or completion of the objective for which it was established.

2- If a bona fide third party continues to deal with one or more joint partner upon amendment of the Memorandum of Association of the company or the Decision to dissolve it, while under the belief that the company is still under existence, such partner shall be liable to third parties prior to the amendment of its Memorandum or the decision to dissolve the company. The publication of the notice in at least two local daily newspapers, one of them is issued in Arabic, shall be sufficient notice to the persons who deal with the Joint Liability Company prior to the date of its dissolution or prior to the notification of the amendment to its Memorandum.

 

Article 59- Mutual Obligations of the Company and the Partners

Without prejudice to the provisions of the Memorandum of Association of the Joint Liability

Company, the following shall be taken into consideration:

1- Obligation for the company to settle any amounts that the partner has personally paid on behalf of the company to enable the company to carry out its usual business or to maintain its assets and activities.

2- Obligation for the partner to indemnify the company against any benefit obtained by him upon performing any work in connection with the company or his use of its property, name or trademarks without the consent of the company.

 

Article 60- Execution against the Assets of a Partner

Execution may not be conducted against the assets of the partner for the obligations of the company, unless after having obtained a writ of execution against the company, and notified it of such payment obligation, and the failure to make such payment by the company. The writ of execution against the company shall be effective as evidence against the partner.

 

Article 61- Profits and Losses

1- The profits and losses and the share of each partner in the company shall be determined at the end of the company's financial year in accordance with the balance sheet and the profit and loss account.

2- Each partner shall be considered to be a creditor of the company to the extent of his share of the profits from the time when such share is determined. Any deficit in the capital as a result of losses shall be made up from the profits of the succeeding years unless there is agreement to the contrary and, apart from that, a partner shall not be bound except with his consent to make good any deficit in his share of the capital of the company resulting from losses.

 

 

Chapter 2

Simple Commandite Company

 

Article 62- Definition of the Company

A Simple Commandite Company is a company which consists of one or more joint partners liable, severally and jointly, for the obligations of the company and having the capacity of traders, and one or more silent partners not liable for the obligations of the company other than to the extent of their respective shares in the capital. Silent Partners shall not have the capacity of a trader.

 

Article 63- Capacity of the Silent Partner

Any natural person or corporate person may be a Silent Partner in the Simple Commandite Company.

 

Article 64- Name of the Company

1- The name of a Simple Commandite Company shall consist of the name of one or more of the joint partners with the addition of such indication of the legal form of the company. In addition to the aforementioned, the company may have its own trade name.

 

 

2- The name of a Silent Partner may not be included in the name of the company. If such name is added with his consent, the Silent Partner shall be deemed as a Joint Partner to bona fide third parties.

 

Article 65- Memorandum of Association of the Company

1- The provisions relating to the Joint Liability Company shall apply to a Simple Commandite Company subject to the following provisions of this Chapter in connection with the Silent Partner.

2- The Memorandum of Association of a Simple Commandite Company shall include a statement of the names of the Joint Partners and the Silent Partners. If such partners are not so identified in the Memorandum of Association, the company shall be deemed as a Joint Liability Company and all the partners shall be deemed as Joint Partners.

3- The share of a Silent Partner may not be his work.

 

Article 66- Management of the Company

The management of the company shall be limited to the Joint Partners. Decisions shall be unanimously passed by the Joint Partners, unless the Memorandum of Association of the company provides for majority. No variation of the nature of the business of the company or amendment to its Memorandum of Association shall be valid without the consent of all the Acting and Silent Partners.

 

Article 67- Borrowing by the Company

1- A Silent Partner in a Simple Commandite Company shall have all the rights and powers of a partner in a Joint Liability Company and shall be governed by all the conditions, limitations and obligations imposed on the partner in the Joint Liability Company.

2- A loan or any other undertaking made by the Joint Partner in the name of the company or for its account shall be deemed as the obligation of the company itself.

 

Article 68- Rights of the Silent Partner

1- A Silent Partner shall have the same rights of a Joint Partner in connection with:

a- To lend the company and to enter into transactions with the company, subject to the consent of all the Joint

Partners.

b- To inspect and obtain copies or extracts of books and records of the Company at all times during the official working hours of the company.

c- To obtain full and accurate information on all the works of the company and a formal statement thereof.

d- A Silent partner may carry out any of the works as set forth in Clause 1/a of this Article in person or by other partners or third parties, provided that no damage to the company occurs.

2- Upon application of the provisions of this Article, a Silent Partner shall not be deemed involved in the management of a Simple Commandite Company upon conducting any of the internal regulatory activities of the company and shall not be jointly liable for the debts of the company against a bona fide third party.

 

Article 69- Management Affairs

1- A Silent Partner may not interfere in the management affairs related to third parties, but may demand a copy of the profit and loss account and the balance sheet and verify the contents thereof by inspecting the books and documents of the company by himself or by an agent from the partners or third parties, provided that no damage to the company occurs.

2- If a Silent Partner contravenes the prohibition as provided by Clause 1 above, he shall be liable in all his assets for the obligations arising from his acts.

3- A Silent Partner may be liable as to all his assets for all the obligations of the company if his management acts may make third parties believe that he is a Joint partner. In such event, the provisions concerning the Joint Partners shall apply to the Silent Partner.

4-  If  a  Silent  Partner  conducts any  of  the  prohibited  management acts  under  and  express or  implicit authorization by the Joint Partners, such partners shall be jointly liable for the obligations that may arise from such acts.

 

Article 70- Assignment of Shares

A Silent partner shall not assign his share in the company to a third party, in full or in part, without the consent of all the partners or by the majority stipulated in the Memorandum of Association of the company. The

 

 

assignee shall not become a partner of the company until the registration of such assignment with the competent authority and notifying the registrar thereof.

Title 3

Limited liability Company

 

 

Chapter 1

Incorporation of the Limited Liability Company

 

Article 71- Definition of the Company

1- A Limited Liability Company is a company where the number of partners is at least two (2) but shall not exceed fifty (50). A partner shall be liable only to the extent of its share in the capital.

2- A single natural or corporate person may incorporate and hold a Limited Liability Company. The holder of the capital of the company shall not be liable for the obligations of the company other than to the extent of the capital  as  set  out  in  its  Memorandum of  Association. The  provisions of  the  Limited  Liability Company contained in this Law shall apply to such person to the extent not in conflict with the nature of the company.

 

Article 72- Name of the Company

1- A Limited Liability Company shall have a name derived from its objective or from the name (s) of one or more partners, provided that name of the company shall be followed by the expression "Limited Liability Company" or  in  short  "LLC".  In  the  event  of  a  sole  proprietorship, the  name  of  the  company shall  be accompanied with the name of its owner and followed by the expression "sole proprietorship with limited liability".

2-  If  the  Manager (or  Managers) contravene the  provision of  Clause  1  of  this  Article, such  Manager (Managers) shall be jointly liable, in their own assets, for the obligations of the company and, as applicable, for the compensations.

 

Article 73- Memorandum of Association and Incorporation Procedures of the Company

A Limited Liability Company shall be incorporated and registered as set forth in Articles 42 and 43 of this

Law.

 

Article 74- Register of the Partners of the Company

1- The company shall prepare at its head office a special register of the partners, including:

a- Full name, nationality, date of birth and place of residence of every partner and, if the partner is a corporate person, the address of its head office;

b- Transactions made on the shares and the dates of such transactions.

2- The managers of the company shall be liable for such register and for the validity of its particulars. The partners and any concerned party may inspect such register.

3- The company shall  dispatch to  the competent authority and the registrar in January every year  the particulars entered in the register of partners and such changes thereto during the last financial year.

 

Article 75- Increase of the Number of the Partners

1- If, at any time upon the incorporation of the company, the number of the partners exceeds the maximum limit in Article 71 of this Law, the Manager or Managers, as the case may be, shall notify the competent authority within thirty (30) days from the date of such increase.

2- Other than in the event of transfer of title to the share of a partner by way of inheritance or Court judgment, the company shall adjust its position within three months from the date of the notice, and the competent authority may extend such period to another period of three months, otherwise the company shall be deemed terminated. The partners shall be personally and jointly liable from their assets for the debts and obligations of the company from the date of increase of the number of the partners.

3- The provisions of Clause 2 of this Article shall not apply to the partners who prove not to be aware of such increase or their objection thereto.

 

Article 76- Capital of the Company

 

 

1- The company shall have sufficient capital to achieve the purpose of its incorporation and the capital shall consist of shares equal in value. On a proposal made by the Minister in coordination with the competent authorities, the Cabinet may issue a decision determining the minimum limit of the capital of the company.

2- Shares may be in cash and/ or in kind and shall be paid in full at the time of incorporation.

3- The shares in cash shall be deposited in a bank operating in the State. The bank may not pay such shares other than to the Managers of the company after providing such evidence that the company has been registered with the competent authority and as provided by the contract appointing such Managers.

 

Article 77- Indivisible Share of the Partner

A share shall be indivisible. If a share is held by several persons without appointing their representative before the company, the partner whose name appears first in the Memorandum of Association shall be the representative of such partners. The company may set a time to make such choice, provided that upon the expiry of such time, the company shall be entitled to sell the share for the account of its holders, in which event the partners shall have the priority right to purchase the share. Unless agreed otherwise, if the priority right is used by more than one partner, the shares shall be divided among them pro rata to their respective shares in the capital.

 

Article 78- Valuation of Contributions in Kind

1- Partners in a Limited Liability Company may provide in consideration to their shares in the company contributions in kind.

2- The contribution in kind shall be evaluated at the expense of the relevant contributors thereof, by one or more financial consultants approved by the Authority to be elected by the competent authority, failing which the assessment shall be void.

3- The competent authority may discuss and object to the evaluation report and appoint another assessor, as required, at the cost of the partners providing such shares.

4- Notwithstanding the provision of Clause 2 of this Article, the partners may agree on the value of the share in kind. In such event, such value shall be approved by the competent authority. The partner providing such contribution shall be liable to third parties for the evaluation of its value in the Memorandum of Association. If the  contributions  in  kind  are  found  to  be  evaluated  above  their  true  value,  the  partner  providing  such contributions shall pay the difference in cash to the company.

 

Article 79- Assignment or Pledge of the Share of a Partner in the Company

1- A partner may Assign or pledge its share in the company to another partner or to a third party. Such assignment or pledge shall be made in accordance with the terms of the Memorandum of Association of the company under an official document, in accordance with the provisions of this Law. Such assignment or pledge shall not be valid against the company or third parties until the date of its entry in the Commercial Register with the competent authority.

2- The company shall not reject then entry of such assignment or pledge in the register unless the transfer or pledge violates the provisions of the Memorandum of Association or this Law.

 

Article 80- Procedures of Assignment of the Partner’s Share in the Company

1- If a partner wishes to assign his share to a person who is not a partner, with or without consideration, such partner shall notify the other partners through the Manager of the company of the assignee or the purchaser and the terms of the assignment or sale. The Manager shall notify the partners as soon as he receives the notice.

2- Every partner may demand to pre-empt the share as set forth in Clause 1 of this Article within thirty (30) days from the date of notifying the Manager of the agreed price. In the event of dispute on the price, such share shall be assessed by one or more experts with technical and financial experience in the subject matter of the share, as nominated by the competent authority on demand by the applicant for pre-emption and at his expenses.

3- If the right of pre-emption is used by more than one partner, the share(s) offered for sale shall be divided among such partners pro rata to their respective shareholdings, subject to the provisions of Article 76 of this Law.

4- If the period as set forth in Clause 2 of this Article has lapsed without use of the pre-emption right by a partner, the relevant partner shall be free to dispose of his share.

 

Article 81- Execution against a Partner’s Share in the Company

If a partner’s creditor commences the execution procedures against the share proceeds of its debtor, the

creditor may agree with the debtor and the company to the method and the terms of the sale. Otherwise, the

 

 

share shall be offered for sale at a public auction, upon a request submitted to the competent Court. One or more partners may recover the sold share at the same terms as awarded at the auction, within 15 days from the date on which the auction is awarded. These provisions shall apply in the event of bankruptcy of a partner.

 

Article 82- Liability of a Partner for any Profit or Benefit to the Company

A partner in a limited liability company shall be liable against the company for any of its properties held by such partner as a trustee or any profits or benefit made through the business or activities of the company, or by the use of the property, name or commercial relationships of the company.

 

 

Chapter 2

Management of the Company

 

Article 83- Managers of the Company

1-  The  management of  a  limited  liability company shall  be  undertaken by one  or  more  Managers  as determined by the partners in the Memorandum of Association. Such Managers shall be elected from the partners or third parties. If the Managers are not appointed in the Memorandum of Association of the company or an independent contract, the general assembly of the partners shall appoint such Managers. If there is more than one Manager, the partners may appoint a Board of Directors. Such board shall have such powers and functions as set out in the Memorandum of Association.

2- Unless the contract appointing the Manager of the company or its Memorandum of Association or Articles of Association provides for the powers granted to the Manager, such Manager shall be authorized to exercise full powers to manage the company and his acts shall be binding to the company, provided that the capacity of Manager is stated upon doing such acts.

 

Article 84- Liability of the Managers of the Company

1- Every partner in a Limited Liability Company shall be liable against the company, the partners and the third parties for any fraudulent acts by such Manager and shall also be liable for any losses or expenses incurred due  to  improper  use  of  the  power  or  the  contravention  of  the  provisions  of  any  applicable  Law,  the Memorandum of Association of the company or the contract appointing the Manager or for any gross error by the Manager. Any provision in the Memorandum of Association or the contract appointing the Manager in conflict with the provisions of this Clause shall be deemed void.

3- Subject to the provisions of the Limited Liability Company in accordance with this Law, the provisions that apply to the Directors of Joint Stock Companies as set forth in this Law shall apply to the Managers of Limited Liability Companies.

 

Article 85 - Vacancy of the Office of the Manager

1- Unless the Memorandum of Association of the company or the contract appointing the manager provides otherwise, the Manager shall be dismissed by Decision of the General Assembly, whether the Manager is a partner or not. The Court may dismiss the Manager at the request made by one or more partners in the company if the Court deems that such dismissal is justified.

2- The Manager may file a written resignation to the General Assembly, with a copy to the competent authority. The General Assembly shall decide in such resignation within 30 days from the date of submittal, otherwise  his  resignation  shall  be  effective  upon  the  expiry  of  this  period,  unless  the  Memorandum  of Association of the company or the contract appointing the Manager provides otherwise.

3- The company shall notify the competent authority of the termination of services of the Manager within no later than 30 days from the date of the termination of service. The company shall appoint another Manager during such period.

 

Article 86- Competition of the Company by the Manager

The  Manager  shall  not,  without  the  consent  of  the  General  Assembly of  the  company,  undertake  the management of a competing company or a company with objects similar to those of the company or make, for his own account or for the account of third parties, deals in a trade in competition or similar to the activity of the company, otherwise the Manager may be dismissed and required to pay compensation.

 

Article 87- Responsibility for Preparing the Accounts

The Manager of the company shall prepare the annual budget and the profit and loss account, and shall also prepare an annual report on the affairs and financial position of the company and provide his recommendations

 

 

on the distribution of the profits of the General Assembly, within three months from the end of the financial year.

 

Article 88- Appointment of a Supervisory Board

1- If the number of the partners is over seven, the partners shall appoint a Supervisory Board consisting of at least three partners. The General Assembly may re-elect such partners upon the expiry of such term or elect other partners in their place. The members of the Supervisory Board may be dismissed at any time for an acceptable reason.

2- The Managers may not vote on the election or dismissal of the members of the Supervisory Board.

 

Article 89- Powers of the Supervisory Board

The Supervisory Board may examine the books and documents of  the company and  request from the Managers at any time to provide a report of their management. Such Board shall control the balance sheet, the annual report and the distribution of the profits. The Board shall present its report in this regard to the General Assembly of the company at least 5 (five) days prior to the date of its convention.

 

Article 90- Liability of the Members of the Supervisory Board

The Members of the Supervisory Board shall not be held liable for the acts of the Managers or the results of such acts unless such members were aware of the errors committed and omitted to state such errors in their report presented to the General Assembly of the partners.

 

Article 91- Rights of Partners who are Not Managers

The partners who are not Managers of the Limited Liability Company, where there is no Supervisory Board, shall  have  all  the  rights  associated  with  the  description of  the  partners  as  provided by  this  Law or  the Memorandum of Association. Any agreement to the contrary shall be void.

 

 

Chapter 3

General Assembly

 

Article 92- Formation of the General Assembly and Inviting It to Convene

1- The Limited Liability Company shall have a General Assembly consisting of all the partners. The General Assembly shall be convened by an invitation from the Manager or the Board of Directors at least once in a year during the four months following the end of the financial year of the company. The General Assembly shall be convened at such time and place as set out in the letter inviting to convene the meeting.

2- The Manager or authorized Manager shall invite the General Assembly to convene upon the request of one or more partners holding at least one quarter of the capital.

 

Article 93- Notification of the Invitation to Hold the General Assembly

Other than the General Assembly adjourned due to absence of quorum in accordance with the provisions of Article 96 of this Law, invitation to convene the General Assembly may be given by registered letters or by any other means as provided by the Memorandum of Association, at least 15 (fifteen) days prior to the date as scheduled to hold the General Assembly, or within any shorter period as agreed by all the partners.

 

Article 94- Agenda of the Annual General Assembly

The Agenda of the Annual General assembly of a Limited Liability Company shall include the consideration and decision-making in the following issues:

1- The Managers' report regarding the activity and the financial position of the company during the ended financial year, the auditor’s report and the Supervisory Board’s report;

2- The balance sheet and the account of profits and losses and the approval thereof;

3- The profits to be distributed among the partners;

4- To appoint the Managers and to determine their remuneration;

5- To appoint the members of the Board of Managers (if any);

6- To appoint the members of the Supervisory Board (if any);

7- To appoint the members of the Internal Shariah Control Committee and the Shariah Controller if the company conducts its activity in accordance with the provisions of the Islamic Shariah;

 

 

8- To appoint and determine the remuneration of the auditor(s); and

9- Any other matters within the powers of the General Assembly in accordance with the provisions of this

Law or the Memorandum of Association of the company.

 

Article 95-Attendance at the Meeting of the General Assembly

Irrespective of the number of the shares held by him, every partner shall have the right to attend the General Assembly in person and may delegate another partner who is not a manager or any other party that the Memorandum of Association permits to be appointed to represent a partner at the General Assembly to do so. Every partner shall have a number of votes equal to the number of the shares held or represented by such partner.

 

Article 96- Quorum for Convene and Voting

1- Quorum at the General Assembly shall not be valid unless one or more partners holding at least 75% of the capital of the company are present.

2- If such quorum as set forth in Clause 1 of this Article is not present at the meeting, the partners shall be invited to another meeting, to be held within 14 days from the date of the first meeting, provided that at least

50% of the capital is present at the meeting.

3- If quorum as set forth in Clauses 1 and 2 of this Article is not present, the partners shall be invited to a third meeting to be held upon the expiry of 30 days from the date of the second meeting. Quorum at the third meeting shall be valid irrespective of the partners present at the meeting.

4- The Decisions by the General Assembly shall not be valid unless passed by the majority of the partners present in person and those represented at the meeting, unless the Memorandum of Association provides for a higher majority.

 

Article 97- Listing a New Issue in the Agenda of the General Assembly

The General Assembly may not discuss any issues other than those listed in the Agenda, unless serious issues that require consideration are found during the meeting. If, at the beginning of the meeting, a partner demands to list a certain issue in the Agenda, the managers shall respond to the request, failing which such partner may appeal to the General Assembly.

 

Article 98- Discussion of the Issues listed on the Agenda of the General Assembly

Every partner may discuss the issues listed on the Agenda. The Managers shall be bound to respond to the questions by the partners to the extent not to cause damage to the interests of the company. If a partner sees that the reply to his question is not adequate, such partner may appeal to the General Assembly. The Decision by the General Assembly shall be binding.

 

Article 99- Voting to Discharge a Managing Partner

A managing partner may not vote on the Decisions to discharge him from liability for the management.

 

Article 100- Register of the Meetings of the General Assembly

Minutes accurately summarizing all the discussions of the General Assembly shall be drawn, the minutes and Decisions shall be recorded in a special register to be kept at the head office of the company. Any partner may inspect the minutes in person or by proxy and may also inspect the balance sheet, the profit and loss account and the annual report.

 

Article 101- Amendment to the Memorandum of Association of the Company and the

Increase or Decrease of its Capital

The Memorandum of Association of the company may not be amended and its capital may not be increased or decreased other than with the consent of a number of partners representing three quarters of the shares represented at the meeting of the General Assembly. The rate of such increase or decrease shall be pro rata to the shares of the partners of the company, unless agreed otherwise. However, the financial obligations of the partners may not be increased other than by their unanimous consent.

 

Article 102- Auditor of the Company

A Limited Liability Company shall have one or more auditors to be elected by the General Assembly of the partners every year and, other than as provided by Article 244 of this Law, the provisions concerning the auditors in public joint stock companies shall apply to  the auditor of a  Limited Liability Company. The expression "Competent Authority" shall substitute the term "Authority" wherever it appears.

 

Article 103- The Legal Reserve

A Limited Liability Company shall set aside in every year 10% of its net profits to form a legal reserve. The partners may decide to stop such deduction if the reserve reaches half the capital.

 

Article 104- Application of the Provisions of the Joint Stock Companies

Unless otherwise provided by this Law, the provisions concerning Joint Stock Companies shall apply to the Limited Liability Company. The expression "Competent Authority" shall substitute the term "Authority" wherever it appears.

Title 4

Public Joint Stock Companies

 

 

Chapter 1

Definition and Incorporation of the Public Joint Stock Company

 

Article 105- Definition of the Company

A Public Joint Stock Company is a company whose capital is divided into equal and negotiable shares. The founders shall subscribe to part of such shares while the other shares are to be offered to the public under a public subscription. A shareholder shall be liable only to the extent of his share in the capital of the company.

 

Article 106- Name of the Company

Every Public Joint Stock Company shall have a trade name, which may not be a name of a natural person unless the objective of the company is to invest an invention patent registered in the name of such person and/or if the company holds a trade name or obtained the right to use such name. In all events, the expression "Public Joint Stock Company" shall be added to the name of the company.

 

Article 107- Number of Founders

1- Five or more persons may form a Public Joint Stock Company.

2- The Federal Government, the Local Government and any company or entity fully held by the Federal Government or Local Government may be a shareholder of a Public Joint Stock Company or incorporate by itself a Public Joint Stock Company, and may also join, in contribution to the capital, a number less than as provided by Clause 1 of this Article.

3- The conversion of any company to a Public Joint Stock Company shall be exempted from the minimum limit stated in Clause 1 of this Article.

 

Article 108- Term of the Company

The term of the company shall be determined in its Memorandum of Association and Articles of Association. Under a special Decision, such term may be extended or shortened if the object of the company so requires.

 

Article 109- The Founder

1- A founder is such person who signed the Memorandum of Association of the company and holds a percentage of its capital in cash or provided contributions in kind at the time of incorporation, subject to the provisions of this Law.

2-  The  founder  shall  be  liable  to  any  damages  suffered  by  the  company or  third  parties  due  to  the contravention of the incorporation rules and procedures. The founders shall be jointly liable for such damage. Any person delegated in the incorporation process shall be liable in person if he omits to state the name of the principal or the instrument of delegation proves to be invalid.

 

Article 110- Memorandum and Articles of Association of the Company

1- The founders shall draft the Memorandum and Articles of Association of the company, including the following particulars:

a- The name and the head office of the company;

b- The objective for which the company is incorporated;

 

 

c- The full name, nationality, date of birth, place of residence and address of each founder;

d- The amount of the capital and the number of the shares, the nominal value per share and the amount paid from the value of each share;

e- An undertaking by the founders to procure to complete the incorporation procedures;

f- An estimate of the amount of expenses, charges and costs expected to be spent on the incorporation process, to be paid by the company by virtue of its incorporation;

g- A statement of the contributions in kind, the name of the provider thereof, their initial value, the conditions of such provision and the rights of pledge lien attached thereto, if any.

2- The Memorandum of Association and Articles of Association of the company shall be compliant with the Law and the Decisions issued in execution hereof and shall include the provisions, jurisdictions and powers of the Board of Directors and the General Assembly of the company. The Authority may issue the form of the Memorandum of Association and Articles of Association of the company. The companies shall comply with such a form.

 

Article 111- Shareholders’ Compliance with the Articles of Association

1-  Subject  to  the  provisions of  this  Law,  the  Articles  of  Association of  the  company shall,  upon  its registration in the Commercial Register with the competent authority, be binding to all its shareholders.

2- Any amount due from a shareholder to the company in accordance with the provisions of the Articles of

Association shall be a debt payable by such shareholder to the company.

 

Article 112- Founders Committee

1- The founders shall choose from their number a committee consisting of at least three members to complete the  incorporation  procedures  and  to  register  the  company  with  the  relevant  authorities.  The  Founders Committee, the consultants and the parties involved in the incorporation procedures and their representatives shall be fully liable for the accuracy, validity and completion of all the documents, studies and reports provided to  the  relevant  authorities in  connection with  the  incorporation, licensing and  registration process of  the company.

2- The Founders Committee may delegate one of its members or a third party to follow and complete the incorporation procedures with the Authority and the competent authority according to such conditions laid by the Authority in this respect.

3- The Founders Committee shall appoint a Financial Consultant, a Legal Consultant and an Auditor for subscription.

 

Article 113- Incorporation procedures before the Competent Authority

1-  The  Founders Committee shall  submit the  application for  incorporation to  the  competent authority, together with the Memorandum of Association and Articles of Association of the company, the economic feasibility of the project to be established by the company, the proposed timetable to perform such project and any other documents required by the competent authority.

2- The competent authority shall consider the application for incorporation and issue its initial approval of the application or reject it and shall notify the Founders Committee within 10 (ten) working days from the date of the application if the application is satisfactory or from the date of completing the required documents or statements. The failure of the competent authority to issue its initial approval during such period shall be deemed as rejection of the application for incorporation.

3- If the competent authority rejects the application for incorporation or the period as set forth in Clause 2 of this Article expires without deciding on the application, the Founders Committee may file a grievance before the Director General of the competent authority or his representative within 10 (ten) working days. If the grievance was rejected or was not settled within 15 (fifteen) working days from the date of filing the grievance, the Founders  Committee  may  appeal,  before  the  Competent  Court,  the  Decision  of  rejection  issued  by  the competent authority within 30 (thirty) days from the date of notifying the committee of the Decision of rejection or from the expiry date of the said period if no such Decision is issued.

 

Article 114- Incorporation Procedures before the Authority

1- The Founders Committee shall submit to the Authority the application for incorporation accompanied with the initial approval of the competent authority, together with the Memorandum of Association and Articles of Association of the company, the economic feasibility of the project to be established by the company, the proposed timetable to perform such project, the prospectus and any approvals by the relevant authorities in connection with the application, according to the applicable requirements of the Authority.

 

 

2- The Authority shall consider the application for incorporation and notify the Founders Committee of its notes on the application for incorporation and its documents within 10 (ten) working days from the date of submitting a satisfactory application or from the date on which the assessor appointed by the Authority presents its final report in assessment of the contributions in kind, if any. The Founders Committee shall complete any deficiency or make such amendments as the Authority may deem necessary to complete the application for incorporation, within 15 (fifteen) working days from the date of the notice, failing which the Authority may consider this as waiver of the application for incorporation.

3- The Authority shall send a copy of the application and its documents to the competent authority within 10 (ten) working days from the date of completing the application to be considered. Then, the Authority shall meet with the competent authority within 10 (ten) working days from the date of sending the application to the Authority. If the competent authority has any notes thereon, the Authority shall notify the Founders Committee thereof and complete the deficiency or make such amendments as the competent authority may require to complete the application for incorporation within 10 (ten) working days from the date of notifying the Founders Committee, failing which the Authority may consider this as waiver of the application for incorporation. The Authority shall confirm that the application and all the documents and notes are satisfactory. The amended copy shall be sent to the competent authority.

 

Article 115- Authentication of the Memorandum of Association

The  Founders  Committee  shall  authenticate  the  Memorandum  of  Association  in  accordance  with  the provisions of this Law and provide to the Authority a copy of the Memorandum of Association and a copy of the Decision issued by the competent authority concerning the initial approval of the license and a certificate issued by a bank licensed to operate in the State, confirming that the founders have paid the amounts payable by them, prior to the approval of the prospectus by the Authority.

 

Article 116- Amendment to the Particulars of the Application for Incorporation

No amendment to the particulars of the application for incorporation may be made upon submitting the application to the competent authority within any stage of the incorporation process, whether the capital or objectives  of  the  company,  the  names  of  the  founders  or  any  other  particulars  in  the  application  for incorporation. If this occurs, the matter shall be referred to the competent authority to take the appropriate action.

 

Article 117- Contribution by the Founders to the Capital of the Company

1- The founders shall subscribe to shares from 30% to 70% of the issued capital of the company, prior to the invitation to the Public Subscription to the remaining shares of the company.

2- The founders may not subscribe to the shares offered for Public Subscription.

 

Article 118- Valuation of the Contribution in Kind

1-The founders of the company may provide contributions in kind in consideration of their shares in the company.

2- The contributions in kind shall be assessed at the expense of those providing them by one or more financial consultants to be elected by the Authority from the financial consultants approved by the Authority or by such entities with financial and technical experience in the subject matter of valuation, as approved by the Authority, failing which the valuation shall be void.

3- The assessor may inspect any information or documents as the assessor may deem necessary to enable the assessor to make the required evaluation and to prepare the evaluation report efficiently. The Founders Committee or, as applicable, the Board of Directors shall take the required procedures to provide it with the required information, documents and instruments as soon as possible from the date of the application.

4- The assessor, the Founders Committee and the Board of Directors (if any) shall be fully liable for the accuracy, adequacy and completion of the statements and information contained in the assessment report.

5- The Authority may discuss and object to the assessment report. The Authority may appoint another assessor as required at the cost of the company under incorporation.

6- The share/ contributions in kind provided by a public person may be a franchise or right to use some public funds.

 

Article 119- Valuation of the Contributions in Kind following Incorporation

The valuation of the contributions in kind following the incorporation of the company shall be governed by the same valuation provisions in this Law.

 

 

Article 120- Exaggeration in the Valuation of the Contributions in Kind

1- If the Authority confirms that there is any exaggeration or negligence upon the valuation of the contributions in kind by the assessor, the Authority may:

a- Prevent the assessor from conducting the activity of valuation with the Authority for a period of at least two years.

b- Prevent the assessor from conducting the activity of valuation with the Authority permanently in the event of recurrence of the contravention.

2-The assessor may file a grievance against the Decision of the Authority, before the Chairman of the Authority within 15 (fifteen) working days from the date of his notification of either Decision as set out in Clause 1 of this Article. If the Chairman of the Authority rejects the grievance or omits to decide it within 15 (fifteen) working days from the  date  of  filing the  grievance, the  assessor may file  an  appeal  before  the Competent Court within 30 (thirty) days from the date of rejecting the grievance or expiry of the period during which the grievance should be considered, as the case may be.

 

Article 121- Invitation to Public Subscription

1- The prospectus shall be signed by the Founders Committee, the consultants and the parties involved in the incorporation procedures and their representatives and shall be jointly liable for the validity of the information as set out in the prospectus.

2- Invitation to the public subscription shall be made under a prospectus to be published in two daily local newspapers, one of them is issued in Arabic, at least 5 (five) working days prior to the date of commencing the subscription.

3- Subscription to the shares shall be made under an application whose particulars shall be determined by the Authority and, in particular, the application shall include the name, objective and capital of the company, the conditions of subscription, the name, address in the State, profession and nationality of the subscriber, the number of the shares proposed to be subscribed thereto by him and his undertaking to accept the provisions of the Memorandum of Association and Articles of Association of the company.

 

Article 122- Entities Authorized to receive Subscriptions

1- Subscription with the licensed entity/ entities licensed to do so in the State, as determined by the Founders Committee in the prospectus. Subscription may be made electronically as determined by the Authority in this respect.

2- The entity/ entities receiving subscriptions shall withhold the monies paid by the subscribers and the revenues from the amounts of subscription to the shares for the account of the company under incorporation. Such monies may not be paid to the Board of Directors of the Company until the Authority issues a certificate of incorporation and the registration of the company in the Commercial Register with the competent authority.

 

Article 123- Underwriters

1- Without prejudice to the provisions of Article 10 of this Law, the company may have, upon incorporation or upon increasing its capital, one underwriter or more certified by the Authority to underwrite what has been left from the subscription shares. He may re-offer what has been subscribed form the shares in accordance with the conditions, terms and procedures issued by a Decision from the Authority.

2- A Decision is issued by the Chairman of the Authority in the terms and conditions of practicing the underwriting activity in the State.

 

Article 124- The Period of Subscription

1- Subscription shall remain open for at least 10 working days and not exceeding 30 working days.

2- If all shares put to subscription are not taken within the scheduled period, the Founders Committee may apply to the Authority for approval to extend the period of subscription for an additional period not to exceed 10 (ten) working days if there is no underwriter.

3- If such additional period expires without taking all the shares offered for public subscription and the founders have not subscribed to the maximum applicable limit as provided by Article 117 of this Law, the founders may subscribe to the balance part of such applicable percentage, failing which the Decision issued by the Authority in approval of the incorporation shall be void.

 

Article 125- Distribution of the Shares to the Subscribers

If subscription exceeds the number of the shares offered, the shares may be distributed to the subscribers pro rata to their respective subscriptions or as determined in the prospectus, as approved by the Authority. The distribution shall be made according to the nearest whole number.

 

Article 126- Share Allocation and Repayment of Excess Amounts

Entities licensed to receive subscriptions shall, upon closure of subscription:

1- Allocate the shares to the subscribers within no later than 5 (five) working days from the date of closing the subscription.

2- Repay the extra amounts paid by the subscribers and the revenues thereon, for which no shares are allocated, within no later than 5 (five) working days from the date of allocating the shares to the subscribers.

 

Article 127- Subscription by Emirates Investment Authority

Emirates Investment Authority shall be entitled to subscribe to shares in any public Joint Stock Company incorporated in the State and offering its shares for public subscription, within the limit of 5% of the shares offered for public subscription, provided that the value of such shares shall be paid prior to  closing the subscription and that the Authority is provided with evidence to such payment.

 

Article 128- Declaring the Non Incorporation of the Company

Unless the company is incorporated, the Authority shall declare this to the public. As a result of such declaration:

1- The subscribers shall have the right to recover the amounts paid by them within ten working days from the date of the declaration and the revenues thereof. The founders shall be jointly liable for payment of such amounts and, if applicable, compensation.

2- The founders shall bear such expenses paid for the incorporation of the company and they shall be jointly liable against third parties for such acts carried out by the founders during the incorporation period.

 

Article 129- Book Building of Securities

Subject to the provisions of Articles 117 and 279 of this Law, the Authority may issue a Decision to regulate the mechanism of subscription on the basis of the Book Building of securities. Entities wishing to follow such method shall comply with the provisions and procedures contained in the Decision issued by the Authority in this respect.

 

Article 130- Incorporation Expenses

The company shall bear all the expenses paid by the Founders Committee for the incorporation of the company and issuing its securities. The detailed statement of such expenses shall be referred to the Constituent General Assembly of the company for consideration and approval.

 

Article 131- Constituent General Assembly

1- The Founders Committee shall invite the shareholders to hold a meeting of the Constituent General

Assembly of the company within no later than 15 (fifteen) days from the date of closing the subscription.

2- If the period as set forth in Clause 1 of this Article expires without such invitation by the founders, the

Authority shall invite the General Assembly at the expenses of the company.

3-  Unless  the  Articles  of  Association of  the  company  determine  a  higher  percentage,  quorum  at  the Constituent General Assembly shall be present if shareholders holding in person or representing by proxy at least 50% of the capital of the company are present at the meeting. If quorum is not present, the meeting shall be adjourned for a period between 5 (five) days and 15 (fifteen) days from the date of the first meeting. The adjourned meeting shall be valid irrespective of the number of the present shareholders.

4- The meeting shall be chaired by such person elected by the Constituent General Assembly for such purpose from among the founders.

5- The Decisions of the Constituent General Assembly shall be passed by the majority votes of shareholders holding at least three quarters of the shares represented at the meeting.

 

Article 132- Agenda of the Constituent General Assembly

In particular, the Constituent General Assembly shall consider and take decisions in the following issues:

1- The founders’ report concerning the procedures and the costs of the incorporation of the company.

2- The acts of the founders in connection with the company during the incorporation period.

 

 

3- To approve the incorporation of the company.

4- To elect the members of the first Board of Directors if not appointed by the founders.

5- To appoint the auditors if not appointed by the founders.

6- To appoint the members of the Internal Shariah Control Committee and the Shariah Controller if the company conducts its business in accordance with the provisions of the Islamic Shariah, if not appointed by the founders.

 

Article 133- Application to issue the Certificate of Incorporation

The Board of Directors of the company shall, within 10 (ten) working days from the date of convening the Constituent General Assembly, provide an application to the Authority to issue a certificate of incorporation, together with:

1- A report by the entity that audited the subscription accounts.

2- An acknowledgement by the Founders Committee of the complete subscription of the share capital in full, the amounts paid by the subscribers from the value of the shares and a statement of the names and nationalities of the subscribers and the number of shares subscribed by each subscriber.

3- A bank certificate confirming that the amount payable from the capital of the company has been deposited.

4- A statement of the names of the members of the Board of the company and an acknowledgement by them that their membership is not in conflict with the provisions of this Law and the Decisions issued hereunder.

5- A statement of the names of the members of the Internal Shariah Control Committee and the Shariah

Controller if the company conducts its business in accordance with the provisions of the Islamic Shariah.

6- Minutes of the meeting of the Constituent General Assembly.

7- Any other documents as required by the Authority.

 

Article 134- Issuing the Certificate of Incorporation

In the event of completion of the documents as set forth in Article 133 of this Law, the Authority shall issue a certificate of incorporation of the company within 5 (five) working days from the date of submitting a complete application by the Board of Directors of the company.

 

Article 135- Registration of the Company with the Competent Authority

1- The Board of Directors of the company shall within 10 (ten) working days from the date of issue by the

Authority of the certificate of incorporation, take its registration procedures before the competent authority.

2- The competent authority shall enter the company in the Commercial Register and issue a commercial licence for the company within 5 (five) working days from the date of completion of the documents and payment of the fees, and shall notify the Authority by a copy of the commercial licence.

 

Article 136- Notification of the Registrar

The Chairman of the company shall, within 5 (five) working days from the date of issue by the competent authority of the commercial licence, notify the registrar of the certificate of incorporation, the Memorandum of Association and Articles of Association of the  company and  its  commercial licence to  be  entered in  the Companies Register and to be published at the cost of the company according to the conditions laid by the Minister in this respect.

 

Article 137- Listing the Shares of the Company in the Financial Market

1- The Board of Directors of the company that offered shares for public subscription shall, within 15 (fifteen) working days from the date of its registration in the Commercial Register at the competent authority, list the shares of the company in one of the financial markets licensed in the State according to the listing rules and regulations applicable at the Authority and the financial market where its shares are to be listed.

2- Companies listed in a financial market in the State shall comply with the applicable Laws and regulations at the financial market.

 

Article 138- Acts by the Founders

Upon its registration in the Commercial Register with the competent authority, the effects of all the acts by the founders for the account of the company prior to the registration shall be transferred to the company. The company shall bear all the expenses paid by the founders in this respect.

 

 

Article 139- Amendment to the Memorandum of Association or Articles of Association of the

Company

Subject to the provisions of this Law, the company may, with the consent of the Authority and the competent authority, issue a special Decision to amend its Memorandum of Association or Articles of Association.

 

Article 140- Inspection of Statements and Information

1- The company shall provide a copy of its Memorandum of Association and Articles of Association on the website of the company and any documents or other information as determined by the authority.

2- The company shall send a copy of its Memorandum of Association and Articles of Association to any shareholder that may so demand, at his own expenses.

 

Article 141- Register of the Shareholders and Records of the Company

1- Every company shall keep a register of its shareholders in accordance with the conditions laid by the

Authority.

2- The Authority may inspect the register of shareholders and the books, documents and records of the company.

 

Article 142- Purchase of Assets during the First Financial Year

If, prior to the approval by the General Assembly of the accounts of the first financial year, the company purchases assets, companies or establishments for an amount exceeding 20% of the capital of the company in aggregate, the Board of Directors shall notify the Authority thereof. The Authority may subject such assets, companies or establishments to assessment in accordance with the provisions of this Law.

 

 

Chapter 2

Management of the Public Joint Stock Company

 

Article 143- Formation of the Board of Directors

1- The management of the company shall be undertaken by a Board of Directors. The Articles of Association of the company shall determine the method of formation of the Board of Directors, the number of its members and the term of membership, provided that the number of the members shall not be less than three and shall not exceed eleven and that the term of membership shall not exceed three Gregorian calendar years, commencing from the date of election or appointment. Members may be re-elected for more than one term.

2- The Board of Directors shall elect from its members by secret ballot a Chairman and a Deputy Chairman to substitute the Chairman in the event of his absence or if there is a preventive. A Managing Director of the company may be elected, and this Managing Director may not be an Executive Officer or a General Manager of another company.

3- The Board of Directors shall notify the Authority of the Decisions for electing the Chairman, the Deputy Chairman and the Managing Director. It is also required to obtain the approval of the Central Bank on such Decisions in the event of companies licensed by it.

4- The company shall have a Secretary of the Board of Directors who is not a member of the latter.

5- The Board of Directors of the Authority shall issue a Decision stating the terms and conditions that the companies shall comply therewith for the formation of their Boards of Directors and the nominations to its membership. In the event of companies licensed by it, the Central Bank shall issue the required Decision in this respect.

 

Article 144- Election of the Members of the Board

1-Subject to the provisions of Article 143 of this Law, the General Assembly shall elect the members of the Board by way of  cumulative voting by secret ballot. Notwithstanding this, the  founders may appoint the members of the first Board of Directors in the Articles of Association of the company.

Cumulative voting shall mean that each shareholder shall have a number of votes equivalent to the number of shares held by him so that he votes to one candidate for the membership of the Board or may distribute his votes among the selected candidates, provided that the number of votes granted to the candidates does not exceed the number of votes owned by him.

2- The General Assembly may appoint a number of experienced persons in the Board of Directors other than the shareholders of the company, provided that such members shall not exceed one third of the number of members as determined in the Articles of Association.

 

 

3- Every company shall keep a register of the members and the Secretary of the Board at its

Head Office. The Authority shall determine such particulars required to be available in such register.

4- The register of the members and the Secretary of the Board of the company as set forth in

Clause 3 of this Article shall be made available for inspection by any shareholder or member of the Board of the company, free of charge, during the working hours, subject to any reasonable entries as may be imposed by the company under the Articles of Association.

 

Article 145- Vacancy of the Position of a Member of the Board

1- If the office of a member of the Board becomes vacant, the Board of Directors shall, subject to the provisions of Article 143 of this Law, appoint a new member to hold the vacant position, provided that such appointment shall be referred to the General Assembly at its first meeting to approve such appointment or appoint another member, unless the Articles of Association of the company provides otherwise. The new member shall complete the term of its predecessor.

2- If the vacant positions reach one quarter of the number of members of the Board, the remaining members shall invite the General Assembly to convene within no later than 30 (thirty) days from the date of vacancy of the last office to elect new members to fill such vacancies.

Article 146- Mechanism of Voting to Elect the Members of the Board

Every shareholder in the company shall have a number of votes equal to the number of shares held by such shareholder. The  Authority shall  issue  a  Decision to  determine  the  mechanism of  voting  at  the  General Assemblies to elect the members of the Boards.

 

Article 147- Nominations for the Membership of the Board

No person may be appointed or elected as a member of the Board of the company until such person acknowledges in writing his acceptance of the nomination, provided that such acknowledgement shall include a disclosure of any activity conducted directly or indirectly by such person in competition of the business of the company and of the names of the companies and establishments where such person works or is a member of the Board.

 

Article 148- Government Membership in the Board of Directors

Notwithstanding the provisions of Article 143, the Federal Government or the Local Government may, if it holds 5% or more of the capital of the company, appoints its representatives at the Board of Directors pro rata to such percentage from the number of the Board members, but at least one member if the required percentage to appoint a member exceeds such percentage and it shall forfeit its right in the voting in the percentage of its appointment. If the Government holds any balance percentage not qualifying to appoint another member, the Government may use such percentage in voting.

 

Article 149- Membership in the Board of Directors of Several Joint Stock Companies

1- No person shall, in his personal capacity or in his capacity as the representative of a corporate person, be a member of the Board of more than five Joint Stock Companies based in the State, or be a Chairman or Deputy Chairman of more than two companies based in the State. Such person may not be a Managing Director of more than one company based in the State.

2- The office of any member that may contravene the provision of Clause 1 of this Article in respect of the Boards of Directors of companies in excess of the legal limit shall be annulled due to his recent appointment. Such contravening member shall  repay to  the  company where his  membership is  annulled  such  amounts received by him from the company.

 

Article 150- Notification of Conflict of Interests by a Member of the Board

1- Every member of the Board of the company that may have a common interest or a conflicting interest in a transaction referred to the Board of Directors for approval shall notify the Board of Directors of such interest and his acknowledgement shall be entered in the minutes of the meeting. Such member may not vote on the Decision concerning such transaction.

2- If a member of the Board fails to notify the Board in accordance with the Provision of Clause 1 of this Article, the company or any of its shareholders may apply to the Competent Court to annul the contract or to require the contravening member to pay any profit or benefit made by him from such contract to the company.

 

Article 151- Nationality of the Members of the Board

 

 

The Chairman and the majority of the members of the Board shall be UAE nationals. If the percentage of the UAE members falls below the applicable percentage under this Article, such deficiency shall be completed within no later than three months, failing which the Decisions of the Board of Directors shall be void upon the expiry of such period.

 

Article 152- Prohibited Dispositions by the Related Parties

1- The related parties shall not utilize the information in the possession of any of them due to its membership or occupation to achieve any interest whatsoever for them or for others as a result of dealing in the securities of the company and any other transactions. Such party or employee may not have a direct or indirect interest with any party making deals intended to influence the rates of the securities issued by the company.

2- The company may not make transactions with the related parties without the consent of the Board of Directors not exceeding 5% of the capital of the company and with the consent of the General Assembly of the company for the excess thereof. Otherwise, the transactions shall be assessed by an assessor approved by the Authority.

3- The member of the Board may not, without the consent of the General Assembly of the company, which consent shall be renewed every year, participate in any business in competition with the company or trade for his own account or for the account of third parties in any branch of the activity conducted by the company, and shall not reveal any information or statements related to the company, otherwise the company may demand him to pay compensation or to consider the profitable transactions made for his account as if it were made for the account of the company.

 

Article 153- Prohibition of Loans to the Members of the Board

1- The Joint Stock Company may not provide any loans to any member of the Board or execute guarantees or provide any collateral in connection with any loans entered granted to them. A loan shall be deemed to be granted to a member of the Board in accordance with the provisions of this Law any loan granted to his spouse, children or relative up to the second degree.

2- No loan may be granted to a company where a member of the Board or his spouse, children or any of his said relatives up to the second degree holds, jointly or severally, over 20% of the capital of that company.

3- Any agreement in conflict with the provisions of this Article shall be invalid. The auditor shall refer in his report presented to the General Assembly of the company to such loans and the credits granted to the members of the Board and the extent of compliance by the company with the provisions of this Article.

 

Article 154- Powers of the Board of Directors

The Board of Directors shall have all the required powers to do such acts as required for the object of the company, other than as reserved by this Law or the Articles of Association of the company to the General Assembly. However, the Board of Directors may not enter into loans for periods in excess of three years, sell or pledge the property of the company or the store, mortgage the company’s movable and immovable properties, discharge the debtors of the company from their obligations, make compromise or agree on arbitration, unless such acts are authorized under the Articles of Association of the company or are within the object of the company by nature. In other than these two events, such acts require to issue a special decision by the General Assembly.

 

Article 155- Representation of the Company

1- The Chairman of the company shall be the legal representative of the company before the Courts and in its relationships with third parties, unless the Articles of Association of the company provides that its General Manager shall be the representative of the company before the Courts and in its relationships with third parties.

2- The Chairman may delegate another member of the Board with some of his powers.

3- The Board of Directors may not delegate to the Chairman all the powers of the Board in an absolute manner.

 

Article 156- Meetings of the Board

1- The Board of Directors shall meet at least 4 (four) times a year under an invitation by the Chairman, unless the Articles of Association of the company provides for more meetings, in accordance with the procedures as provided by the Articles of Association of the company. However, the Chairman may invite the Board to convene whenever at least two members so demand, unless the Articles of Association of the company provides otherwise.

 

 

2- The meetings of the Board shall be held at the head office of the company, unless the Board deems otherwise. The Board meeting shall not be valid unless all the members are invited to the meeting and their majority are present in person, unless the Articles of Association of the company permit to participate in the meetings by such modern means of technology as approved by the Authority.

 

Article 157- Board Decisions

1- The Board Decisions shall be passed by the majority votes and in the event of parity, the Chairman shall have a casting vote.

2- Notwithstanding the provision of Clause 2 of Article 156 of this Law, the Board of Directors may issue some Decisions by circulation, in accordance with such terms and conditions as decided by the Authority in this respect.

 

Article 158- Absent Member of the Board

If a member of the Board is absent from the meetings of the Board for three successive meetings or five intermittent meetings within the period of the Board without any excuse acceptable to the board, such member shall be deemed as resigned.

 

Article 159- Minutes of the Board of Directors Meetings

The Secretary of the Board of Directors shall prepare the minutes of the meetings. Such minutes shall be signed by the present members and the Secretary. The member who disagrees to a decision passed by the Board may enter his objection in the minutes of the meeting. The signatories to such minutes shall be liable for the validity of the statements contained therein. The Authority shall lay the required conditions in this respect.

 

Article 160- Delegation of a Member to attend the Board Meetings

1- A member of the Board may not delegate another member to attend the Board meetings unless the Articles of Association of the company so permits, provided that the delegated member represents only one other member and that the number of the members present in person is at least 50% of the number of the Board members.

2- No voting by correspondence shall be allowed. A delegated member shall vote on behalf of the absent member as determined in the deed of proxy.

 

Article 161- Liability of the Company for the Acts of the Board of Directors

The company shall be bound by the acts of the Board of Directors within the limits of its powers. The company shall also be liable for the damage due to unlawful acts by the Chairman and members of the Board of the company.

 

Article 162- Liability of the Board of Directors

1- The members of the Board shall be liable towards the company, the shareholders and the third parties for all acts of fraud, misuse of power, and violation of the provisions of this Law or the Articles of Association of the company or an error in management. Every provision to the contrary shall be invalid.

2- Liability as provided for in Clause 1 of this Article shall apply to all the members of the Board if the error arises from a Decision passed unanimously by them. However, in the event of the decision passed by the majority, the members who object to such decision shall not be held liable provided they state their objection in writing in the minutes of the meeting. Absence from a meeting at which the decision has been passed shall not be deemed a reason to be relieved from liability unless it is proven that the absent member was not aware of the Decision or could not object to it upon becoming aware thereof.

 

Article 163- Acts of the Member of the Board

The company shall be bound by the acts of the member of the Board as against a bona fide third party, even if it is found thereafter that the procedures of election or appointment of the member are invalid or the applicable conditions for such election or appointment are not available.

 

Article 164- Acts harmful to the Interests of the Company

1- If one or more shareholders holding at least 5% of the shares of the company deem that the affairs of the company are or have been conducted to the detriment of the interests of all or any of the shareholders, or that the company intends to do or omit to do any act that may cause damage to a shareholder, such shareholder shall

 

 

have the right to provide an application to the Authority, together with the supporting documents to issue such relevant decisions at its own discretion.

2- If the Authority rejects the application or the application is not considered within 30 (thirty) working days, the shareholder or shareholders may resort to the Competent Court within 10 (ten) days from the date of rejecting the application or the expiry of such period, as the case may be.

3- The Authority may resort to the Competent Court if it believes that the affairs of the company are or have been conducted to the detriment of the interests of all or any of the shareholders, or that the company intends to do or omit to do any act that may cause damage to the shareholders.

4- The competent Court shall hear the lawsuit filed by the shareholder or the Authority as a matter of urgency in both events as set forth in Clauses 2 and 3 of this Article. The Court may appoint one or more experts to provide a report on one or more transactions of management. The Court may issue a judgment to annul the act or omission to act, the subject matter of the application, or to continue to do any act that it omitted to do.

 

Article 165- Lawsuits by the Company

The company may file a liability lawsuit against the Board of Directors due to the errors that may result in damages to all the shareholders, under a decision issued by the General Assembly to appoint a representative of the company to initiate the lawsuit in the name of the company.

Article 166- Lawsuits by the Shareholder

Every shareholder may file the liability lawsuit individually against the Board of Directors if not filed by the company, provided that the error may cause private damage to him as a shareholder and that such shareholder shall notify the company of his intention to file the lawsuit. Every provision in the Articles of Association of the company to the contrary shall be invalid.

 

Article 167- Liability Nonsuit

Any decision passed by the General Assembly to relieve the Board of Directors shall not prevent the filing of the liability lawsuit against the Board of Directors due to the errors committed by them during the performance of their duties. If the act giving rise to liability has been presented to and approved by the General Assembly, the liability lawsuit shall be forfeited upon the expiry of one year from the date of such meeting. However, if the act ascribed to the members of the Board is a criminal act, the lawsuit shall not be forfeited until the public case is forfeited.

 

Article 168- Dismissal of the Members of the Board

1- The General Assembly may dismiss all or any of the members of the Board, even if the Articles of Association of the company provides otherwise. In such event, the General Assembly shall elect new members of the Board instead of those dismissed, subject to the provisions of Articles 143 and 144 of this Law. The Authority and the Competent Authority shall be notified of such election.

2- If a member of the Board is dismissed, he shall not be re-nominated for the membership before three years from the date of issuing the dismissal decision.

 

Article 169- Remuneration of the Members of the Board

1-The Articles of Association shall state the method of calculating the remuneration of the members of the Board, provided that it shall not exceed (10 %) of the net profits of the ending financial year after deducting all the depreciations and reserves.

2- The penalties imposed on the company due to contraventions by the Board of Directors of the Law or the Articles  of  Association  of  the  company  during  the  ending  financial  year  shall  be  deducted  from  the remuneration of the Board of Directors. The General Assembly may resolve not to deduct such penalties if it finds that such penalties are not due to omission or error by the Board of Directors.

 

Article 170- Invalid Decisions

1- Without prejudice to the rights of bona fide third party, any Decision passed in contravention of the provisions of this Law, the Memorandum of Association or Articles of Association of the company or for or against a certain class of shareholders or to bring a special benefit to the related parties or others without consideration of the interest of the company shall be invalid.

2- Ruling such invalidation shall make the Decision void ab initio in respect of all the shareholders.

3- The Board of Directors shall publish the invalidation judgment in two daily local newspapers, one of them issued in Arabic.

 

 

4- The invalidation lawsuit shall be time barred after 60 (sixty) days from the date of issuance of the contested decision. Filing the lawsuit shall not prevent the execution of the decision, unless the Competent Court orders otherwise.

 

 

Chapter 3

General Assemblies of the Public Joint Stock Company

 

Article 171- Convening the General Assembly

1- The General Assembly of the shareholders shall be convened under an invitation by the Board of Directors at least once every year, within four months following the end of the financial year, at such time and place as determined in the Articles of Association of the company. The Board may invite the General Assembly to convene as the Board may deem fit.

2- If the Board of Directors omits to send an invitation to convene the General Assembly in such events where this Law requires to be invited, the auditor shall dispatch such invitation. This shall also apply as necessary. In such event, the auditor shall lay and publish the agenda.

 

Article 172- Notification of the Invitation to the Meeting of the General Assembly

Other than the meeting of the General Assembly adjourned due to absence of quorum in accordance with the provisions of Article 183 of this Law, invitation shall, subject to the consent of the Authority, be sent to convene the General Assembly to all the shareholders by a notice in two daily local newspapers, one of them issued in Arabic, under registered letters or according to the method of notification as determined by the Authority in this respect, at least 15 (fifteen) days prior to the scheduled date to hold the General Assembly. The notification of the invitation shall include the agenda. A copy of the papers of the invitation shall be sent to the Authority and the competent authority.

 

Article 173- Valid Notification of the Invitation of the Shareholders

If the invitation to hold the meeting of the General Assembly is notified prior to the date of the meeting within a period less than the period as determined in Article 172 of this Law, the invitation to convene the General Assembly shall be valid with the consent of shareholders representing 95% of the capital of the company.

 

Article 174- Request by the Shareholders to invite the General Assembly

1- The Board of Directors of the company shall invite the General Assembly to convene whenever one or more shareholders hold shares representing at least 20% of the capital, unless the Articles of Association of the company determines a less percentage, provided that invitation to hold the General Assembly is addressed within 5 (five) days from the date of the application. The General Assembly shall be convened within at least 15 (fifteen) days, but not exceeding 30 (thirty) days from the date of invitation to the meeting.

2- The application as set out in Clause 1 of this Article shall be kept at the head office of the company and state the purpose of the meeting and the issues to be discussed. The applicant for the meeting shall provide a certificate from the financial market where the shares of the company are listed, confirming the prohibition of disposition of  the  shares  held  by the  applicant on his  demand  until  holding the  meeting of  the  General Assembly.

 

Article 175- Request by the Auditor to Invite the General Assembly

The Board of Directors shall invite the General Assembly to convene on demand by the auditor. If the Board fails to send the invitation within 5 (five) days from the date of the application, the auditor shall send the invitation. The General Assembly shall be convened within at least 15 (fifteen) days, but not exceeding 30 (thirty) days from the date of invitation to the meeting.

Article 176- Request by the Authority to Invite the General Assembly

1- The Authority may demand the Chairman of the company or his representative to address an invitation to hold the General Assembly in any of the following events:

  1. Upon expiry of 30 days from the date as determined in Article 171 of this Law without inviting the General

Assembly to convene;

  1. b. If the number of the Directors is less than the minimum limit required for the quorum of the meeting;
  2. If the Authority finds at any time that there any contravention of Law or the Articles of Association or that any error in the management of the company has occurred; or 
  1. d. If one or more shareholders holding at least 20% of the capital in the event where the Board of Directors of the company fails to respond in accordance with the provision of Article 174 of this Law.

2- If the Chairman of the company or his representative fails to invite the General Assembly to convene in any of the above events within 5 (five) days from the date of demand by the

Authority, the Authority shall give the invitation to the meeting at the expenses of the company.

 

Article 177- Competence of the Annual General Assembly

In particular, the annual General Assembly of the company shall consider the following issues and take decisions in their regard:

1- The report prepared by the Board of Directors in respect of the activity and the financial position of the company during the year, the auditor’s report and the report of the Internal Shariah Control Committee, if the company conducts its activity in accordance with the provisions of the Islamic Shariah, and their ratification;

2- The company’s balance sheet and the profits and losses account;

3- Election of the members of the Board if necessary;

4-  If  the  company conducts its  activity in  accordance with  the  provisions of  the  Islamic  Shariah, the appointment of the members of the Internal Shariah Control Committee;

5- Appointment of the auditors and determination of their remuneration;

6- The proposals of the Board of Directors concerning the distribution of profits, whether in cash or bonus shares;

7-  The  proposals  of  the  Board  of  Directors  concerning  the  remuneration  of  the  members  and  the determination of such remuneration;

8- Discharge or dismissal of the members of the Board and filing the liability lawsuit against them, as the case may be; and

9- Discharge or dismissal of the auditors and filing the liability lawsuit against them, as the case may be.

 

Article 178- Right to Attend the General Assembly

1- Every shareholder shall have the right to attend the General Assembly and shall have a number of votes equal to the number of his shares. Any shareholder that has the right to attend the General Assembly may delegate any person elected by such shareholder, other than a member of the Board, under a special written proxy. A proxy of a number of shareholders shall not hold in this capacity over 5% of the capital of the company. Shareholders who are minors or interdicted shall be represented by their legal representatives.

2- A corporate person may delegate one of its representatives or those in charge of its management under a decision passed by its Board of Directors or any similar entity to represent such corporate person in any General Assembly of the company. The delegated person shall have the powers as determined under the delegation decision.

 

Article 179- Control of the Meetings of the General Assembly

1- The Authority and the Competent Authority may send one or more controllers representing each of them to attend the meetings of the General Assembly of companies without having any right to vote. The presence of such controllers shall be stated in the minutes of meeting of the General Assembly.

2- The Central Bank or the Insurance Authority may send one or more controllers to attend the meetings of the General Assembly of companies licensed by the Central Bank and the Insurance Authority, without having the right to vote. The presence of such controllers shall be stated in the minutes of meeting of the General Assembly.

 

Article 180- Powers of the General Assembly

1- Subject to the provisions of this Law and the Decisions issued hereunder and the Articles of Association of the company, the General Assembly shall have the power to consider all the issues in connection with the company. The General Assembly may not consider other than the issues listed in the agenda.

2- Notwithstanding the provisions of Clause 1 of this Article, the General Assembly may consider the serious incidents revealed during the meeting or if the Authority or a number of shareholders holding at least 10% of the capital of the company demand, before commencing the discussion of the agenda of the General Assembly, to list certain issues in the agenda, the Board of Directors shall respond to such request, failing which the General Assembly shall have the right to resolve to discuss such issues. The Authority may issue a decision determining the applicable conditions to list a new issue on the agenda of the General Assembly.

 

 

Article 181- Record of the Meetings of the General Assembly

The shareholders shall enter their names in a special record prepared for such purpose at the head office of the company prior to the scheduled time to hold the meeting of the General Assembly. Such record shall include the names of the shareholders, the number of the shares represented by them and the names of the holders of such shares, and the instrument of proxy shall be provided. The shareholder shall be given a card to attend the meeting, in which the number of the votes held by such shareholder in person or by proxy is stated.

 

Article 182- Chairman of the General Assembly

The Chairman or, in his absence, the Deputy Chairman or, if both the Chairman and the

Deputy Chairman are absent, any shareholder so elected by the other shareholders by way of voting by any means as determined by the General Assembly, shall chair the General Assembly. The General Assembly shall also appoint a secretary for the meeting. If the General Assembly considers any issue related to the Chairman of the meeting, whoever he is, the General Assembly shall elect from the number of the shareholders a Chairman of the meeting during the discussion of this issue.

 

Article 183- Quorum at the Meeting of the General Assembly

Unless the Articles of Association determine a higher percentage, quorum at a meeting of the General Assembly shall be present if shareholders holding or representing by proxy at least 50% of the capital of the company are present at the meeting. If quorum is not present at the first meeting, the General Assembly shall be adjourned to another meeting to be held after at least 5 (five) days, but not exceeding 15 (fifteen) days from the date of the first meeting. Quorum at the adjourned meeting shall be present irrespective of the number of the present shareholders.

 

Article 184- Withdrawal from the Meeting of the General Assembly

If any of the shareholders or their representatives withdraws from the meeting of the General Assembly upon the presence of quorum thereat, such withdrawal shall not, irrespective of the number of the shares withdrawing, affect the validity of the General Assembly, provided that the decisions shall be passed by the applicable majority in this Law.

Article 185- Discussion of the Agenda of the General Assembly

1- Every shareholder attending the General Assembly shall be entitled to discuss the matters listed on the agenda of the General Assembly and to address questions to the members of the Board and the auditor. The members of the Board and the auditor shall reply to the questions to the extent that may not cause damage to the interest of the company.

2- A shareholder may appeal to the General Assembly if the shareholder sees that the reply to his question is insufficient. The Decision by the General Assembly shall be enforceable. Every provision in the Articles of Association of the company to the contrary shall be invalid.

 

Article 186- Voting on the Decisions of the General Assembly

1- Subject to the provision of Article 146 of this Law, voting on the General Assembly Decisions shall be conducted by the method as determined by the Articles of Association of the company. However, voting shall be secret if related to the election, dismissal or accountability of the Directors.

2- Subject to the provision of Article 178 of this Law, the members of the Board shall not participate in voting on the Decisions of the General Assembly for their discharge from liability for their management or in connection with a special benefit of the members of the Board, a conflict of interests, or a dispute between them and the company, and in the event of a corporate person, the share of such corporate person shall be excluded.

 

Article 187- Minutes of Meetings of the General Assembly

1- Minutes of the General Assembly shall be issued. The minutes shall include the names of the shareholders present in person or those represented, the number of the shares held by them, in person or by proxy, the votes held by them, the Decisions passed, the number of the votes for or against such Decisions and an adequate summary of the discussions at the meeting.

2- The minutes of the meeting of the General Assembly shall be regularly entered after each meeting in a special register, to be kept in accordance with the conditions determined by a Decision of the Authority. The minutes shall be signed by the Chairman and the secretary of the meeting, the canvasser and the auditor. The persons who sign the minutes of meetings shall be responsible for the authenticity of their contents.

 

Article 188- Decisions of the General Assembly

 

 

1- The Decisions of the General Assembly shall be passed by the majority of the shares represented at the meeting, or such higher majority as determined by the Articles of Association of the company.

2- The Decisions passed by the General Assembly in accordance with the provisions of this Law and the Articles of Association of the company shall be binding to all the shareholders, whether they were present or absent from the meeting at which the Decisions have been passed and whether they agreed or objected to such Decisions.

 

Article 189- Execution of the Decisions of the General Assembly

The Chairman of the company shall execute the decisions of the General Assembly and notify a copy thereof to the Authority and the Financial Market where the shares of the company are listed and to the competent authority in accordance with such conditions laid by the Authority in this respect.

 

Article 190- Inspection of the Minutes of the General Assembly

1- The minutes of meetings of the General Assembly of the shareholders shall be kept at the head office of the company. Any shareholder may inspect such minutes free of charge within the applicable working hours.

2- If the company rejects or fails to comply with the provisions of this Article, the Authority may issue an order to inspect the contents of the minutes in respect of the discussions of the General Assemblies. The Authority may issue an order to the company to deliver the required copies to the person or persons who demand such copies.

 

Article 191- Suspension of a Decision by the General Assembly

1- On demand by the shareholders who hold a percentage of at least 5% of the shares of the company, the Authority may issue a Decision to suspend the execution of the decisions passed by the General Assembly of the company to the detriment of the shareholders or in favour of a certain class of the shareholders or to bring a special benefit to the members of the Board or others whenever the grounds of the request are serious.

2- A request to suspend the execution of the Decisions of the General Assembly shall not be acceptable upon the expiry of 3 (three) working days from the date of such Decisions.

3- The concerned parties shall file the lawsuit to annul such Decisions before the Competent Court and notify the Authority with a copy thereof within 5 (five) days from the date of the Decision suspending the execution of the Decisions of the General Assembly, otherwise the suspension shall be void ab initio.

4- The Court shall consider the lawsuit to annul the Decisions of the General Assembly, and may order, as a matter of urgency, to suspend the execution of the Decision by the Authority on demand by the adversary until the conclusion of the merits of the lawsuit.

 

Article 192- Non-Election of the Board of Directors or Appointment of the Auditor

1- Subject to the provisions of Article 143 of this Law, if the General Assembly of the company fails to take a Decision in connection with the election of the members of the Board at two successive meetings although quorum is present, the Authority shall refer the issue to its Chairman, upon consultation with the Competent Authority and the entities supervising the activity conducted by the company in the State, to appoint a temporary Board of Directors of the company for not more than one financial year. At the end of the financial year, the temporary Board of Directors shall invite the General Assembly of the company to elect the members of the Board. If such General Assembly fails to elect the members of the Board, the Authority shall refer the issue to its Chairman, upon consultation with the competent authority and the entities supervising the activity conducted by the company in the State, to take the appropriate Decision, including the dissolution of the company.

2- If the General Assembly of the company fails to take a Decision in connection with the appointment of its auditor at its annual meeting in accordance with the provisions of Articles 243 and 244 of this Law despite the presence of quorum, the Authority may appoint the auditor of the company for one financial year and determine his fees.

Chapter 4

Capital of a Public Joint Stock Company

 

Article 193- Issued and Authorized Capital of the Company

1- The minimum limit of the issued capital of a Public Joint Stock Company is AED thirty million. This limit may be increased under a Decision by the Cabinet on a suggestion made by the Chairman of the Authority.

2-  The  Articles of  Association of  the  company may determine as  authorized capital such  amount  not exceeding the double of the issued capital, in accordance with such terms and conditions laid by the Authority in this respect.

 

 

Article 194- Increase of the Company’s Capital

1- The capital of the company may be increased upon payment of its issued capital in full.

2- The authorized capital may be increased with the consent of the Authority under a special Decision issued by the General Assembly.

3- The Board of Directors may increase the issued capital of the company within the limit of the authorized capital previously approved by the General Assembly, in accordance with such terms laid by the Authority in this respect.

4- The Decision to increase the issued capital shall state the amount of such increase and the price of the new shares issued.

5- If the increase of the capital of the company involves contributions in kind, the provisions related to valuation of the contributions in kind as contained in this Law.

6- If there is no authorized capital, the decision to increase the issued capital may delegate the Board of Directors of the company to determine the date to execute the increase Decision, provided that such date shall not exceed one year from the date of issue thereof, otherwise the Decision shall be deemed void ab initio.

 

Article 195- Methods to Increase the Capital of the Company

The capital of the company may be increased by any of the following ways:

1- Issue of new shares;

2- Capitalize the reserve; or

3- Convert the bonds or Sukuk issued by the company into shares.

 

Article 196- Issue Premium

1- The shares from increase of the capital of the company shall be issued under a nominal value equal to the nominal value of the original shares. However, the company may under a special Decision, subject to the consent of the Authority, resolve to add a premium to the nominal value of the share and determine the amount of such premium. Such premium shall be added to the legal reserve; even if the reserve exceeds half the capital thereby.

2- The Board of Directors of the Authority shall issue a Decision determining the method of calculation of the premium.

 

Article 197- Pre-emption Right

1- Subject to the provisions of Articles 223, 224, 225, 226 and 283 of this Law, the shareholders shall have priority to subscribe to the new shares. Any provision to the contrary in the Articles of Association of the company or the Decision to increase the capital shall be void.

2- A shareholder may sell the pre-emption right to another shareholder or to third parties with a material consideration. The Board of Directors of the Authority shall issue the Decision regulating the conditions and procedures of selling the pre-emption right.

 

Article 198- Subscription to New Shares

1- Subscription to new shares shall be governed by the rules of subscription to the original shares.

2- The Board of Directors shall publish a  summary for the pre-emption rights issue accredited by the Authority in two local daily newspapers, one of them published in Arabic, to notify the shareholders of their pre-emption right in subscription to the new shares.

 

Articles 199- Distribution of the New Shares

1- New shares shall be distributed to the shareholders who provide applications for subscription to shares, according to the number of shares held by them provided that this does not exceed the requests of each.

2- Subject to Clause 2 of Article 197, the balance shares shall be distributed to the shareholders who provide applications for subscription to shares in excess of the number of shares held by them. Any balance shares thereafter shall be offered for public subscription, in accordance with such conditions as determined by the Authority.

 

Article 200- Capitalization of the Reserve

Under a special Decision, the reserve may be merged in the capital of the company by creating bonus shares to be distributed to the shareholders pro rata to the shares held by each of them, or by the increase of the

 

 

nominal value of the shares pro rata to the percentage of urgent increase in the capital. The shareholders shall not bear any financial obligation as a result thereof.

 

Article 201- Conversion of Deeds or Sukuk to Shares

Bonds or Sukuk shall be converted to shares according to the prospectus and conditions as approved by the

Authority. The approval by the Central Bank shall be obtained in the event of companies licensed by it.

 

Article 202- Decrease of the Capital of the Company

The capital of the company may not be decreased without the consent of the Authority and issuing a special decision upon hearing the report of the auditor. The capital may be decreased in either of the following cases:

1- If it exceeds the needs of the company;

2- The company suffers such loss that cannot be compensated by future profits.

 

Article 203- Methods to Decrease the Capital of the Company

The capital may be decreased by any of the following methods:

1- To decrease the nominal value of the shares, either by refunding part of its value to the shareholders or to discharge them from the value of the share or any part thereof;

2- To decrease the value of the shares by the cancellation of part of such value equal to the loss incurred by the company;

3- To forfeit a number of shares equal to the amount of the capital decided to be decreased; or

4- To purchase a number of shares equal to the part proposed to be decreased and forfeited.

 

Article 204- Procedures to Decrease the Capital of the Company

1- The Board of Directors shall, upon decrease of its capital:

  1. Publish an announcement in two daily local newspapers, one of them issued in Arabic, 30 (thirty) days prior to the date scheduled to decrease the capital, provided that the announcement includes the amount of the capital before and after the decrease, the value of every share and the effective date of the decrease. The creditors shall provide to the company such documents in support of their debts within 30 (thirty) days from the date of publication of the announcement.
  2. b. That the majority of the Board members of the company at least execute an undertaking on the determined effective date of the decrease, stating that the company is able to pay its debts on that date, or that all the creditors of the company have agreed to the decr
  3. If, upon execution of the undertaking by the majority of the Board members of the company that the company is capable to repay its debts on that date, any of the creditors of the company objects to the decrease and it is established that the company is unable to repay the debts, the members executing the undertaking shall be jointly liable as between themselves to repay the debt of the objecting creditor, to be calculated on the basis of the assets, rights and obligations of the company if it were liquidated on the day preceding the date of execution of the undertaking.
  4. d. Any other requirements as decided by the Authority.

2- If the decrease of the capital is by the repayment of part of the nominal value of the shares to the shareholders or discharge of the shareholders to the extent unpaid of the value of the shares or any part thereof, such decrease shall not be effective against the creditors who provided their demands on the date as set forth in Clause 1/ a of this Article, unless such creditors have received their due debts or obtained the securities adequate for the repayment of the debts not due by then.

 

Article 205- The Decision to Increase or Decrease the Capital of the Company

The Board of Directors of the company shall, within 5 (five) working days from the effective date of the decision to increase or decrease its capital, enter such decision with the Authority, the competent authority and the registrar.

Chapter 5

Shares, Bonds and Sukuk

 

Article 206- Rights Attached to Shares

1- Unless otherwise provided for in this Law, the shareholders of the company shall be equal in the rights attached to the shares. The company shall not issue different classes of shares.

 

 

2- Notwithstanding the provision of Clause 1 of this Article, the Cabinet may, on proposal by the Chairman of the Authority, issue a Decision determining other classes of shares and the conditions of issuing the shares, the rights and obligations arising from such shares and the rules and procedures regulating them.

3- A shareholder may not demand to recover its contribution to the capital of the company.

 

Article 207- Nominal Value of the Shares

1- The nominal value of the share in a company may not be less than one Dirham, and shall not exceed one hundred (100) Dirhams.

2- Shares may be issued by payment of at least one quarter of their nominal value, provided that the balance value of such shares shall be paid within no later than 3 (three) years from the date of registration of the company with the competent authority.

3- The company may, under a special Decision and with the consent of the Authority, divide the nominal value of its shares into a smaller value, provided that the new value shall be at least one Dirham per share.

 

Article 208- Nature of the Shares and Dividends

The shares shall be nominal. No shares to bearer shall be issued. The shares shall be negotiable. The Articles of Association of the company shall determine the form and provisions of dividends, which may be nominal or to  bearer. At all  events, dividends shall be  negotiable. Any condition restricting free negotiation of  such dividends shall be void ab intio.

 

Article 209- Disposal of the Shares

The method and conditions of disposal of shares shall be determined in accordance with the provisions of this Law, the Regulations and Decisions issued by the Authority and the Articles of Association of the company, provided that the disposal of the shares shall not lead to the decrease of the share of the UAE nationals in the capital of the company below the applicable limit according to this Law.

 

Article 210- Mortgage of the Shares

Shares may be mortgaged by the delivery thereof to the creditor or its representative upon following the applicable procedures in this respect. A mortgagee creditor shall collect the profits and use the rights attached to the share, unless agreed otherwise in the mortgage contract.

 

Article 211- Transfer of Title to the Shares Listed in the Markets

Title to the shares of the company listed in any of the financial markets licensed in the State shall be transferred in accordance with the applicable procedures of the Authority and the Financial Market where such shares are listed.

 

Article 212- Transfer of the Title to Shares Not Listed in the Markets

1- The title of the shares not listed in the markets shall be transferred by the entry of such transfer in a register held by the company. Such entry shall be marked on the share and the transfer shall be effective against the company or third parties only from the date of such entry.

2- However, the company may not enter the disposal of the shares in the following events:

  1. If such disposal is in violation of the provisions of this Law or the Decisions issued in execution hereof or the Articles of Association of the company;
  2. b. If the shares are mortgaged or attached by an order of the Court;
  3. If the certificate of shares is lost and the company did not issue a substitute thereof;
  4. d. If the company holds a debt on the shares, the company may suspend the registration of the transfer of the shares, unless its debt is repaid; and
  5. If any of the contracting parties lacks capacity, is incapacitated or declares its bankruptcy or insolvency.

 

Article 213- Transfer of Title to Shares by Inheritance, Will or Court Judgment

1- If title to a share is transferred by way of inheritance or will, the heir or legatee shall demand to enter the transfer of title in the register of shares.

2- If the transfer of title is under an applicable court judgment, such transfer shall be entered in the share register in accordance with this judgment. The transferee shall use the rights derived from such transfer from the date of such registration.

 

 

Article 214- No Division of the Share

A share shall be indivisible. If title to a share is vested in several heirs or a share is held by several persons, they shall choose one of their number as their representative against the company. Such persons shall be jointly liable for the obligations arising from the title to the share. If such holders fail to agree on the choice of their representative, any of them may resort to the competent Court to appoint such representative.

 

Article 215- Limitations to Trading in the Shares of the Founders

1- The shares in cash or in kind of the founders may not be traded prior to the publication of the balance sheet and the profit and loss account for at least two financial years commencing from the date of listing the company in the Financial Market in the State or from the date of registration of the company in the Commercial Register with the competent authority in the event of companies excluded from listing. Such shares shall be marked as founders' shares. The provisions of this Article shall apply to the subscriptions by the founders in the event of increase of the capital prior to the expiry of the prohibition period.

2- During the prohibition period, such shares may be mortgaged or transferred by sale by a founder to another founder or by the heirs of a founder in the event of his death to third parties or by the bankruptcy trustee of a founder to third parties or under a final judgment.

3- The Board of Directors of the Authority may issue a Decision to expand the period of prohibition as set forth in Clause 1 of this Article, without exceeding three years.

 

Article 216- Attachment of Shares

The funds of the company may not be attached due to debts payable by a shareholder. However, the creditors of the shareholder may attach its shares and the profits derived from them. A share shall be marked in the share register and in the Financial Market where the shares of the company are listed.

 

Article 217- Non Payment by a Shareholder of the Balance Value of the Share

1- If a shareholder in a Joint Stock Company fails to pay the installment of the share value on the maturity date, the Board of Directors may notify the shareholder to pay the outstanding installment under a registered letter. If the shareholder fails to make payment within 30 days, the company may sell the share at a public auction or according to the Decisions issued by the Authority.

2-  The  company  shall  apply  the  sale  proceeds  to  settle  any  overdue  installments  and  expenses  as compensation for the delay and shall pay the balance amount to the holder of the share. The company shall have the right of recourse against the shareholder from his own funds if the sale proceeds cannot settle the rights of the company, and the shares shall be entered in the share register in the name of the purchaser.

 

Article 218- Discharge of Shareholders

1- The company may not discharge a shareholder from his obligation to pay the value of a share. Such obligation may not be set off against any rights of the shareholder from the company.

2- Any of the creditors of the company may file a lawsuit against the shareholder to demand him to pay the value of the share.

 

Article 219- Company Share Buyback

1- The company may not mortgage its own shares or purchase such shares unless the purchase is intended to decrease the capital or for the redemption of the shares. In such event, such shares shall have no vote in the deliberations of the General Assembly or a share of the profits.

2- Notwithstanding the provision of Clause 1 of this Article, the company that has been incorporated as a Public Joint Stock Company for at least two financial years may purchase a percentage of its shares not exceeding 10% of the shares representing its capital for the purpose of resale thereof in accordance with the terms and conditions as resolved by the Board of Directors of the Authority. The shares purchased for the purpose of resale thereof shall have no vote in the deliberations of the General Assembly or a share of the profits until the resale of such shares.

 

Article 220- Omitting the Entry of Particulars in the Shares Register

If the name of any person or the number of the shares held by such person is omitted to be entered in the register of the shareholders of the company, or in the event of any unjustified failure or delay to enter the incident that any person is not a shareholder, the affected person or any shareholder of the company may demand the company to amend the particulars of the register, and the company may reject the request for amendment. In such event, the affected person may resort to the Court.

 

 

Article 221- Shareholder Rights

1- A shareholder in a Joint Stock Company shall have:

  1. All the rights attached to the share, particularly the right to obtain its share of the profits and assets of the company upon its liquidation, to attend the meetings of the General Assembly and voting on its Decisions, all in accordance with such terms and conditions as provided by this Law and the Articles of Association of the company.
  2. b. The right to inspect the books and documents of the company and any documents or instruments in connection with a deal made by the company by entering into the deal with a related party by authorization from the Board of  Directors or  under  a  decision of  the  General  Assembly or  as  provided by the  Articles of Association of the company in this resp

2- The Court may demand the company to provide specific information to the shareholder not in conflict with the interests of the company.

3- Any Decision issued by the Board of Directors or the General Assembly of the company that may prejudice the rights of the shareholder derived from the provisions of this Law or the Articles of Association of the company or requires to increase the obligations of such shareholder shall be invalid.

 

Article 222- Financial Aid to the Shareholder

The company or any of its subsidiaries may not provide financial aid to any shareholder to enable the shareholder to hold any shares, bonds or Sukuk issued by the company. In particular, financial aid shall include:

1- To provide loans;

2- To provide gifts or donations;

3- To provide the assets of the company as security; and

4- To provide a security or guarantee of the obligations of another person.

 

Article 223- Contribution by the Strategic Partner

1- Notwithstanding the provisions of Articles 195, 197, 198 and 199 of this Law, the company may under a special Decision increase its capital by the entry of a strategic partner. The Board of Directors of the Authority shall  issue  a  Decision  determining the  conditions  and  procedures  of  entry  of  the  strategic  partner  as  a shareholder of the company.

2- The Board of Directors of the company shall present to the General Assembly a study showing the benefits to be achieved by the company from the entry of the strategic partner as a shareholder in the company.

3- The Authority and the competent authority may reject the contribution by the strategic partner in the company if such contribution may contravene the applicable Laws or Regulations of the State or adversely affect the public interest.

 

Article 224- Conditions of Contribution by the Strategic Partner

1- The Board of Directors of the company may, within three months from the date of the Decision to increase the capital of the company to enter a strategic partner as a shareholder of the company, offer all or any of the new shares for subscription by the strategic partner without offering such shares to the shareholders, under the following conditions:

  1. That the activity of the strategic partner is similar or supplementary to the activity of the company and leads to a real benefit thereof; and
  2. b. That the strategic partner has issued two balance sheets for at least two financial year This shall not apply to the Federal Government or the Local Government in the State.

2- If the Board of Directors fails to offer the new shares to the strategic partner within the three-month period as set forth in Clause 1 of this Article or if the strategic partner fails to subscribe to such shares within a period of no later than 30 (thirty) days from the date of offering the shares to such partner, the decision by the General Assembly to increase the capital of the company to join a strategic partner shall be deemed void ab initio.

 

Article 225- Capitalization of Cash Debts

1- Notwithstanding the provisions of Articles 195, 197, 198 and 199 of this Law, the company may under a special Decision increase its capital by the capitalization of its cash debts.

2- The Board of Directors of the company shall present to the General Assembly a study showing the necessity to capitalize the cash debts.

 

 

3- It shall be deemed as cash debts in accordance with the provisions of this Law, the debts payable to the Federal Government, the Local Governments and the public authorities and establishments in the State, the banks and the financing companies.

4- The Board of Directors of the Authority shall issue a Decision determining the conditions and procedures to capitalize the cash debts.

 

Article 226- Encouraging the Personnel of the Company to hold Shares

1- Notwithstanding the provisions of Articles 195, 197, 198 and 199 of this Law, the company may under a special Decision increase its capital by the application of the scheme to encourage the personnel of the company to hold shares.

2- The Board of Directors of the company shall present to the General Assembly a scheme to encourage the personnel of the company to hold shares.

3- The Board members of the company may not participate in the scheme to encourage the personnel of the company to hold shares.

4- The Board of Directors of the Authority may issue a Decision including the conditions and mechanism to implement a scheme to encourage the personnel of the company to hold shares.

 

Article 227- Share Certificates

1- Unless, after its incorporation, the company has listed its shares in any of the financial markets in the State, the Board of Directors shall, within three months from the date of registration of the company in the Commercial Register  with  the  competent  authority, substitute  the  notices to  allocate  the  shares  by  share certificates.

2-  Share  certificates shall  be  signed  by at  least  two  members  of  the  Board,  stating  the  name  of  the shareholder, the number of the shares subscribed thereto, the method of payment of their value, the part paid of such value, the date of payment, the serial number of the certificate, the numbers of the shares held by the shareholder, the issued and authorized capital of the company, the head office and the term of the company and the date of the Decision authorizing the incorporation of the company. Such certificates shall substitute the shares.

3- If the value of the share is installed, the obligation of the company to deliver the share certificate shall be adjourned until the payment of the value of the shares in full. The shares representing contributions in kind may not be delivered until the transfer of title to such contributions in kind to the company.

 

Article 228- Loss or Destruction of Shares, Bonds or Sukuk Certificates

1- If a share, bond or Sukuk certificate is lost or destroyed, the holder of the certificate in whose name the certificate is registered may demand a new certificate instead of the lost or destroyed certificate. The owner shall publish the numbers of the lost or destroyed certificates and their quantity in two daily local newspapers, one of them issued in Arabic.

2- If no objection is received by the company within thirty days from the date of publication, the company shall give to the holder of the former certificate a new certificate, stating that it is in lieu of the lost or destroyed certificate. Such new certificate shall entitle its holder all the rights and impose on him all the obligations connected with the lost or destroyed certificate.

 

Article 229-Issuing Bonds or Sukuk

1- The company may issue negotiable bonds or Sukuk, whether they can be converted into shares of the company for equivalent values per each issuance.

2- The bond or deed shall remain nominal until the payment of its value in full.

3- Bonds or Sukuk shall not be converted into shares, unless the prospectus so provides. If conversion is decided, the holder of the bond or Sukuk alone shall have the right to accept the conversion or to collect the nominal value of the bond or Sukuk.

4- Bonds or Sukuk issued in connection with a single loan, giving equal rights to the holders of such bonds or deeds. Any condition to the contrary shall be invalid.

5-  Bonds,  Sukuk  and  other  debt  instruments  shall  be  issued  in  accordance  with  such  conditions  and procedures determined under a regulation issued by the Central Bank and the Authority.

 

Article 230- Conditions to Issue Bonds or Sukuk

Subject to the provision of Clause 5 of Article 229 of this Law, bonds or Sukuk shall be issued only upon:

 

 

1- Issuing a special Decision by the General Assembly. The General Assembly may authorize the Board of Directors to determine a date to issue bonds or Sukuk, provided that such date shall not exceed one year from the date of approval of the authorization.

2- Collection of the capital in full from the shareholders and the publication of the balance sheet and the profits and losses account for at least one financial year, unless the issue is secured by the State or a bank operating in the State.

 

Article 231- Increase or Decrease of the Capital after issuing Bonds or Sukuk

Upon issuing a special Decision to issue bonds or Sukuk convertible to shares and until the date of such conversion or payment of their value, the company may not decrease its capital or increase the rate decided to be distributed as a minimum limit of profits to the shareholders. In the event of decrease of the capital of the company due to the losses by way or forfeiture of a number of shares or the decrease of the nominal value of the share, the capital shall be decreased, as if the holders of the bonds were shareholders.

 

Article 232- Profits of the Bonds or Sukuk upon their Conversion into Shares

Shares received by the holders bonds or Sukuk converted into shares in the capital of the company shall have a share of the profits resolved to be distributed for the financial year during which the conversion is made, from the date of such conversion until the end of the financial year.

 

Article 233- Date of Payment of Bonds or Sukuk

The company may not advance or delay the date of payment of bonds or Sukuk unless otherwise provided by the Decision issuing the bonds or Sukuk and the prospectus. However, if the company is dissolved other than for merger, the holders of bonds or Sukuk may demand to pay the value of their bonds or Sukuk prior to their maturity date. The company may also offer such payment to them. In either event, if payment is made, interests shall not be payable for the balance period of the loan.

 

Article 234- Rights of the Holders of Bonds or Sukuk

The rights of the holders of bonds or Sukuk issued by the company, which are not offered for public subscription in the agreement creating such bonds or Sukuk shall be determined. Such agreement shall also include procedures needed from the holders of bonds or Sukuk to hold meetings and appointing any committees, voting rights and all the other related issues and the conditions of converting them to shares in the company if they were convertible .The Authority may issue a Decision regulating the rights of the holders of bonds or Sukuk.

Chapter 6

Finance of the Public Joint Stock Company

 

Article 235- Preparing the Accounts of the Financial Year

1- The Board of Directors in each Joint Stock Company shall prepare accounts of every financial year including the balance sheet as per the last day of the financial year and a statement of the profits and losses account.

2- The accounts of the company shall be prepared in accordance with the International Accounting Practices and Standards. Such accounts shall give a true and fair view of the profits or losses of the company for the financial year and the affairs of the company at the end of the financial year and shall comply with any other requirements in this Law and the relevant Decisions issued by the Authority.

3- The financial statements shall be approved by the execution thereof by the members of the Board or by the

Chairman and the auditor.

 

Article 236- Auditing the Accounts of the Financial Year

1- The accounts of the financial year of the company shall be reviewed by the auditor, who shall prepare a report thereon. Such accounts shall be approved by the Board of Directors and presented to the General Assembly together with the auditor's report, within 4 (four) months from the end of the financial year of the company.

2- The company shall provide the Authority and the competent authority a copy of the accounts and the auditor's report within seven days from the date of convening the General Assembly that the accounts and the auditor's report have been provided thereto.

 

Article 237- Accounting Practices and Standards

 

 

The International Accounting Practices and Standards shall be applied by the companies upon preparing their periodical and annual accounts and determining the dividends.

 

Article 238- Publication of the Balance Sheet of the Company

The balance sheet and the profits and losses account shall be published in two daily local newspapers, one of them issued in Arabic, within 15 (fifteen) days from the date of approval thereof by the General Assembly. A copy of the balance sheet and the profit and loss account shall be provided to the Authority and the competent authority.

 

Article 239- Legal Reserve

1- 10% of the net profits of the company shall be set aside every year and allocated to create a legal reserve, unless the Articles of Association of the company provide for a higher percentage.

2- The General Assembly may suspend such deduction whenever the legal reserve reaches 50% of the paid capital of the company, unless the Articles of Association of the company provide for a higher percentage.

3- The legal reserve may not be distributed to the shareholders. However, the legal reserve in excess of 50% of the capital may be distributed as profits to the shareholders in accordance with the percentage determined in the Article of Association in the years in which the company does not make sufficient net profits to distribute such rate.

 

Article 240- Voluntary Reserve

The  Articles of  Association of  any Joint  Stock  Company may provide for  the  allocation of  a  certain percentage of the net profits to create a voluntary reserve to be allocated for the purposes as provided by the Articles of Association. The voluntary reserve may not be used for other purposes except under a Decision by the General Assembly of the company.

 

Article 241- Distribution of Profits

1- The General Assembly of the company shall determine such percentage of the net profits to be distributed to the shareholders after deducting the legal reserve and the optional reserve.

2- A shareholder shall be entitled to his share of the profits in accordance with the conditions as determined under a Decision by the Authority.

3- Subject to Clause 1 of this Article, the Articles of Association of the company may provide for the distribution of annual, biannual or quarterly profits.

 

Article 242- Joint Liability of the Companies

Upon the expiry of two financial years from the date of its incorporation and making profits, the company may, under a special Decision, give contributions. Such contributions may not exceed 2% of the average net profits of the company during two financial years preceding the year of contribution, provided that:

1- Such contributions shall be used for the purposes of serving the society;

2- To clearly state the beneficiary from such contributions in the auditor's report and the balance sheet of the company.

Chapter 7

Auditors of Public Joint Stock Companies

 

Article 243- Appointment of the Company’s Auditor

1- Every Public Joint Stock Company shall have one or more auditors nominated by the Board of Directors and approved by the General Assembly.

2- The General Assembly may appoint one or more auditors for one renewable year, provided that such term shall not exceed three successive years, so that the auditor shall undertake his duties until the end of the next annual General Assembly. The Board of Directors of the company may not be authorized for such purpose. The founders of the company may, at the time of incorporation, appoint one or more auditors as approved by the Authority to perform its duties until the convention of the first General Assembly.

3- The General Assembly shall determine the fees of the auditor. The Board of Directors may not be delegated to this effect, provided that such fees are reflected in the accounts of the company.

 

Article 244- Conditions of the Company’s Auditor

 

 

The Board of Directors of the Authority shall issue a Decision of the conditions to approve the auditors of

Public Joint Stock Companies. In particular, the auditor shall meet the following conditions:

1- To be licensed to practice the profession in the State and to have experience in auditing Joint Stock

Companies for at least five years;

2- His name shall be approved by the Authority;

3- Not to combine between the profession of auditor and the capacity of a shareholder in the company, and to occupy the office of member of the Board or any technical, administrative or executive office therein;

4- Not to be a partner or agent of any of the founders of the company or any of its Board members or a relative of any of them up to the second grade.

5- That the name of the auditor is approved by the Central Bank in case of companies licensed by the latter. f. The Authority may require providing a professional insurance by the auditor.

 

Article 245- Audit Report

1- Subject to the provisions of the Federal Law regulating the profession of auditors, as amended, the auditor shall issue a report on the accounts audited by him. If the company has more than one auditor, they shall distribute the duties among themselves and each of them shall provide a separate report on the issues of the task assigned to such auditor, and then all the auditors shall prepare a common report for which they shall be jointly liable. The auditor shall state his name on the report and sign it.

2- The report shall state whether the accounts have been prepared in accordance with the provisions of this

Law and whether the accounts give a fair view of the financial position of the company.

 

Article 246- Duties of the Company’s Auditor

1- The auditor shall audit the accounts of the company, inspect the balance sheet and the profits and losses account, review the transactions of the company with the related parties and ensure the application of the provisions of this Law and the Articles of Association of the company. The auditor shall provide a report as a result of such inspection to the General Assembly and dispatch a copy of the report to the Authority and the competent authority.

2- Upon preparing his report, the auditor shall confirm the following:

  1. The extent of validity of the accounting records kept by the company.
  2. b. The extent of agreement between the records of the company and the accounting record

3- The auditor shall review all the records, papers and other documents of the company. The auditor may require such explanations as the auditor may deem necessary to perform his duties. The auditor may also verify the assets, rights and obligations of the company.

4- If no facilities are provided to the auditor to perform his duties, the auditor shall state this in his report to the Board of Directors. If the Board of Directors fails to facilitate the task of the auditor, the Board of Directors shall send a copy of the report to the Authority.

5- The subsidiary and its auditor shall provide such information and explanations as demanded by the auditor of the holding company for the purposes of audit.

 

Article 247- Confidentiality of the Particulars of the Company

The auditor shall keep the confidentiality of the particulars of the company inspected by him by way of performing the duties of his job with the company. The auditor may not disclose such particulars to third parties or to the shareholders other than during the General Assembly, failing which the auditor shall be dismissed, without prejudice to the civil and penal liability, as applicable.

 

Article 248- Prohibition of Trading in Securities by the Auditor

The auditor and his personnel may not purchase the securities of the company whose accounts are audited by him or sell such securities directly or indirectly or provide any consultancies to any person in connection with such securities, failing which the auditor shall be dismissed, without prejudice to the civil and penal liability, as applicable.

 

Article 249- Notification of Crimes and Contraventions

1- The auditor shall notify the Authority in connection with any violations of the provisions of this Law or any contraventions that constitute a crime detected upon performance of his duties at the company, within 10 (ten) days from the date of detecting the contravention.

 

 

2- If the auditor contravenes the provision of Clause 1 of this Article, the Authority may suspend the auditor from auditing the accounts of Public Joint Stock Companies for no later than one year, strike out the approval of the Authority or refer the auditor to the Public Prosecution, as applicable, and at all events, to notify the Ministry and the competent authority in this respect.

 

Article 250- Contents of the Auditor's Report

The auditor shall read his report at the General Assembly of the company when the balance sheet of the company is considered, provided that his report shall state whether the auditor has inspected the information that he deems necessary for the satisfactory performance of his duties and prepared the accounts in accordance with the provisions of this Law, and that such accounts reflect, in particular, the following issues:

1- The position of the company at the end of the financial year, particularly the balance sheet of the company;

2- The profits and losses account;

3- That the company keeps regular accounts;

4- A statement whether the company has purchased any shares or stocks during the financial year;

5- That the statements in the Board report are identical to the books and records of the company;

6- A statement of the deals of conflicts of interest and the financial transactions made between the company and any of the related parties and the procedures taken in that respect;

7- To state whether, within the limit of the information made available to the auditor, any contraventions of the provisions of this Law or the Articles of Association of the company have occurred during the financial year so as to adversely affect the activity or financial position of the company, whether such contraventions still exist or not and whether there are any penalties imposed on the company due to such contraventions;

8- To state whether there are penalties imposed on the company due to contraventions of this Law or the Articles of Association of the company during the ending financial year and whether such contraventions still exist; and

9- In the events of accounts of any group, to state the financial position at the end of the financial year and the profits and losses account of the holding company and its subsidiaries, including the consolidated statements as a whole, in connection with the relevant parties in the holding company.

 

Article 251- Dismissal of the Company’s Auditor

1- The company may, under a Decision taken by its General Assembly, dismiss the auditor.

2- The Chairman shall notify the Authority of the Decision dismissing the auditor and the reasons of such dismissal, within a period not exceeding 7 (seven) days from the date of the dismissal decision.

 

Article 252- Resignation of the Company’s Auditor

1- The auditor may resign from his task under a written notice given to the company and the Authority. Such notice shall be deemed as termination of his task as an auditor of the company from the date of giving the notice or on any later date as determined in the notice.

2- The auditor that resigns for any reason shall file with the company and the Authority a statement of the reasons for his resignation. The Board of Directors of the company shall invite the General Assembly to convene within 10 (ten) days from the date of filing for resignation to consider the reasons for resignation and to appoint another auditor and to determine the fees of such substitute auditor.

 

Article 253- Liability of the Company’s Auditor

The auditor shall be liable to the company for the audits and the validity of the statements in his report and to indemnify the damage incurred by the company due to his acts upon performing his job. If there is more than one auditor, each of them shall be liable for his own fault that caused the damage.

 

Article 254- Liability Lawsuit against the Company’s Auditor

The liability lawsuit against the auditor of the company shall be time barred upon the expiry of one year from the date of holding the General Assembly at which the auditor's report is read. If the act attributed to the auditor constitutes a crime, the liability lawsuit shall not be time barred until the public lawsuit is time barred.

Title 5

Private Joint Stock Companies

 

Article 255- Definition of the Private Joint Stock Company

 

 

1- A Private Joint Stock Company is a company where the number of the shareholders is at least two shareholders, but not exceeding two hundred shareholders. The capital of the company shall be divided into shares of the same nominal value, to be paid in full without offering any shares for public subscription, by the execution of the Memorandum of Association and compliance with the provisions of this Law in connection with registration and incorporation. A shareholder shall be liable only to the extent of his share in the capital of the company.

2- It shall be excluded from the maximum limit of the number of shareholders as set forth in Clause 1 of this

Article:

  1. Private Joint Stock Companies existing at the time of issue of this Law. Such companies may not increase the number of their shareholders after the enforcement of the provisions of this Law; and
  2. b. The transfer of title of a shareholder by inheritance or a final Court judgmen

3- Notwithstanding the minimum limit of the number of shareholders as set forth in Clause 1 of this Article, a single legal person may incorporate and hold a Private Joint Stock Company. The holder of the company’s capital shall only be liable for its obligations to the extent of the capital as set out in its Memorandum of Association. The name of the company shall be followed by the expression "Sole Proprietorship - Private Joint Stock". The provisions of the Private Joint Stock Company as set forth in this Law shall apply to such owner to the extent not in conflict with the nature of such company.

 

Article 256- Company’s Capital

1- The issued capital of the company shall not be less than AED 5,000,000 (AED five million) and shall be paid in full. Such limit may be amended under a Decision by the Cabinet on a proposal made by the Minister.

2- Private Joint Stock Companies existing and registered with the Ministry prior to the effective date of this

Law shall be excluded from the minimum limit of capital as set forth in Clause 1 of this Article.

 

Article 257- Founders Committee

1- The founders shall choose from among them a committee consisting of at least two members to complete the incorporation procedures and to register the company with the relevant authorities. The Founders Committee shall be fully liable for the accuracy, validity and completion of all the documents, studies and reports provided to  the  relevant  authorities in  connection with  the  incorporation, licensing and  registration process of  the company. In the event of a sole proprietorship, the founder shall act as the committee.

2- The Founders Committee may delegate one of its members or a third party to follow and complete the incorporation procedures with the Ministry and the Competent Authority according to such conditions laid by the Authority in this respect.

 

Article 258- Application for Incorporation provided to the Competent Authority

1- The Founders Committee shall provide the application for incorporation to the Competent Authority, together with the Memorandum of Association and Articles of Association of the company, the economic feasibility of the project to be established by the company and the proposed timetable to perform such project.

2- The Competent Authority shall consider the application for incorporation and issue its initial approval of the application or reject it and shall notify the Founders Committee within 10 (ten) working days from the date of submittal of the application if the application is satisfactory or from the date of completion of the required documents or statements. The omission by the Competent Authority to issue its initial approval during such period shall be deemed as rejection of the application for incorporation.

3- The Founders Committee may appeal, before the Competent Court, the Decision in rejection issued by the Competent Authority within 30 (thirty) days from the date of its notification of the Decision of rejection or from the expiry date of the period as set out in Clause 2 of this Article if no such Decision is issued.

 

Article 259- Application for Incorporation provided to the Ministry

1- The Founders Committee shall provide to  the Ministry the application for incorporation as initially approved  by  the  Competent  Authority,  together  with  the  Memorandum  of  Association  and  Articles  of Association of the company, the economic feasibility of the project to be established by the company, the proposed timetable to perform such project, and any approvals by the relevant authorities in connection with the application, according to the applicable requirements of the Ministry.

2- The Ministry shall consider the application for incorporation and notify the Founders Committee of its notes on the application for incorporation and its documents within 10 (ten) working days from the date of submitting the application or from the date of submittal of the assessment of the contributions in kind, if any. The Founders Committee shall complete any deficiency or make such amendments as the Ministry may deem

 

 

necessary to complete the application for incorporation, within 10 (ten) working days from the date of the notice, failing which the

Ministry may consider this as a waiver of the application for incorporation.

3- The Ministry shall dispatch a copy of the application and its documents to the Competent Authority within

5 (five) working days from the date of completing the application to be considered. Then, the Ministry shall meet with the Competent Authority within 5 (five) working days from the date of sending a copy the application to the Ministry. If the Competent Authority has any notes thereon, the Ministry shall notify the Founders Committee thereof and complete the deficiency or make such amendments as the Competent Authority may require to complete the application for incorporation within 5 (five) working days from the date of notifying the Founders  Committee,  failing  which  the  Ministry  may  consider  this  as  a  waiver  of  the  application  for

incorporation.

4- The competent authority shall issue a decision to grant the licence after the consent of the Ministry.

 

Article 260- Secretariat of the Shares Register

1- Private Joint Stock Companies shall have a register where the names of the shareholders, the number of shares held by them and any dispositions of the shares are entered. Such register shall be delivered to the shares register secretariat.

2- The Authority shall, in coordination with the Ministry, issue a decision to regulate, supervise and control the work of the share register secretariat.

 

Article 261- Incorporation Certificate

1- The Founders Committee or its representative shall apply to the Ministry to issue the incorporation certificate of the company. The application shall be accompanied with:

  1. A bank certificate confirming that the issued capital of the company has been deposited;
  2. b. The attested Memorandum of Association and Articles of Association of the company;
  3. A copy of the Decision by the competent authority as initial licensing approval;
  4. d. A statement of the names of the Board members of the company and written acknowledgement by them that their membership is not in conflict with the provisions of this Law and the decisions issued hereunder;
  5. A statement of the names of the members of the Internal Shariah Control Committee and the Shariah

Controller if the company conducts its business in accordance with the provisions of the Islamic Shariah;

  1. f. A certificate  confirming  that  the  register  of  shareholders  has  been  delivered  to  the  shares  register secretariat; and
  2. g. Any other documents as required by the Ministry.

2- In the event of completion of the documents as set forth in Clause 1 of this Article, the Ministry shall issue a  certificate of incorporation of the company within 2 (two) working days from the date of submitting a complete application.

3- The registration of the company with the Ministry shall be published in accordance with such conditions laid by the Minister in this respect at the expense of the company.

 

Article 262- Commercial Licence of the Company

1- The Board of Directors of the company shall within 5 (five) working days from the date of issue by the

Ministry of the incorporation certificate make its registration procedures before the Competent Authority.

2- The Competent Authority shall enter the company in the Commercial Register and issue a commercial licence for the company within 3 (three) working days from the date of completion of the documents and payment of the fees.

 

Article 263- Shares Transfer

1- The title of the shares shall be transferred by the entry of such disposal with the shares register secretariat. Such disposal shall be effective against the company or third parties only from the date of such entry with the shares register secretariat.

2- A private joint stock company shall not enter any waiver of its shares other than with the shares register secretariat.

3- The shares register secretariat may reject to enter the waiver of shares in any of the events as provided by

Clause 2 of Article 212 of this Law.

 

 

Article 264- Limitations to the Transfer of Shares

1- The shares of a private joint stock company may not be transferred prior to the publication of the balance sheet and the profits and losses account for at least one financial year commencing from the date of registration of the company in the Commercial Register with the competent authority. The provisions of this Article shall apply in the event of increase of the capital prior to the expiry of the prohibition period.

2- During the prohibition period, such shares may be mortgaged or transferred by sale by a shareholder to another shareholder, or by the heirs of a shareholder in the event of his death to third parties or by the bankruptcy trustee of a shareholder to third parties or under a final judgment.

3- The Minister may issue a Decision to expand or shorten the period of prohibition as set forth in Clause 1 of this Article, to be not less than six months and not exceeding two years.

 

Article 265- Application of the Provisions concerning Public Joint Stock Companies

Other than the provisions of public subscription, unless specifically provided, all the provisions of this Law concerning public Joint Stock Companies shall apply to the Private Joint Stock Companies, and the term "Ministry" shall replace the term "Authority" wherever it may appear therein.

Title 6

Companies with Special Structure

Chapter 1

Holding Companies

 

Article 266- Definition of the Holding Company

1- A holding company is a Joint Stock Company or a Limited Liability Company that establishes subsidiaries inside the State or abroad or has control on existing companies, by holding shares or stocks enabling such company to control the management of the subsidiary and to have influence on the Decisions of the subsidiary.

2- The name of the company followed by the expression “Holding Company” shall appear on all the papers,

advertisements and other documents issued by the Holding Company.

 

Article 267- Objectives of the Holding Company

1- The objectives of a Holding Company shall be limited to the following:

  1. To hold shares or stocks in Joint Stock Companies and Limited Liability Companies;
  2. b. To provide loans, guarantees and finance to its subsidiaries;
  3. To acquire the movables and real estates required to commence its activity;
  4. d. To manage its subsidiaries; and
  5. To acquire industrial property rights from patents on invention, trademarks, industrial marks, royalties and other rights in kind and to lease the same to its subsidiaries or to other companies.

2- Holding Companies may not conduct their activities other than through their subsidiaries.

 

Article 268- Accounts Records to be kept by Subsidiaries

A Holding Company shall take the required procedures to ensure that the subsidiaries keep the required accounting records to enable the Board members or the Board of Directors of the Holding Company to confirm that the financial statements and the profits and losses account are compliant with the provisions of this Law.

 

Article 269- Subsidiaries

1- A company shall be considered as a subsidiary of a Holding Company in any of the following events:

  1. If the Holding Company holds dominating and controlling shares in the capital of the company and controls the formation of its Board of Directors; or
  2. b. If the company is a subsidiary of a subsidiary.

2- A subsidiary shall not be a shareholder of its own Holding Company. Any allocation or transfer of any shares in a Holding Company to any of its subsidiaries shall be invalid.

3- If a company that holds shares or stocks in a Holding Company becomes a subsidiary of such Holding

Company, such company shall continue to be a shareholder in the Holding Company, provided that:

  1. The subsidiary shall be deprived from the right to vote at the meetings of the Board of Directors of the

Holding Company or the meetings of its General Assembly; and

 

 

  1. b. The subsidiary shall dispose of its shares in the Holding Company within 12 (twelve) months from the date of acquisition of the subsidiary by the Holding Company.

 

Article 270- Financial Year of the Holding Company

The Holding Company shall, at the end of every financial year, prepare a consolidated balance sheet, the profits and losses account and the cash flows of the Holding Company and all its subsidiaries and shall present them to the General Assembly, together with the relevant notes and statements, in accordance with the internationally accepted accounting and audit practices and standards.

Chapter 2

Investment Funds

 

Article 271- Formation of Investment Funds

1- Investment funds shall be established according to the conditions and controls stated in a decision issued by the Authority in this regard.

2- The licenses of investment funds issued by the Central Bank before the entry into effect of this Law shall be excluded from Clause 1 of this Article.

 

Article 272- Legal Personality of the Fund

The investment fund shall have an independent legal personality, legal entity and financial liability. Title 7

Conversion, Merger and Appropriation of Companies

Chapter 1

Conversion of Companies

 

Article 273- Rules of Conversion

Any  company  may  be  converted  from  one  form  into  another,  while  keeping  its  legal  personality,  in accordance with the provisions of this Law and the Regulations and Decisions regulating the conversion of companies  as  issued  by  the  Ministry  or  the  Authority,  each  according  to  its  powers,  in  this  respect  in coordination with the competent authority.

 

Article 274-Conversion of the Company into another Legal Form

1- Subject to the provision of Article 292 of this Law, a Public Joint Stock Company may be converted to a

Private Joint Stock Company if the following conditions are met:

  1. The approval of the Common Committee formed, under a Decision by the Minister, from the Ministry of Economy, the Securities & Commodities Authority and the competent authority, to consider the request for conversion into a Private Joint Stock Company;
  2. b. The expiry of 5 audited financial years from the date of registration in the Commercial Register as a Public Joint Stock Company. In the event of its conversion into a Private Joint Stock Company, the company may not apply to be converted into a Public Joint Stock Company once again until the expiry of 5 audited financial years from the date of registration in the Commercial Register as a Private Joint Stock Company; and
  3. Issuing a special Decision by the General Assembly in approval of the conversion of the majority shares representing 90% of the capital of the company.

2- Other than Public Joint Stock Company, a company may convert into a Joint Liability Company, a Simple Commandite Company,  a  Limited  Liability company or  a  Private  Joint  Stock  Company if  the  following conditions are met:

  1. Issuing a Decision in accordance with the applicable conditions to amend the Memorandum of Association and the Articles of Association of the company.
  2. b. The expiry of a period of at least two audited financial years of the company from the date of its registration in the Commercial Register.
  3. The unanimous consent of the partners in the event of conversion into a Joint Liability Company.
  4. d. The completion of the applicable incorporation and registration procedures to the proposed form of conversion.

 

Article 275-Conversion to a Public Joint Stock Company

 

 

Subject to the provisions of Article 273 of this Law, it is conditional for the conversion of a company into a

Public Joint Stock Company that:

1- The value of the issued shares or stocks has been paid in full or the shares of the partners have been paid in full;

2- A period of at least two audited financial years has expired;

3- The company made net operational profits distributable to the shareholders or partners, from the activity for which the company is established, for an average of 10% of the capital, within the two financial years preceding the application for conversion.

4- That a special Decision or any similar action is issued to convert the company into a Public Joint Stock

Company.

5- Any other conditions under a Decision by the Authority’s Board of Directors.

 

Article 276- Documents of Conversion into a Public Joint Stock Company

1- Any company may be converted into a Public Joint Stock Company, under an application on such form prepared by the Authority for such purpose, executed by the authorized signatory of the company.

2- The following documents shall be attached to the application:

  1. The amended Memorandum of Association and Articles of Association of the company;
  2. b. The Decision by the General Assembly of the relevant company or anybody in lieu thereof passed by the applicable majority to amend the Memorandum of Association or Articles of Association of the company, including the approval of any necessary increase of the capital and the conversion of the company into a Public Joint Stock Company. The Decision by the partners or shareholders for conversion shall include any changes of the Memorandum of Association or Articles of Association of the company as required in the circumstances, including the change of the name of the company;
  3. The approval by the Ministry and the competent authority for the conversion of the company into a Public

Joint Stock Company;

  1. d. A balance sheet of the company prepared within six months prior to the date of the application for conversion, in addition to a copy of a reservation free report from the auditor of the company regarding such balance sheet;
  2. A written statement by the auditors of the company, confirming that the net assets of the company on the date of preparing the balance sheet are not less than its required share capital and undistributed reserves.
  3. f. An assessment of the contributions in kind of the company, prepared in accordance with the provisions of

Article 118 of this Law.

  1. g. An acknowledgement by the managers or the Board of Directors, as the case may be, confirming that the following conditions are met:

- That a Decision is issued by the General Assembly of the company or any similar body in lieu thereof approving the conversion is issued and that all the other requirements under this Law are satisfied; and

- That there is no adverse material change of the financial position of the company during the period from the date of the relevant balance sheet and the date of application for conversion; and

  1. h. Any other documents as required by the Authority for conversion.

 

Article 277- Announcement of the Conversion Decision

1- The company shall announce the conversion Decision in two daily local newspapers issued in the State, one of them issued in Arabic, within 5 (five) working days from the date of the conversion Decision and shall notify the shareholders / partners and the creditors by registered letters.

2- The announcement and the notice to the shareholders / partners and the creditors as set forth in Clause 1 of this Article shall include the right of any of the creditors of the company and the holders of loan bonds or Sukuk, and any concerned shareholders or partners may object to the conversion at the head office of the company.

 

Article 278- Objection to the Conversion Decision

1- A partner or shareholder that objects to the conversion Decision may withdraw from the company and recover the value of his stocks or shares, by an application in writing to the company within 15 (fifteen) days from the date of completion of the publication of the conversion Decision. The value of the shares or stocks shall be paid according to their market or book value on the date of conversion, whichever is higher.

 

 

2- The shareholders / partners, the creditors of the company and the holders of loan bonds or Sukuk and any concerned party may object before the company within 30 (thirty) days from the date of the notice of the conversion Decision and a copy of the objection shall be delivered to the Ministry or the Authority, as the case may be, and the competent authority, provided that the objecting party states the subject matter of its objection and the grounds of such objection and such damage that such conversion may specifically cause to the objecting party, as alleged by such party.

3- If the company fails to settle the objections for any reason whatsoever within no later than 30 (thirty) days from the date of delivery of a copy of the objection to the Ministry or the Authority, as the case may be, and the competent authority, the objecting party may resort to the Competent Court.

4- The conversion Decision shall remain suspended unless the objection is waived or the Court rejects the objection under a final judgment, or the company pays the debt if current or provides sufficient securities if deferred.

5- If the conversion Decision is not objected thereto within the period as provided by Clause 2 of this Article, such omission shall be deemed as implicit acceptance of the conversion.

 

Article 279- Sale of Part of the Shares of the Company upon its Conversion

1- Subject to the provisions of Article 117/2 of this Law, a company proposing to be converted into a Public Joint Stock Company may sell by way of public subscription 30% maximum of its capital after assessment in accordance with the provisions of Article 118 of this Law.

2- The Chairman of the Authority shall issue a Decision regulating the terms and conditions for the sale of part of the shares of the company upon its conversion.

 

Article 280- Notification of the Conversion Decision

Subject to the provisions of Article 274 of this Law, the company shall provide a copy of the Decision for conversion to the Ministry or, as applicable, the Authority and the competent authority, together with:

1- A statement of the assets, rights and obligations of the company and the assessed value of such assets, rights and obligations; and

2- A statement of the settlement of the objection or the expiry of its term.

 

Article 281- The Results of Conversion

1- Upon conversion, every partner or shareholder shall have a number of shares or stocks in the new company equal to the value of his shares or stocks in the company prior to conversion. If the value of the shares or stocks of a partner is less than the applicable minimum limit of the nominal value of the new shares or stocks, the difference shall be completed in cash, failing which such partner shall be deemed to have withdrawn from the company. The value of his shares or stocks shall be paid according to their market or book value on the date of conversion, whichever is higher.

2- After its conversion and re-registration under its new legal form, the company shall maintain its corporate personality and its rights and obligations prior to such conversion. Such conversion shall not discharge the acting partners from the obligations of the company prior to the conversion, unless the creditors agree thereto in writing.

 

Article 282- Entry of the Conversion

1- After approval of the conversion Decision by the Ministry or, as applicable, the Authority and the competent authority, the particulars kept by the Registrar shall be amended;

2- The competent authority shall enter the company in the Commercial Register and issue a commercial licence according to the new form of the company. The conversion shall be effective from the date of issuing the commercial licence.

Chapter 2

Merger

 

Article 283- Merger

1- Notwithstanding the provisions of Articles 197, 198 and 199, the company may, under a special Decision issued by the General Assembly or any similar body, even during the liquidation process, merge with another company by a contract to be made between the merged companies in this respect.

2- Subject to the applicable rules of the Central Bank, in the event of merger of the companies licensed by the latter, the Minister shall issue the Decision regulating the methods, conditions and procedures of merger in

 

 

respect of all companies, except the Public Joint Stock Companies, as the Board of Directors of the Authority issues the Decision concerning such companies.

 

Article 284- Merger Contract

The merger contract shall determine the conditions and method of merger. In particular, it shall determine the following issues:

1- The  Memorandum of  Association and Articles of  Association of  the merging company or  the  new company after merger;

2- The name and address of each member of the Board or the proposed manager of the merging company or the new company.

3- The method of conversion of the shares or stocks of the merged companies to shares or stocks of the merging company or the new company.

 

Article 285- Presenting the Merger Contract to the General Assembly

1- The Board members or Managers of every merged and merging company shall present the draft merger contract to the General Assembly or any other similar body for approval by the applicable majority for the amendment of the Memorandum of Association of the company.

2- The invitation of the General Assembly to convene to consider the merger:

  1. Shall be accompanied by a copy or summary of the merger contract;
  2. b. The contract shall clearly state the right of any one or more shareholders holding at least 20% of the capital of the company, who objected to the merger, to appeal the merger before the Competent Court within 30 (thirty) days from the date of approval of the merger contract by the General Assembly or any other similar body.

 

Article 286- Merger of Holding Companies and Subsidiaries

1- A Holding Company may merge with one or more of the companies held by such Holding Company in full as a single company without entry into a merger contract. Merger shall be made under a special Decision by such companies, passed by the applicable majority to amend the Memorandum of Association of each company.

2- Two or more companies fully held by a Holding Company may merge into a single company without entry into a merger contract.

3- In the event of merger where the merged company is a Holding Company, the provisions of merger in this Law and the Decisions issued in execution hereof shall apply to its subsidiaries held in full by the Holding Company.

 

Article 287- Refunding the Value of Shares

1- Except for the Joint Stock companies, the partners who object to the merger Decision may demand to withdraw from the company and to recover the value of their shares, by providing a written request to the company within 15 (fifteen) working days from the date of the merger Decision.

2- The value of the shares, the subject matter of withdrawal, shall be assessed by mutual agreement. In the event of disagreement on such assessment, the issue shall be referred to a committee formed by the competent authority for this purpose in respect of all companies prior to resorting to the Court.

3- The undisputed value of the shares, the subject matter of the withdrawal, shall be paid to their holders prior to completing the merger procedures and prior to resorting to the committee as set forth in the preceding Clause in connection with the disputed value.

 

Article 288- Notification of the Creditors of the Merger Decision

Every merging company or merged company shall notify its creditors within 10 (ten) working days from the date of approval of the merger by the General Assembly, provided that such notice shall:

1- State that the company intends to merge with one or more companies;

2- Be sent in writing to every creditor of the company to notify him of the merger;

3- Be published in two daily local newspapers issued in the State, provided that one of them is issued in

Arabic; and

4- Provide for the right of any of the creditors of the (merging and merged) company/companies, the holders of loan bonds or Sukuk and any concerned party to object to the merger at the head office of the company, and to deliver to the Ministry or the Authority, as the case may be, a copy of the objection, within 30 (thirty) days from the date of the notice.

 

 

Article 289- Objection to the Merger

1- A creditor that notifies the company of his objection in accordance with the provisions of Clause 4 of Article 288 of this Law, without payment or settlement of his claim by the company within 30 (thirty) days from the date of the notice, may apply to the Competent Court to order to suspend the merger.

2- If, at the time of filing the application to suspend the merger, the Court finds that the merger shall adversely affect the interests of the applicant unlawfully, the Court may order to  suspend the merger, in accordance with any other conditions as it may deem appropriate.

3- Merger shall remain suspended unless the objection is waived, or the Court rejects the objection under a final judgment, or the company pays the debt if current or provides sufficient securities if deferred.

4- If the merger Decision is not objected thereto within the period as provided by Clause 4 of Article 288 of this Law, such omission shall be deemed as implicit acceptance of the merger Decision.

 

Article 290- Approval of the Merger

1- Upon approval of the merger Decision by the Ministry or, as applicable, the Authority, the particulars kept by the Registrar shall be amended;

2- The competent authority shall enter the termination of the merged company and notify the Ministry or the

Authority of the same, as the case may be.

 

Article 291- Results of the Merger

Merger means that the merged company or companies shall cease to be a legal person(s) and that the merging company or the new company shall substitute such company or companies in all their rights and obligations. The merging company shall be a legal successor of the merged company or companies.

Chapter 3

Appropriation

 

Article 292- Appropriation Process

Any person or group of associated persons or related parties desiring to purchase or do any act that may lead to the appropriation of shares or securities convertible to stocks in the capital of a Public Joint Stock Company incorporated in the State, which offered its shares for public subscription or listed in a Financial Market in the State, shall  comply with  the  provisions and  Decisions regulating the  rules,  conditions and  procedures of appropriation issued by the Authority.

 

 

Article 293- Contravention of the Appropriation Rules and Procedures

Without prejudice to the right of the damaged parties to resort to the Court, if it is established that any person contravened the provisions of Article 292 of this Law or the Decision issued by the Authority in this respect, the Authority may take either of the following Decisions:

1- To cancel the purchase or disposition that results in the appropriation process or processes. The contravening party shall be subject to a fine of not less than 20% and not exceeding 100% of the value of appropriation process and Article 339 on the regulation of conciliation shall be applied.

2- To deprive the contravening party from nomination or participation in the Board of Directors of the company whose shares are appropriated and to deprive such party from voting at the meetings of the General Assembly, to the extent of such contravention.

 

Article 294- Publication of the Appropriation Decision

The Appropriation Decision shall be published in two local daily newspapers issued in the State, one of them issued in Arabic, at the expense of the appropriating company.

Title 8

Termination of the Memorandum of Association of the Company

Chapter 1

Reasons for the Termination of Companies

 

Article 295- General Reasons for the Termination of Companies

Subject to the Provisions concerning the termination of companies, a company shall be dissolved for any of the following grounds:

 

 

1- The expiry of the term provided in the Memorandum or the Articles of Association of the company, unless such term is renewed in accordance with the rules provided in either of them;

2- The depletion of the objective for which the company was established;

3- The loss of all or most of the assets of the company, so that the investment of the balance shall not be economically profitable;

4- Merger in accordance with the provisions of this Law;

5- Unanimous consent by the partners to end its term, unless the Memorandum of Association provides that a specific majority is sufficient; or

6- The issuance of a judgment to dissolve the company.

 

Article 296- Dissolution of a Joint Liability and Simple Commandite Company

Without prejudice to the rights of third parties, and subject to the provisions of this Law and the contracts made between the  partners, the  Joint  Liability Company and  the  Simple  Commandite Company shall  be dissolved for any of the following reasons:

1- The death, bankruptcy or insolvency of any of the partners of the company or his loss of legal capacity, unless agreed otherwise in  the  Memorandum of  Association of  the  company. It  may be  provided in  the Memorandum of Association of the company for its continuation with the heirs of the dead partners, even if all or any of the heirs are minors. If the dead partner is an acting partner and the heir is a minor, the minor shall be deemed as a silent partner to the extent of his share from the estate. In such event, the continuity of the company shall not be conditional by issuing a court order to keep the assets of the minor in the company.

2- If the only acting partner withdraws from the Simple Commandite Company; or

3- If, for six months, the Joint Liability Company remains with a single partner and the company fails to adjust its legal position during such period.

 

Article 297- Continuity of the Joint Liability Company or the Simple Commandite Company by Agreement

1- Unless the Memorandum of Association of the Joint Liability Company or the Simple Commandite Company provides for its continuity for the other partners in the event of withdrawal or death of a partner, issuing a judgment of interdiction or declaring his bankruptcy or insolvency, the partners may, within 60 days from the date of occurrence of any of the above events, resolve unanimously to continue in the company as between themselves. The partners shall enter such agreement with the competent authority within the above sixty days.

2- If the company continues with the remaining partners, the share of the withdrawing partner shall be assessed according to the last inventory, unless the Memorandum of Association of the company provides for another method of assessment. Such partner or his heirs shall have no share in the rights of the company upon such withdrawal other than to the extent such rights are derived from transactions made prior to his withdrawal from the company.

 

Article 298- Order to Dissolve a Joint Liability Company or a Simple Commandite Company

1- The Court may rule to dissolve any Joint Liability Company or Simple Commandite Company on demand by a partner if the Court finds serious reasons to justify such dissolution. The Court may also rule to dissolve the company on demand of a partner due to the failure by a partner to perform his undertakings.

2- If the reasons justifying the dissolution arise from acts of a partner, the Court may rule to exit him from the company. In such event, the company shall continue as between the other partners and shall deduct the share of the partner upon its assessment in accordance with the last inventory or by any means that the Court may determine to follow.

3- Any condition to deprive a partner from using the right to dissolve a company by the Court shall be deemed void ab initio.

 

Article 299- Dissolution, Liquidation or Suspension of the Activity of a Sole Proprietorship

1-  The  Sole  Proprietorship  Company shall  be  dissolved  upon  the  death  of  the  natural  person  or  the termination of the legal person that founded it. However, the company shall not be terminated by the death of the natural person in a Sole Proprietorship Company if the heirs choose to continue in the company, upon adjusting its position in accordance with the provisions of this Law. Such heirs shall choose a representative to manage the company on their behalf, within no later than six months from the date of death.

 

 

2- If the owner of a Sole Proprietorship liquidates it or suspends its activity prior to the expiry of its term or the achievement of the objective for which it was established in bad faith, the owner shall be liable for its obligations from his own funds.

 

Article 300- Death or Withdrawal of a Partner in a Limited Liability Company

The death of a partner in a Limited Liability Company or his withdrawal by a judgment of interdiction or declaring his bankruptcy or insolvency shall not lead to its dissolution unless the Memorandum of Association of the company so provides. The share of a partner shall be transferred to his heirs. A legatee shall be considered as an heir.

 

Article 301- Losses of a Limited Liability Company

1- If the losses of a Limited Liability Company reach half the capital, the Managers shall refer to the General Assembly of the partners the issue of dissolution. The dissolution Decision shall be passed by the applicable majority to amend the Memorandum of Association of the company.

2- If the losses reach three quarters of the capital, the partners holding one quarter of the capital may demand to dissolve the company.

 

Article 302- Losses of Joint Stock Company

1- If the losses of a Joint Stock Company reach half of its issued capital, the Board of Directors shall within

30 (thirty) days from the date of disclosure to the Ministry or the Authority, as applicable, of the periodical or annual financial statements invite the General Assembly to take a special Decision to resolve the company prior to the expiry of its term or to continue in the activity of the company.

2- If the Board of Directors fails to invite the General Assembly to convene or if the General Assembly fails to issue a Decision in the matter, each concerned party may file a lawsuit before the Competent Court seeking to dissolve the company.

 

Article 303- Deregistration of the Company

1- Subject to the events as set forth in this Law or in any other Law, if the Ministry, the Authority or the competent authority, as applicable, confirms that the company ceased to conduct its business or that it conducts such business in contravention of the provisions of this Law and the Decisions issued in execution hereof, the Ministry, the Authority or the competent authority, as applicable, shall notify the company that it shall be deregistered within three months from the date of the notice, unless a good reason not to deregister the company is provided.

2- If the Ministry, the Authority or the competent authority, each within its own competence, receives upon the expiry of the three months as set forth in Clause 1 of this Article a confirmation that the company still suspends its business or if the company fails to provide a reasonable justification for such suspension, the issue shall be referred to the competent court to take the required procedure in connection with the liquidation of the company.

3- The liability of the Board members, Managers, Shareholders and Partners of the company deregistered in accordance with the provisions of this Article shall continue as if the company has not been dissolved.

 

Article 304- Notification of the Competent Authority and the Registrar of the Dissolution

1- The entity authorized to manage the company shall notify the competent authority and the Registrar if any of the reasons for the dissolution of the company is available.

2- If the partners agree to dissolve the company, the agreement shall include the method of liquidation and the name of the liquidator.

3- Upon the dissolution or liquidation of the company, no partner or shareholder shall be entitled to a share of its capital until the repayment of its debts.

 

Article 305- Entry of the Dissolution of the Company

The Managers of the company, the Chairman and the Liquidator, as applicable, shall enter the dissolution of the  Commercial  Register  with  the  competent  authority  and  publish  the  dissolution  in  two  daily  local newspapers; one of them is issued in Arabic. The dissolution of the company shall not be effective against third parties until the date of such registration.

 

 

Chapter 2

Liquidation of the Company and the Division of its Assets

 

Article 306- Applicable Provisions in Liquidation

Unless the Memorandum of Association or Articles of Association of the company provides for the method of liquidation or the partners agree otherwise upon the dissolution of the company, the provisions of this Law shall apply to the liquidation of the company.

 

Article 307- Termination of the Authority of the Managers or the Board of Directors

The authority of the Managers or the Board of Directors shall terminate by the dissolution of the company. However, they shall continue to manage the company and they shall be considered as liquidators to third parties until a liquidator is appointed. The management of the company shall remain in existence during the period of liquidation, and to such extent, and within the powers as the liquidator may see required for the liquidation process.

 

Article 308- Appointment of the Liquidator

1- The liquidation shall be conducted by one or more liquidators appointed by the partners or under a Decision by the General Assembly or any other similar body, provided that the liquidator is not an auditor of the company at the time being or has already audited its accounts within five years preceding the appointment.

2- If liquidation is made under a judgment, the competent Court shall point out the method of liquidation and appoint the liquidator. In all events, the task of the liquidator shall not be terminated by the death, declaration of bankruptcy, insolvency or interdiction ordered against the partners, even if the liquidator is appointed by the partners.

 

Article 309- Multiple Liquidators

If there is more than one liquidator, their acts shall not be valid without the unanimous consent of the liquidators, unless the document appointing them provides otherwise. This condition shall not be effective against third parties until the registration thereof in the Commercial Register.

 

Article 310- The Decision appointing the Liquidator

The liquidator shall enter the Decision appointing him and the agreement of the partners or the Decision issued by the General Assembly concerning the method of liquidation or the judgment issued for such purpose in the Commercial Register. The appointment of the liquidator or the method of liquidation shall not be effective against third parties other than from the date of entry thereof in the Commercial Register. The liquidator shall charge such fee as determined in the document appointing him, failing which the Competent Court shall determine such fee.

 

Article 311- Dismissal of the Liquidator

1- The liquidator shall be dismissed in the same way as he has been appointed. Any decision or judgment to dismiss a liquidator shall include the appointment of a new liquidator.

2- The dismissal of a liquidator shall be entered in the Commercial Register and such dismissal shall not be effective against third parties other than from the date of such registration.

 

Article 312- Inventory of the Assets and Liabilities of the Company

The liquidator shall, immediately upon his appointment, shall prepare an inventory of all the assets and liabilities of the company. The managers or the Chairman shall provide to the liquidator the books, documents and assets of the company.

 

Article 313- Preparation of a List of the Assets and Liabilities of the Company

The liquidator shall issue a detailed list of the assets and liabilities of the company and its balance sheet to be signed by the managers of the company or its Chairman. The liquidator shall keep a book to enter the liquidation procedures.

 

Article 314- Duties of the Liquidator

The liquidator shall do everything required to maintain the assets and rights of the company and collect the debts of the company from third parties and shall deposit the amounts collected in a bank for the account of the company under liquidation immediately upon such collection.

 

 

However, the liquidator may not demand the partners to pay the balance value of their shares other than as required for the liquidation process and provided that the partners are treated equally.

 

Article 315- The Liquidator as a Representative of the Company

The liquidator shall do all acts required for the liquidation and in particular to represent the company before the Courts, to pay the company’s debts, to sell the movables and real estates of the company at a public auction or by any other way, unless the document appointing the liquidator provides for a specific way for the sale. However, the liquidator may not sell the assets of the company all at once without permission from the partners or the General Assembly of the company.

 

Article 316- Notification of the Creditors of the Liquidation

All the debts payable by the company shall become immediately outstanding upon its dissolution. The liquidator  shall  notify  all  the  creditors  by  registered  letters  with  acknowledgment  of  receipt  of  the commencement of the liquidation, inviting the creditors to present their claims. The notice shall be published in two local daily newspapers; one of them is issued in Arabic. In all events, the notice of liquidation shall include a period granted to the creditors for at least 45 days from the date of the notice to present their claims.

 

Article 317- Repayment of the Debts of the Company

If the assets of the company are not sufficient to repay all the debts, the liquidator shall pay part of such debts, without prejudice to the rights of preferred creditors. Every debt arising from the liquidation procedures shall be settled from the funds of the company before any other debts.

 

Article 318- Deposit of the Debts in the Court Treasury

If some creditors fail to provide their claims, their debts shall be deposited in the treasury of the Competent Court. Sufficient amounts to pay the share of the disputed debts shall also be deposited, unless the holders of such debts obtain adequate securities or it is resolved to adjourn the division of the assets of the company until the conclusion of the dispute in the said debts.

 

Article 319- New Works of the Company

The liquidator shall not commence new works other than as required to complete previous works. If the liquidator performs any new works not required for liquidation, the liquidator shall be liable from all his funds for such works. If there is more than one liquidator, they shall be jointly liable.

 

Article 320- Term of Liquidation

The liquidator shall complete his task within the period as determined in the document appointing him. If no such period is determined, any partner may refer the issue to the Competent Court to determine the term of liquidation.

Such period may not be extended other than under a Decision by the partners or under a special Decision by the General Assembly, as the case may be, upon inspection of the liquidator's report stating the reasons for not completing the liquidation in due time. If the term of liquidation is determined by the Competent Court, it may not be extended without the consent of the Court.

 

Article 321- Interim Account of the Liquidation Procedures

The liquidator shall provide to all the partners or the General Assembly every three months an interim account of the liquidation procedures. The liquidator shall state any information and statements as required by the partners on the status of liquidation. Within one week from the date of the approval by the General Assembly, the liquidator shall notify the partners to receive their dues within no later than 21 days under an announcement to be published in two daily local newspapers, one of them issued in Arabic.

 

Article 322- Final Account of the Liquidation

1- The liquidator shall, upon completion of liquidation, provide to the partners or the General Assembly or to the Competent Court a final account of the liquidation process. Such process shall be complete upon approval of the final account.

2- The liquidator shall enter the completion of the liquidation in the Commercial Register with the competent authority. The completion of liquidation shall not be effective against third parties other than from the date of such entry. The registration of the company shall be stricken off from the Commercial Register kept with the competent authority.

 

 

Article 323- Acts of the Liquidator

The company shall comply with the liquidator’s acts required for the procedures of liquidation as long as such acts are within the limits of the liquidator’s powers. The liquidator shall not be liable, whatsoever, due to taking such procedures.

 

Article 324- Liability of the Liquidator

The liquidator shall be liable if he mismanages the affairs of the company during the period of liquidation. The liquidator shall also be liable for the damage incurred by third parties due to his professional faults in the liquidation process.

 

Article 325- Division of the Assets of the Company

1- The assets of the company resulting from liquidation shall be divided among all the partners upon payment of the debts. Each partner, upon division, shall obtain an amount equal to his share in the capital, and the rest shall be divided among the partners at the pro rate of their shares in the profits. If a partner fails to appear to collect his share, the liquidator shall deposit such share in the treasury of the Competent Court.

2- If the net funds of the company are not sufficient to pay the shares of the partners in full, the loss shall be distributed among them in accordance with the prescribed rate for the distribution of losses.

 

Article 326- Barring of the Liability Lawsuit by Limitation

1- Upon denial and lack of legitimate excuse, lawsuits against the liquidator on the ground of the liquidation works and lawsuits against the partners, managers or members of the Board or the auditors of the company due to their jobs shall be barred by limitation upon the expiry of three years, unless the Law provides for a shorter period.

2- Such period shall be calculated from the date of entering the completion of liquidation in the Commercial

Register in the former event, and from the date of the act creating liability in the latter event.

3- If the act attributed to any of such persons may be a crime, the liability lawsuit shall not be barred until the public lawsuit is barred.

Title 9

Foreign Companies

 

Article 327- Foreign Companies governed by the Provisions of this Law

Subject to the special agreements made between the Federal Government or the local Government or any entity of either of them and foreign companies, the provisions of this Law, excluding the provisions concerning incorporation, shall apply to the foreign companies that conduct their activities in the State or their place of management is based in the State.

Article 328- Performance by a Foreign Company of its Activity

1- Other than foreign companies licensed to conduct their activities in free zones in the State, foreign companies may not conduct an activity inside the State or set up an office or branch therein without a licence to this effect by the competent authority with the consent of the Ministry. The licence issued shall determine the activity that the company is licensed to conduct.

2- If a foreign company or its office or branch conducts its activity in the State prior to completion of the above procedures in this Law, the persons who conduct such activity shall be personally and jointly liable for such activity.

 

Article 329- Agent of Foreign Company

The agent of a foreign company shall be a UAE national. If the agent is a company, it shall be a UAE company and all its partners shall be UAE nationals. The obligations of the agent to the company and third parties shall be limited to providing such services to the company, without any responsibility or financial obligations in connection with the business or activity of the branch or office of the foreign company inside the State or abroad.

 

Article 330- Registration Procedures of Foreign Companies

1- No foreign company shall conduct its activity in the State unless entered in the Foreign Companies Register with the Ministry in accordance with the provisions of this Law and until the company has obtained the required approvals and licences under the applicable Laws in the State.

 

 

2- The procedures of registration in the Foreign Companies Register and the conditions to prepare the accounts and balance sheets of the branches of foreign companies in the State shall be determined under a Decision by the Minister. The office or branch of a foreign company shall be deemed as its domicile in respect of its activity in the State. The activity to be conducted shall be governed by the provisions of the applicable Laws in the State.

3- The Ministry shall issue such Decisions stating the documents required to be attached to the application for registration. Such Decisions may determine such events and conditions that should be observed for the management and closure of the branch or office of the foreign company.

4- In the event of closure of a branch of a foreign company, the Ministry shall strike off the name of such branch or office from the Foreign Companies Register kept by the Ministry.

 

Article 331- Balance Sheet of the Foreign Company

Other than representative offices, foreign companies or their branches shall have an independent balance sheet and an independent profits and losses account and shall have an auditor registered in the roll of auditors operating in the State. Such foreign companies or branches shall be provide to the competent authority and the Ministry annually a copy of the balance sheet and the final accounts, together with a report by the auditor and a copy of the final accounts to its holding company, if any.

 

Article 332- Representative Offices

1- Foreign companies may establish representative offices whose object is limited to market and production capabilities study without performance of any commercial activity.

2- The Executive Decisions of this Law shall determine the aspects of control exercised by the Ministry and the competent authority on such offices.

Title 10

Control and Inspection of Companies

 

Article 333- Control of Companies

1- Subject to the jurisdictions of the Central Bank, the Ministry, the Authority and the competent authority, as applicable, shall have the right of control of joint stock companies and to inspect the works, books or any papers or records at the branches and subsidiaries of the companies inside the State and abroad or in the custody of the auditor or any other company related to the company, the subject matter of inspection. It may, together with the Inspection Committee, seek the assistance of one or more experts with the required technical and financial experience in the subject matter of inspection, to verify that the company is compliant with the provisions of this Law and the decisions issued in execution hereof and with the Articles of Association of the company. The inspectors may demand, at their own discretion, any information or statements from the Board of Directors, the Executive Officer, the Managers or the Auditors of the company.

2- The Ministry, the Authority or the competent authority, as the case may be, may request to dissolve the company if incorporated or if it performs its activity in violation of the provisions of this Law. The Competent Court shall decide on such request as a matter of urgency.

 

Article 334- Inspection Regulation

The Minister shall issue the regulation for inspection of the private joint stock companies. The Board of Directors of the Authority shall issue the regulation for inspection of Public Joint Stock Companies. The regulation shall determine the inspection procedures and the powers and duties of the inspectors.

 

Article 335- Request for Inspection of the Company

1- Subject to the provisions of Articles 333 and 334 of this Law, shareholders holding at least 10% of the capital of the company may request the Minister or, as applicable, the Authority to order to inspect the company in respect of the serious breaches attributed to the members of the Board or the auditors upon performing their duties as provided by this Law or the Articles of Association so long reasons to make the occurrence of such breaches highly probable.

2- The request for inspection shall include:

a- Such evidence that the applicants have serious grounds to justify taking such procedures.

b- The deposit by the applicant shareholders of their shares and to remain deposited until the conclusion of the request.

 

 

3- The Ministry or, as applicable, the Authority may, after hearing the statements of the applicants and the Board members or any other similar body and the auditors at a secret hearing, order to inspect the works, books or any papers or records with another company associated with the company, the subject matter of inspection, or in the custody of the auditor, and may appoint for such purpose one or more experts at the expense of the applicants for inspection.

 

Article 336- Facilitating the Work of the inspectors

Subject to the provisions of Article 333 of this Law, the Chairman, Executive Officer, General Manager, personnel and Auditors of the company shall provide to those assigned for inspection all the books, minutes of meeting (Board of Directors, committees and General Assemblies), records, documents and papers of the company as they deem necessary and provide the required statements and information.

 

Article 337- Inspection Report

1- Subject to the provisions of Articles 334 and 335 of this Law, upon completion of the inspection, the inspectors shall provide a final report to the Minister in respect of Private Joint Stock Companies or to the Chairman of the Authority in respect of Public Joint Stock Companies.

2- If the Ministry or, as applicable, the Authority finds that there are breaches constituting a crime against the Board members or the auditors, it shall invite the General Assembly to convene. In such event, the meeting shall be chaired by the representative of the Ministry or the Authority, as the case may be, of a degree of an executive officer or any similar officer, to consider the following:

a- The dismissal of the Board members and filing the liability lawsuit against them; and b-The dismissal of the auditors and filing the liability lawsuit against them.

3- The Decision by the General Assembly shall be valid in the event as set out in Clause 2 of this Article if approved by the present majority upon exclusion of the share of the Board member whose dismissal is under consideration. In the event of the Board member that represents a legal person, the share of such legal person shall be excluded.

 

Article 338- Publication of the Results of Inspection

If the Ministry or, as applicable, the Authority finds that the breaches attributed by the applicants for inspection to the Board members or the auditors are not true, the Ministry or the Authority may order to publish the result of inspection in a daily local newspaper issued in Arabic and require the applicants for inspection to pay its costs, without prejudice to civil and penal liability as applicable.

Title 11

Penalties

 

 

Chapter 1

Crimes where Reconciliation is possible

 

Article 339- Regulation of Conciliation

1- The criminal lawsuit for the crimes set forth in Chapter One of this Title shall not be filed unless by a written request from the Chairman of the Authority or his representative concerning the crimes related to the Public Joint Stock companies and from the Minister or his representative for the crimes related to others. Conciliation is possible before referral of the criminal lawsuit to the competent Court against payment of an amount not less than two times the minimum fine limit, if any, and equivalent to the daily fine.

2- In the event of repetition of the crime within one year from the conciliation or return to the crime after issuance of a final judgment, the fines set forth in this Chapter in their minimum and maximum limits shall be doubled.

3- The Minister or the Authority, as applicable, shall issue the conciliation rules and procedures.

 

Article 340- Failure to Comply with the Decision of the Registrar

A fine of AED 1,000 (one thousand) per day shall be imposed on any company that fails to comply with the decision by the Registrar concerning the change of the name of the company. Such fine shall be calculated upon the expiry of 30 working days from the date of notifying the decision to the company.

 

Article 341- Failure to List

 

 

A fine of AED 2,000 (two thousand) per day shall be imposed on any Public Joint Stock Company that fails to be listed in a financial market in the State. Such fine shall be calculated for every day of delay after expiry of the required period for listing in accordance with the provisions of this Law.

 

Article 342- Rejection of Inspection by Concerned Parties

A fine of at least AED 10,000 (ten thousand), but not more than AED 50,000 (fifty thousand) shall be imposed on the company that rejects to enable the partner or shareholder to inspect the minutes of meetings of the General Assembly or the company’s books, documents or any records related to a transaction concluded by the Company with relevant parties.

 

Article 343- Failure to Invite the Annual General Assembly to Convene

A fine of at least AED 50,000 (fifty thousand), but not more than AED 100,000 (one hundred thousand) shall be imposed on the Chairman of a Joint Stock Company if he fails to invite the Annual General Assembly of the company to convene within the period as determined by this Law or if he publishes the invitation without the prior consent of the Ministry or, as applicable, the Authority, and on any Director that deliberately prevents the invitation or convention of the General Assembly.

 

Article 344- Failure to Invite the General Assembly in Case of Losses

A fine of at least AED 50,000 (fifty thousand), but not more than AED 1,000,000 (one million) shall be imposed on the Chairman of a Joint Stock Company or the Chairman of a Limited Liability Company if the losses of the company reach half of its capital and the Board fails to invite the General Assembly of the company to convene in accordance with the provisions of this Law.

 

Article 345- Failure to Invite the General Assembly on Demand by the Ministry or the

Authority

A fine of at least AED 100,000 (one hundred thousand), but not more than AED 300,000 (three hundred thousand) shall be imposed on the Chairman of a Joint Stock Company or his representative if he fails to invite the General Assembly of the company to convene upon receipt of a request to this effect from the Ministry or, as applicable, the Authority.

 

Article 346- Failure to invite one of the Board Members to Attend the Board Meetings

A fine of at least AED 50,000 (fifty thousand), but not more than AED 100,000 (one hundred thousand) shall be imposed on the Chairman of a Joint Stock Company or his representative if he fails to invite a Board member to attend the Board meetings.

 

Article 347- Rejection to Provide Assistance to the Auditors or Inspectors

A fine of at least AED 10,000 (ten thousand), but not more than AED 100,000 (one hundred thousand) shall be imposed on the Chairman, Board member, Executive Officer, General Manager or other employee of a company if he rejects to provide documents or information to the auditors of the company or to the inspectors from the Ministry or the Authority to perform their duties, conceals information or explanations or provides misleading information to such auditors or inspectors.

 

Article 348- Failure to keep Accounting Records

A fine of at least AED 50,000 (fifty thousand), but not more than AED 500,000 (five hundred thousand) shall be imposed on the national or foreign company that fails to keep accounting records for the company to state its deals.

 

Article 349- Failure to keep Accounting Records for the Period determined in this Law

A fine of at least AED 20,000 (twenty thousand), but not more than AED 100,000 (one hundred thousand) shall be imposed on the national or foreign company that fails to keep accounting records for the period determined in this Law.

 

Article 350- Auditors not approved by the Authority

1- A fine of at least AED 20,000 (twenty thousand), but not more than AED 100,000 (one hundred thousand) shall be imposed on the auditor that audits the accounts of a Joint Stock Company in the State without being approved by the Authority.

 

 

2- A fine of at least AED 50,000 (fifty thousand), but not more than AED 200,000 (two hundred thousand) shall be imposed on the Chairman of a Joint Stock Company, who assigns an auditor to audit the accounts of the company without being approved by the Authority.

 

Article 351- Non-Compliance by Shariah Controller and Members of the Internal Shariah

Control Committee

A fine of at least AED 10,000 (ten thousand), but not more than AED 50,000 (fifty thousand) shall be imposed on the Shariah Controller and each member of the Internal Shariah Control Committee in companies that operate according to the provisions of the Islamic Shariah, who fails to comply with the requirements to perform their work as determined under a Decision by the Cabinet.

 

Article 352- Failure to refund Amounts in Excess of Subscription

A fine of at least AED 500,000 (five hundred thousand), but not more than AED 10,000,000 (ten million) shall be imposed on such entity or entities that delay in repayment of the extra amounts paid by the subscribers and the returns thereon, in respect of which no shares are allocated during the period as determined in this Law.

 

Article 353- Breach of the Percentage of Contribution by UAE Nationals

A fine of at least AED 20,000 (twenty thousand), but not more than AED 200,000 (two hundred thousand) shall  be  imposed  on  every  company  that  violates  the  provisions  in  connection  with  the  percentage  of contribution by the UAE nationals in the capital of the companies or the percentage of UAE Directors in their Boards.

 

Article 354- Disposition of the Shares in Violation to the Provisions of this Law

A fine of at least AED 20,000 (twenty thousand), but not more than AED 200,000 (two hundred thousand)

shall be imposed on any person that may dispose of the shares in breach of the rules as provided by this Law.

Article 355- Failure to Register the Foreign Company with the Registrar or the Competent Authority

A fine of at least AED 100,000 (one hundred thousand), but not more than AED 500,000 (five hundred thousand) shall be imposed on a foreign company or its branch or office in the State if not registered with the Registrar or the competent authority.

 

Article 356- Performance of a Commercial Activity by a Representative Office

A fine of at least AED 100,000 (one hundred thousand), but not more than AED 500,000 (five hundred thousand) shall be imposed on a representative office of a foreign company in the State if it performs a commercial activity inside the State.

 

Article 357- Late Adjustment of the Positions

A fine of AED 2,000 (two thousand) per day of delay shall be imposed on any company that fails to amend its Memorandum of Association and Articles of Association to be compliant with the provisions of this Law. Such fine shall be calculated from the day following the expiry date of the applicable period for such purpose.

 

Article 358- Publication of the Invitation to Public Subscription without the Consent of the

Authority

A fine of at least AED 100,000 (one hundred thousand), but not more than AED (ten million) 10,000,000 shall be imposed on the company, entity or natural or legal person inside the State or abroad or in the free zones that fails to obtain the approval of the Authority prior to the publication of announcements including an invitation to the public for subscription in any shares, bonds or other securities, whether the announcement is made by way of publication in  the daily newspapers or  the magazines or  by any other means of  public advertisement in the State.

 

Article 359-Receipt of Public Subscriptions without the Consent of the Authority

A fine of at least AED 100,000 (one hundred thousand), but not more than AED 10,000,000 (ten million) shall be imposed on every entity or company that receives money from subscription to shares, bonds or any other securities without the consent of the Authority.

 

Article 360- Violation of the Provisions of this Law and the Decisions in Execution Hereof

 

 

A fine of at least AED 10,000 (ten thousand), but not more than AED 100,000 (one hundred thousand) may be imposed on whoever violates the provisions of this Law for which a penalty is not stated or whoever violates the rules, regulations or decisions issued in execution thereof.

 

 

Chapter 2

Crimes where Conciliation is not possible

 

Article 361- Providing False Statements or Statements in Violation of the Law

A person shall be punished by imprisonment for a period between six months and three years and/ or a fine between AED 200,000 (two hundred thousand) and AED 1,000,000 (one million) if he deliberately inserts in the Memorandum of Association or Articles of Association of the company or in the prospectuses of shares or bonds or in any other documents of the company, any false statements or such statements in violation of the provisions of this Law, any other person that may, knowingly, signs or distributes such documents.

 

Article 362- Overvaluation of the Contributions In kind

Any person that may, in bad faith, assesses the contributions in kind provided by the founders or shareholders in excess of their actual value shall be punished by imprisonment for a period between six months and three years and/ or a fine between AED 500,000 (five hundred thousand) and AED 1,000,000 (one million).

 

Article 363- Distribution of Profits or Interests in Violation to the Law

Any manager or Board member who distributes to the shareholders or others profits or interests in contravention of the provisions of this Law or the Memorandum of Association or Articles of Association of the company and any auditor who approves such distribution while being aware of such contravention shall be punished by imprisonment for a period between six months and three years and/ or a fine between AED 50,000 (fifty thousand) and AED 500,000 (five hundred thousand).

 

Article 364- Concealing the True Financial Position of the Company

Any manager, Board member, auditor or liquidator who deliberately provides false statements in the balance sheet or the profits and losses account or in a financial report or omits material incidents in such documents for the purpose of concealing the true financial position of the company shall be punished by imprisonment for a period between six months and three years and/ or a fine between AED 100,000 (one hundred thousand) and AED 500,000 (five hundred thousand).

 

Article 365- False Incidents in the Inspection Report

The penalty of imprisonment between three months and two years and/ or a fine of at least AED 10,000 (ten thousand), but not in excess of AED 100,000 (one hundred thousand) shall apply against:

1- Any person appointed by the Ministry, the Authority or the competent authority to inspect the company, who deliberately states in the inspection report false incidents or deliberately omits to state material incidents that may affect the results of inspection; and

2- The Chairman, a Board member, the Executive Officer or the General Manager of the company who deliberately declines to provide documents or information to the inspectors after the Ministry or the Authority imposes the applicable fine in accordance with the provisions of Article 347 of this Law.

 

Article 366- Deliberate Damage to the Company by the Liquidator

Any liquidator who deliberately causes damage to the company, the shareholders, the partners or the creditors shall be punished by imprisonment for a period between three months and three years and/ or a fine between AED 50,000 (fifty thousand) and AED 500,000 (five hundred thousand).

 

Article 367- Issuing Securities in Violation to the Provisions of this Law

Any person who issues or offers to trade in shares, subscription receipts, interim certificates or bonds in violation to the provisions of this Law shall be punished by imprisonment for a period between three months and two years and/ or a fine between AED 100,000 (one hundred thousand) and AED 500,000 (five hundred thousand).

 

Article 368- Giving a Loan, Guarantee or Security

The penalty of imprisonment for no later than three months and/ or a fine of at least AED 100,000 (one hundred thousand), but not in excess of AED 500,000 (five hundred thousand) shall apply against:

 

 

1- Any Board member of the Joint Stock Company who obtains for himself or for his spouse or relatives up to the second of kin a loan, guarantee or security from the company where he is a Board member, in violation to the provisions of this Law, and shall be required to repay such loan, guarantee or security.

2- The Chairman, Board member, Executive Officer or General Manager of a Joint Stock Company who accepts to provide a loan, guarantee or security to a Board member of the company or to his spouse or relatives up to the second of kin a loan, in violation to the provisions of this Law.

 

Article 369- Disclosure of the Secrets of the Company

The penalty of imprisonment for no later than six months and/ or a fine of at least AED 50,000 (fifty thousand), but not in excess of AED 500,000 (five hundred thousand) shall apply against:

1- Any person who utilizes the statements or information obtained from the Constituent Committee at any stage of incorporation of the company from the legal or financial consultants or the subscription manager, the subscription  coverage  sponsor   or   the   parties   participating  in   the   incorporation  procedures  or   their representatives.

2- The Chairman, Board member or other employee of the company, who utilizes or discloses a secret of the company or deliberately attempts to cause damage to the activity of the company.

 

Article 370- Influencing the Prices of Securities

The Chairman, Board member or other employee of the company who participates, directly or indirectly, with any entity that makes transactions for the purpose of influencing the prices of securities issued by the company shall be punished by imprisonment for a period of no later than six months and/ or a fine of at least AED 1,000,000 (one million) but not in excess of AED 10,000,000 (ten million).

 

Article 371- Imposition of Severer Penalty

The penalties as provided by this Law shall be without prejudice to any severer penalty in any other Law.

 

Article 372- Criminal Liability

Criminal Liability for the contraventions as provided by this Law and committed by the company, shall be addressed to the legal representative of the company.

 

Article 373- Capacity of Judicial Officers

The employees appointed under a Decision by the Minister of Justice in agreement with the Minister and in coordination with the Authority or the competent authority, as the case may be, shall have the capacity of Judicial Officers to report any acts in contravention of the provisions of this Law and the Regulations and Decisions issued in execution thereof, within the scope of jurisdiction of each of them.

Title 12

Provisional and Final Provisions

 

Article 374- Adjustment of Positions

1- Existing companies that the provisions of this Law apply thereto shall adjust their positions according to the provisions of this Law within no later than one year from the effective date of this Law. Such term may be extended for another similar term under a Decision by the Cabinet on a proposal made by the Minister.

2- Subject to the penalties as provided by this Law, if a company fails to comply with the provision of Clause

1 of this Article, the company shall be deemed as dissolved in accordance with the provisions of this Law.

 

Article 375- Rules of Motivation of Companies

The Cabinet shall issue the rules necessary for the motivation of the companies to commence their social liability and the stages of implementation thereof.

 

Article 376- Revocation of Contrary Provisions

Any provision contrary to or in conflict with the provisions of this Law is hereby revoked. The Federal Law

No. 8 of 1984 and its amending laws concerning commercial companies are also hereby repealed.

 

Article 377- Issuing Implementing Regulations and Decisions

The Regulations and Decisions issued in implementation of the provisions of the Federal Law No. 8 of 1984 concerning commercial companies shall continue to be in force to the extent not in conflict with the provisions

 

 

of this Law, until such time the Ministry and the Authority, as applicable, issues the Regulations, Rules and

Decisions as required to implement the provisions of this Law.

 

Article 378- Publication and Effective Date

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

Issued by us in the presidential palace in Abu Dhabi

On 5 Jumada Al Akhira 1436 H Corresponding to 25 March 2015

Khalifa Bin Zayed Al Nahyan

President of the United Arab Emirates

Business Laws in Dubai - UAE

 

 

 

 

 

 

 

 

Business Laws in Dubai - UAE

The UAE provides a supportive legal framework for businesses in line with the vision of country's leadership and their deep conviction that an effective legal framework in par with international standards is essential to a competitive and prosperous economy.

The UAE is currently working on upgrading a number of key legislation, especially with regard to the development of the country's economic infrastructure and investment climate in a bid to better address investment issues and regulate the relationship between all parties concerned with the country's economic development and investment process.

The country has issued a number of laws related to the economy, trade and investment since its formation in 1971. Some of these laws are listed in the left menu of the page like (UAE Commercial Companies Law & UAE Commercial Transactions Law) .

 

 

 

Commercial Transactions Law - UAE - Dubai

 

 

 

 

 

 

 

 

 

 

 

COMMERCIAL TRANSACTIONS LAW

PRELIMINARY PART

 

ARTICLE (1)

The provisions of this Law shall apply to traders, as well as to all commercial activities carried out by any person even though he be not a trader.

 

ARTICLE (2)

  1. Traders and commercial activities shall be governed by the agreement entered into by the two contracting parties unless such agreement contradicts an imperative commercial text.
  2. Where there is no specific agreement, the rules of commercial customs and practices shall apply to any matter, regarding which, there is no provision herein or in another law related to trading matters.A specific or local custom shall have precedence over the general custom.  In the absence of a commercial custom, the provisions pertaining to civil matters shall apply as long as they do not contradict the general principles of the commercial activity.
  3. Specific agreements or commercial customs rules may not be applied if they contradict the Public Order or Morals.

 

ARTICLE (3)

Commercial matters regarding which Specific Federal Laws are enacted shall be subject to the provisions of such laws, and to the provisions hereof which do not contradict with said laws.

 

BOOK  ONE

COMMERCE IN GENERAL

PART ONE

CHAPTER ONE

COMMERCIAL ACTIVITIES

 

ARTICLE (4)

Commercial activities are :

  1. Such activities which are carried out by a trader in relation to his trade affairs, provided that each activity carried out by a trader is considered to be related to his trade unless proved otherwise.
  2. Speculative activities carried out by a person, though not a trader, with the intent of realizing profit.
  3. The activities which are specified by the Law to be commercial activities.
  4. The activities which are related to or facilitating a commercial activity.

 

ARTICLE (5)

The following activities shall, by virtue of their nature, be considered as commercial activities:

  1. The purchase of commodities and other material and non-material movables with the intention of selling them at a profit, best to sell them in the same condition or after processing or manufacturing them.
  2. The purchase or the hiring of commodities and other material and non-material  movables with the intent of hiring them out.
  3. The sale or hiring out of commodities and movables purchased or hired as provided for herein.
  4. The banking, exchange, stock markets and investment companies operations, trust funds, financial establishments and all kinds of other financial brokerage operations.
  5. All kinds of transactions related to commercial papers, irrespective of the capacity of the concerned persons therein or the nature of the transactions for which such operations are carried out.
  6. All kinds of sea and air navigation activities, including:-

 

  1. The construction, sale, purchase, chartering or taking on charter , repair or maintenance of vessels and aircrafts, as well as sea and air shipment and carriage.
  2. The sale and purchase of vessel and aircraft supplies, tools and materials and supplies thereof.
  3. Loading and unloading activities.
  4. Maritime and air loans.
  5. Employment contracts for commercial vessel and aircraft captains and pilots.
  6. Formation of companies.
  7. Current accounts.
  8. All kinds of insurances with the exception of the cooperative insurance.
  9. Public auction sale premises.
  10. Hotels, restaurants, movie halls, theaters, play grounds and amusement centers activities.
  11. Water, electricity and gas distribution activities.
  12. Publication of newspapers and  magazines with the intent of making profit through the publishing of advertisements, news and articles.
  13. Post, telegraph and telephone activities.
  14. Broadcasting, television, recording and photography studios activities.
  15. The activities of public warehouses and mortgages on property deposited therein.

 

ARTICLE (6)

The following activities shall be considered as commercial activities if practiced as a profession:-

  1. Brokerage.
  2. Commercial agency.
  3. Commission agency.
  4. Commercial representation.
  5. Supply contracts.
  6. Purchase and sale of lands or real estates with the intent of making profit  by selling there in their original condition or after transforming or dividing
  7. Land transport.
  8. Real estate activities at times when the Contractor undertakes to supply the materials or the workers.
  9. The income from extraction industries of natural resources.
  10. Tourism, travel, export, import and customs clearing activities, as well as the activities of services and recruitment offices.
  11. Printing, publishing, photography, recording and advertising activities.
  12. Industry.
  13. Animal resources and fisheries activities.
  14. Third party's work hiring and taking on lease with the intent of giving it on lease.
  15. Letting or renting of houses, apartments and rooms, furnished or unfurnished, with the intent of sub-letting them.

 

ARTICLE (7)

Activities which may be deemed to be analogous to the activities herein mentioned in the above two articles, due to the similarity of their qualities and objectives shall be considered as commercial activities.

 

ARTICLE (8)

An artwork made and sold by the artist himself, or by using the services of workers, shall not be deemed to be a commercial activity the same applying to an another printing and selling his work.

 

ARTICLE (9)

  1. The sale by a farmer of the produce obtained from land owned or  cultivated by him, even when the said produce has been transformed means normally available to hire, shall not be deemed to be a commercial act activity.
  2. Where a farmer establishes a permanent trading shop or factory for the sale of his produce in its original condition or after manufacturing, the sale in such a case shall be deemed to be a commercial activity.

 

ARTICLE (10)

Where a contract is commercial with regard to one party and civil to the other party, the provisions hereof shall apply to the obligations of both parties unless the laws states otherwise or there is an agreement between the parties to the contrary.

 

CHAPTER TWO _

THE TRADER

 

ARTICLE (11)

Shall be deemed a trader:-

 

  1. Every person who works  in his own name and for his own account in commercial activities and has the proper qualification when taking on such activities as his occupation.
  2. Every company which undertakes a commercial activity or has adopted one of the legal forms stipulated by the Commercial Companies Law, even if such an activity whereof civil nature.

 

ARTICLE (12)

Any person who announces to the public, by any means, about business premises established by him for commerce, shall be deemed a trader even if he does not take on trade as his normal profession.

 

ARTICLE (13)

The capacity of trader shall be established in respect of any person who practices commerce under a pseudonym or under the cover of another person's name.  The person whose name is apparent shall also be established to have the capacity of trader.

 

ARTICLE (14)

Any person who carries out a commercial activity although prohibited under specific laws or regulations from practicing trade, shall be deemed a trader and shall be governed by the provisions hereof.

 

ARTICLE (15)

The capacity of trader shall not be established to the State Ministries, Departments, Public Authorities and Corporations, as well as Public Benefit Authorities and Establishments, Associations and Clubs, and those persons who practice free professions excluding commercial activities.  However, commercial activities carried out by such entities shall be governed by this Law except if excluded by virtue of a specific text.

 

ARTICLE (16)

The capacity of trader is established in respect of trade companies formed, owned or portions owned by the State or public entities and corporations and they shall be governed by the provisions hereof except where otherwise excluded by a specific provision.

 

ARTICLE (17)

Individuals who practice a simple business or small trade where they rely on their work to derive some form of profit to secure their living more than their reliance  on cash capital, shall not be governed by the duties of commerce such as keeping commercial books or registering in the Commercial Register nor shall they be governed by the provisions of bankruptcy and composition.  The Ministry of Economy and Commerce shall, in consultation with the specialized authorities  in the Emirates, determine the maximum number of individuals working with  them and the capital to be invested in this small trade.

 

ARTICLE (18)

  1. Any person who has attained 21 calendar years  of age and is free of any legal impediment shall be competent to carry on commerce.
  2. Nevertheless, a minor may - whether under guardianship or custody - practice commerce whenever he attains 18 calendar years of age and is granted a Court order giving him an absolute or restricted permission to practice trading activities.

 

ARTICLE (19)

  1. Where a minor or a legally incompetent person has funds in commerce, the Court is empowered to order the withdrawal of his funds from said commerce or to carry on with the business, as may best serve his interests.
  2. If the  Court gives orders for the business to continue, it shall be required to grant the person acting for him an absolute or restricted authority to undertake all activities required therefor.
  3. The Court has the power to withdraw or limit the authority where there be causes to justify it, without undo prejudice to any rights acquired by a bona fide third party.

 

ARTICLE (20)

Any order issued by the Court to continue with the business of the minor or the legally incompetent person, or to withdraw or limit the authority, must be entered in the Commercial Register and published in two arabic dailies issued in the State.

Where the Court orders the continuance of the business of the minor or the legally incompetent person, he shall be liable only to the extent of the funds invested in such commerce.  He may be declared bankrupt but the bankruptcy shall not include funds which are not invested in the business nor shall it have any effect with regard to the minor or the legally incompetent person.

 

ARTICLE (21)

  1. The capacity of a married woman to practice trade shall be regulated by the law of the country of which she is a national, subject to the provision of Article (II) of the Civil Transactions Law.
  2. A foreign wife who practices trade is assumed to have obtained her husband's approval to do so; and where the applicable law authorizes a husband to object to his wife practicing the trade or to withdraw his previous permission, such objection or withdrawal of permission should be entered in the Commercial Register and published in two arabic dailies issued in the State.
  3. The objection or withdrawal of permission shall have no effect  except from the date of its entry in the Commercial Register and newspaper publication, nor shall it be prejudicial to the rights acquired by a bona fide third party.

 

ARTICLE (22)

  1. It shall be assumed that a foreign trader wife has concluded a marriage settlement based on separate ownership of property, unless the financial stipulation between the spouses provides otherwise.  Moreover such stipulation may not be opposed to third parties unless it is entered in the Commercial Register and a summary thereof has been published in two Arabic dailies issued in the State.
  2. In case of negligence to enter the stipulation in the Commercial Register and publish its summary, a third party may prove that the marriage settlement was based on a financial system more convenient to his interest than the separate ownership of property.
  3. A foreign judgement ordering the separation of property ownership may not be opposed to third parties except from the date of its entry in the Commercial Register and publication of its summary in two Arabic dailies issued in the State.

 

ARTICLE (23)

  1. No persons other than a U.A.E. citizen may practice trade in the State., unless he has one or more U.A.E. partners according to the conditions and within the limits stipulated by the Commercial Companies Law.
  2. Professionals may not practice import and export activities.
  3. Non-U.A.E. citizens practicing on trade in the State at the time when this Law becomes effective and having no national partners, must regulate their status according to the provisions hereof.

ARTICLE (24)

The following persons may not engage in trade:-

 

  1. Every trader whose bankruptcy was declared during the first year of his practicing trade unless he has been rehabilitated.
  2. Any person who has been convicted of a crime of bankruptcy either by fraud, commercial swindle, theft, deception, or by breach of trust, forgery, use of falsified papers, unless he was rehabilitated.
  3. Any person who violates the foregoing prohibition in the above subsection shall be sentenced to imprisonment for no more than one year and charged with a fine of at least Dhs 5,000/- and not exceeding Dhs 100,000/-, or with either of these penalties, with an order to have the trading premises closed in all cases.

 

ARTICLE (25)

Any dealings formalities undertaken by the trader in connection with his trade may not be accepted by the specialized authorities, unless such trader is entered in the Commercial Register.

 

CHAPTER THREE

COMMERCIAL BOOKS      

 

ARTICLE (26)

  1. The trader shall keep such commercial books as may be required by the nature and importance of his trade, in such manner as to show his financial position with accuracy as well as any rights and liabilities related to his trade.
  2. In all cases, the trader is to keep the following two books:-
    1. Daybook;
    2. General ledger.

 

ARTICLE (27)

  1. All the financial operations carried out by the trader as well as his personal drawings shall be entered into the Daybook day by day.
  2. The trader has to use auxiliary daybooks to prove the details of his commercial operations, in which case it shall be sufficient to enter the total of such operations in the Daybook at regular intervals, otherwise each auxiliary book shall be deemed a Daybook.

 

ARTICLE (28)

The following shall be entered in the General Ledger:-

  1. All accounting operations carried forward from the Daybook on the basis of supporting documents thereof; in particular the accounts related to the cash money bank, partners, creditors, debtors, revenues, withdrawals and expenditures.
  2. Inventory of the stocks available to the trader at the end of the financial year or an overall statement thereof if the particulars are shown in separate books or lists, in which case such books and lists shall be considered as a complementary section to the General Ledger.
  3. A copy of the annual balance sheet and the profit and loss account.

 

ARTICLE (29)

  1. The commercial books shall not contain any blank, crossing out, erasure, writing in the margins, scraping or insertion.
  2. Before using the Daybook and the General Ledger, the pages thereof shall be numbered and signed by the Commercial Registrar used by the trader, and stamped with the official seal of the said Authority, showing the date of such procedure.  Where the pages of the said two books are filled up, the trader is to produce them to the same Authority to have them marked up to that effect after the last entry made therein and before using the new book.
  3. In case of discontinuation of the commercial activities in the business premises, the trader or his heirs is to produce the said two books to the Commercial Register to have them marked up to that effect.
  4. No fees shall be charged for affixing the official seal and the marking up stipulated in the foregoing cases.

 

ARTICLE (30)

The trader must keep exact copies of the originals of all correspondence, telegrams and invoices sent or issued by him for the purpose of his commercial activities; and further he must keep all incoming correspondence, telegrams, invoices and other documents related to his trade.  All such papers shall be kept in an orderly fashion that facilitates reference thereto and for a minimum period of five years from the date of issue or receipt.

 

ARTICLE (31)

The trader or his heirs should keep the commercial books and the documents supporting the entries made therein for a minimum period of five years to run from the date of marking up the book when all its pages are filled up.

 

ARTICLE (32)

The banks, companies or establishments in respect of which a decision is taken by the Minister of Economy and Commerce may keep, for the period mentioned in the two preceding  Articles the micro films (or any other modern technological device) instead of keeping the originals of the books documents, correspondence, telegrams and other papers related to their financial and commercial activities.  Such micro films shall constitute the same evidence as the original provided that the rules organizing use thereof for the purpose of this Article shall be set by the Minister of Economy and Commerce, and said banks, companies and establishments shall be bound to comply with such rules.

 

ARTICLE (33)

Entries made in the commercial books by employees authorized by the trader shall be deemed as entries made by the trader himself, and it shall be assumed that such entries were made with his knowledge and consent until he proves  otherwise.

 

ARTICLE (34)

The Court may, of its own record or at the request of either litigant, order the trader to produce his commercial books to extract therefrom what is of relevance to the conflict referred to such Court; and the latter should get peruse directly peruse such books, or through an expert appointed by it to that effect.

 

ARTICLE (35)

  1. The Court may not order the trader to produce his commercial books for the perusal of his adversary unless the conflict in question is related to an estate, a partnership or the division of joint property to both of them.
  2. In case of bankruptcy or composition  the commercial books shall be delivered to the specialized Court, the bankruptcy trustee or to the composition controller.

 

ARTICLE (36)

The commercial books kept by the traders may be used as evidence in the cases lodged by or against them if such cases are related to their commercial activities and according to following rules:-

  1. The data entered in the commercial books - even if not duly organized according to the law provisions - shall constitute a proof against the trader who keeps such commercial books.  Nevertheless, a person wishing to derive therefrom any evidence in his favour, may not divide the data entered therein.
  2. The data duly entered in the commercial books according to the law provisions shall constitute a proof for the trader  who keeps such books against his opponent trader, unless such opponent nullifies them by virtue of data duly entered in his books according to the law provisions or by any other means proving that them not be true.
  3. In the event where both litigants' commercial books are regularly kept according to the law provisions and the comparison mode between them shows a contradiction in the data entered therein, the Court shall require another evidence.
  4. In case of discrepancy in the data entered in both litigants' books, while one trader's books are regularly and duly kept according to the law provisions and the other trader's books are not, the data entered in the regular books shall prevail, unless the adversary proves the contrary of the data entered therein.  The same provision shall apply if either litigant produces regular books and the other one does not produce any books.

 

ARTICLE (37)

If either litigant trader relies for the validity of his case on his opponent's commercial books, and he admits in advance the correctness of the data entered therein, then the opponent refrains without excuse from producing such books to the Court  for perusal; this shall be  deemed a presumption that the facts required to be proved is the books are correct.  The Court may further administer suppletory oath to the Plaintiff on the validity  of his case.

 

ARTICLE (38)

Traders using computers or other modern technological equipment in the organization of their trading activities, shall be excluded from the provisions of Articles (26,27,28,29) of this Law.  The data obtained from such computer or other high tech methods shall be considered as commercial books and general rules shall be set by a resolution of the Minister of Economy and Commerce to regulate the use of such data.

PART TWO

BUSINESS PREMISES, TRADE NAME, UNFAIR COMPETITION, TRADE MARKS AND DESCRIPTIONS

 

CHAPTER ONE

BUSINESS PREMISES, TRADE NAME AND UNFAIR COMPETITION

 

SECTION (ONE)

BUSINESS PREMISES

 

ARTICLE (39)

A business premise constitutes a group of tangible and intangible assets allocated for the practice of commercial activities.

 

ARTICLE (40)

  1. The business premises cover the necessary elements for the commercial activity.  Such elements are divided into tangible elements such as the goods, equipment, machines and tools, and intangible elements such as the clientele (customer contacts), goodwill, trade name, right to let, industrial, literary and artistic patents and licenses.
  2. The tangible elements are not considered essential to the business premises, contrary to the intangible elements as the business premises have no existence unless one or more elements  thereof are available.

 

ARTICLE (41)

In the event where the trader is the owner of the real estate in which he practices his trade, such estate shall not be considered as an element of the business premises and any provision to the contrary shall not be valid.

 

ARTICLE (42)

Any action dealing with the transfer of the ownership of the business premises or the creation a real right thereon, shall not be valid unless it is attested and authenticated by the Notary Public and entered in the Commercial Register.

 Such action should include the following data:

  1. Names of the contracting parties with their nationalities and place of residence.
  2. Date and type of the action.
  3. Type and address of the business premises and those elements agreed to be included in the action.
  4. Price of the tangible and intangible elements, each of them being separate, if the action is a sale and part of the price paid upon conclusion of the contract and mode of payment of the balance.
  5. Specific agreements concerning the contracts and undertakings (if any), pertaining to the business premises.
  6. Agreements concerning the seller maintaining the right of rescission, termination or franchise -if any-.

 

ARTICLE (43)

Out of any sum paid on account of the price, the price of the goods shall be deducted first, then the price of the equipment, then that of the intangible elements, even if there is an agreement to the contrary.

 

ARTICLE (44)

  1. The title to the business premises shall only be transferred as between the contracting parties and with regards to third parties, from the date on which the action is entered in the Commercial Register and a summary thereof is published in two Arabic dailies issued in the State with an interval of one week between the two issues, and after expiry of the period prescribed for acceptance of the objection to the said action.
  2. In case the business premises include elements that are subject to specific regulations for advertisement and registration, the advertisement made for the disposal of the business premises shall not replace the special advertisement or registration procedure, unless the law provides otherwise.

 

ARTICLE (45)

The disposal of the business premises shall only be entered after finalization of the following formalities:

 

  1. The officer in charge at the Commercial Register shall, at the request and expense of the purchaser, publish a summary of the sale contract in two Arabic dailies issued in the State with an interval of one week between the two issues.
  2. The summary published shall include the names of the contracting parties, their nationalities and place of residence, designation of the business premises, total price and an authorization to the creditors to submit their objections within ten days from the date of the last publication.
  3. Objections shall be lodged with the specialized Civil Court to which jurisdiction the business premises pertain and they shall include the amount of the debt and its cause.
  4. The purchaser shall be forbidden from paying the price until the Court makes a ruling on the objections.  However, the seller may make a request for the summary judge to authorize him to cash the price even before the objections are looked into, if he provides sufficient guarantees for the settlement of the creditors' rights.
  5. Any objecting creditor or mortgagor may offer to purchase the business premises for himself or for a third party for a price exceeding by at least one fifth the price agreed upon.
  6. Any person objecting to the price shall deposit at the Court treasury a sum equal to at least one third of the original price in addition to the increase offered by him.
  7. The specialized Court shall notify the offers of increase to the two contracting parties for the sole of the business premises and twenty days after such notification the Court shall decide the sole of the that the business premises be sold to the persons having offered the highest price. 

 

ARTICLE (46)

  1. Any person upon whom the ownership of the business premises devolves, shall, under the law, subrogate the person who disposed thereof in all the rights and obligations arising from the contracts related to the business premises, it was agreed upon to the contrary or unless the contract is entered into on basis of personal considerations.
  2. Nevertheless, any person second party to the contracts referred to in the previous paragraph, may request the cancellation of the disposal within ninety days from the date of  notification thereof, provided he has serious reasons to justify such cancellation and provided that he notifies the new owner within a convenient period of his wish to cancel the disposal.

 

ARTICLE (47)

  1. The person upon whom the title to the business premises has devolved, shall fix a date for the creditors holding debts prior to the notification of the disposal, in order to submit a statement of their debts for settlement.  Such date shall be published in two dailies issued in the State one of which is in Arabic and with an interval of one week between the two issues.  The date fixed to the creditors may not be less than ninety days from the date of publication.  The person upon whom the title to the business premises has devolved shall remain liable for the debts, if the creditors of such debts submit a statement thereof within the said prescribed period and if such debts are not settled within such period.
  2. However, the person upon whom the title to the business premises has devolved, shall be released of any debts regarding which the creditors do not produce a statement within the prescribed time as shown in the previous paragraph.
  3. Furthermore, the disposing party shall remain liable for the debts related to the business premises and which have arisen prior to the notification of the disposal unless he is discharged therefrom by the creditors.

 

ARTICLE (48)

As an exception to the bankruptcy provisions, the seller of a business premise who did not receive the full price, may protest to the group of creditors in the purchaser's bankruptcy and exercise his right to rescind the sale contract of the business premises, to redeem this latter or his right of lien if he reserved for himself such right in the sale contract, and if such right of lien was published in the newspapers.  Nevertheless, such rescission or  termination or lien shall only affect the elements included thereby.

 
ARTICLE (49)
  1. Business premises may only be mortgaged to banks  and financing institutions.
  2. Where the mortgage deed does not specify the elements covered by the mortgage, it shall then only cover the trade name, the right to let, the clientele (customers' contacts) and the goodwill.

 

ARTICLE (50)

  1. A mortgage is not put into effect except by  an authenticated deed, attested by the Notary Public and entered in the Commercial Register.
  2. The mortgage deed shall contain a declaration by the debtor as to whether or not the seller has a privilege over the mortgaged business premises, as well as the name of the company which insured the business premises (if any).

 

ARTICLE (51)

  1. The mortgage entry in the Commercial Register shall secure a privilege right for five years from the date thereof, and  where the entry is not renewed within the said time limit it shall be deemed to have been cancelled.
  2. The said entry may be crossed off by mutual agreement of the concerned parties or pursuant to a final Court order. 

 

ARTICLE (52)

The mortgagee shall be held responsible to keep the mortgaged business premises in good condition.

 

ARTICLE (53)

  1. Where the owner of the business premises fails to pay the price or the balance of the price to the seller, or  if he fails to pay the debt on the maturity date to the mortgagor, the seller or mortgagor may, after eight days from the date of service of a notice on his debtor  who has possession of the business premises, submit a petition to the summary judge, requesting permission to sell, by public auction all or some of the constituent elements of the business premises which are covered by the seller's or mortgagor's privilege.
  2. The sale shall be effected at the venue, date and hour and according to the manner designated by the judge; and the sale shall be advertised for at least ten days before the set date.

 

ARTICLE (54)

Any provision in the mortgage contract granting the creditor the right to acquire the property of the mortgaged business premises or to dispose thereof without the procedures prescribed above shall be  considered  null and void.

 

ARTICLE (55)

The seller, as well as the mortgagors, shall have the same rights and privileges over the sums resulting from the insurance as those which they had over the insured items, provided it has been established that such sums have matured.

 

ARTICLE (56)

The lessor of the place wherein lies the mortgaged furniture and equipment being used for exploiting the business premises, may not exercise his privileges for more than two years.

 

SECTION TWO        

TRADE NAME

           

ARTICLE (57)

The trade name of an individual trader consists of his first name and surname; it may also contain particulars pertaining to the persons therein mentioned,  relevant to the kind of trade for which it is designated.  However, it may consist of an innovated nomenclature.  In all cases, the  trade name must conform to the truth, or else it would be  misleading or prejudicial to the public order or morals.

 

ARTICLE (58)

Trade names of commercial companies shall be in compliance with the specific and relevant provisions.

 

ARTICLE (59)

A trade name shall be entered in the Commercial Register in accordance with the provisions stipulated to that effect.  Once registered, no other trader may use such name for his trade which is of a similar kind. Where the name  and surname of a trader are similar to a trade name previously entered in the Register, he must add to his name such particulars as would distinguish him from the trade name already registered.

 

ARTICLE (60)

  1. The trader shall write his trade name on the  facade of his business premises, and he must carry out his commercial transactions under his trade name.
  2. A trader may not use the trade name of another trader after abatement or removal of such name, except after the lapse of one year from the date of such abatement or removal.

 

ARTICLE (61)

  1. A trade name may not  be disposed of independently of the business premises allocated therefor.
  2. However, in case the owner of the business premises disposes thereof, such disposal shall not include the trade name, unless it is explicitly or implicitly provided as such.
  3. The person upon whom the title to the business premises devolves, excluding its trade name, shall not be liable for the obligations of his predecessor unless there is an agreement to the contrary entered in the Commercial Register.

 

ARTICLE (62)

  1. A person to whom the ownership of a business premise is transferred, may not use his predecessor's trade name, unless such name devolves unto him or the predecessor authorizes him to use it; provided that he adds to the name such particulars purporting to the transfer of ownership.
  2. Any violation of the provisions of the previous paragraph shall be punished by being sentenced to imprisonment or by a fine of at least (Dhs 10,000) Ten Thousand Dirhams or by either of these two punishments.

 

ARTICLE (63)

  1. Any person to whom the ownership of a trade name is transferred, following the transfer of the title to a business premise, shall subrogate his predecessor in the rights  and obligations accrued under the said trade name. Any agreement to the contrary does not be apply to third parties except from the date of its entry in the Commercial Register and the notice served to the concerned parties to that effect.
  2. In case of denial and lack of legitimate excuse, the action in liability  for the predecessor's obligations, may not be heard after the lapse of five years from the date on which the ownership of the business premises is transferred.

 

SECTION THREE

UNFAIR COMPETITION

 

ARTICLE (64)

A trader may not induce the employees or workers of another competitor trader, so that they aid him in  usurping the customers of that other trader, or so that they leave their employer's service and enter into his service or disclose to him the secrets of his competitor; and the foregoing acts are considered unfair competition necessitating damages.

 

ARTICLE (65)

A trader may not disclose such matters as are inconsistent with the reality regarding the origin or description of his goods, or any other matters pertaining to their nature or importance.  He may not either declare falsely that he holds a status or degree or award, nor may he resort to any other misleading means, with the intent thereby to usurp the customers of a  competitor trader; or else, he shall be liable for compensation.

 

ARTICLE (66)

A trader may not resort to fraud and cheating when marketing his goods, nor may he spread or publish false particulars tending to be prejudicial to the interests of another competitor trader; in default he shall be liable for damages.

 

ARTICLE (67)

A trader may not issue to an ex-employee or ex-worker a certificate that is inconsistent with the reality, otherwise he shall be liable to compensate the damages caused to any other trader who was mislead by such certificate.

 

ARTICLE (68)

  1. Where a trade name is used by other than its owner without any agreement authorizing it or where the owner uses it in a manner violating the law, the concerned parties may apply to the specialized Court to order the prohibition of its use and to strike it off if it is entered in the Commercial Register; they may further claim damages, if relevant.
  2. Any violation of the foregoing provisions shall be punishable by imprisonment or a fine of at least (Dhs 10,000) Ten Thousand Dirhams or by either of these two punishments.

 

ARTICLE (69)

Any person engaged in the business of supplying information to commercial houses about the conditions of trade, who knowingly or through gross negligence supplies untrue statements about the behavior or financial standing of a trader, shall be liable to compensate such damages which may result therefrom.

 

ARTICLE (70)

The foregoing provisions shall be without prejudice to any other punishments stipulated by other laws concerning the commitment of the acts mentioned in such provisions.

 

CHAPTER TWO

TRADE MARKS AND DESCRIPTIONS

 

ARTICLE (71)

Trade marks and descriptions shall be regulated by the specific laws issued to that effect.

 

BOOK TWO

COMMERCIAL OBLIGATIONS AND CONTRACTS

PART ONE

COMMERCIAL OBLIGATIONS

 

ARTICLE (72)

  1. Where two individuals or more assume a commercial debt, they shall be jointly liable for the settlement of such debt, unless otherwise provided for by law or agreement.
  2. The foregoing provision shall also apply in cases where there are several guarantors in a commercial debt.

 

ARTICLE (73)

A guarantee shall be commercial if the guarantor has guaranteed a debt which is deemed in regard to the debtor to be commercial unless otherwise provided for by law or agreement, or if the guarantor is a trader and has an interest in guaranteeing the debt.

 

ARTICLE (74)

In a commercial guarantee, the guarantors shall be jointly liable with each other and with the debtor.

 

ARTICLE (75)

Where a trader carries on, for a third party, such business or services as are related to his commercial activities, he shall be deemed to have done so in return of a consideration, save where it is established otherwise; such consideration shall be determined according to the custom and in the absence of such custom, it shall be determined by the Court.

 

ARTICLE (76)

A creditor is entitled to receive interest on a commercial loan as per the rate of interest stipulated in the contract. If such rate is not stated in the contract, it shall be calculated according to the rate of interest current in the market at the time of dealing, provided that it shall not exceed 12% until full settlement.

 

ARTICLE (77)

Where the contract stipulates the rate of interest and the debtor delays payment, the delay interest shall be calculated on basis of the agreed rate until full settlement.

 

ARTICLE (78)

The interest shall be paid at the end of the year if the loan is for one or more years, or on the maturity date of the debt if the loan period is less than one year, unless the commercial or banking practice requires otherwise.

 

ARTICLE (79)

 

Where the loan is for a specified term, the creditor shall not be bound to accept payment prematurely, unless the debtor pays the interest which accrues for the remaining period of the loan term, save where both parties agree otherwise.

 

ARTICLE (80)

Demands and authorizations issued by a trader for matters related to his commercial activities shall not lapse upon his death. Nevertheless, his heirs may cancel same if they decide to discontinue the trade, and in such a case they shall not be deserving of any compensation if they notify in due time that who has contracted with the intestate (or legator) of notify their wish to cancel such demands and authorizations.

 

ARTICLE (81)

  1. Where the commercial obligation is the delivery of a certain thing within a specific season or a time of the year, it shall be referred to the agreement between the two parties, in order to fix the time for delivery, and in case is no such agreement then to the custom prevailing in the country where the delivery is to take place.
  2. As to the method of measuring, weighing or counting the goods, it is the custom prevailing in the country, where the contract was concluded, that shall be applied.

 

ARTICLE (82)

A creditor may not be compelled to accept performance of a contract for the performance of which a term has been fixed, after the expiry of such term and if the debtor fails to perform within the specified term, unless there is an agreement to the contrary.

 

ARTICLE (83)

Where the debt is deferred and the debtor offers to settle it before its maturity, he may not upon payment deduct a part of it therefrom except with the creditor's consent, unless it is otherwise provided for by law or agreement.

 

ARTICLE (84)

Where either contracting party reserves the right to rescind the contract before execution has commenced, such party shall forfeit his right of rescission if he performs his obligations under the contract or if he consents to the other party's performance of his obligations.

 

 

ARTICLE (85)

Excuses and notices in commercial matters shall be through the notary public, by registered letter with acknowledgement of receipt or by cable.

 

ARTICLE (86)

Courts may nor grant a debtor, who is under a commercial obligation a respite for payment nor may they make same payable by installments except with the creditor's consent or under general exceptional circumstances.

 

ARTICLE (87)

Where the debtor settles a commercial debt to the person holding the instrument of such debt marked with acquittal or to the person holding an acquittal from the creditor, he shall be discharged from the debt.

 

ARTICLE (88)

Where the commercial obligation is a sum of money which was known when the obligation arose and the debtor delays payment thereof, he shall be bound to pay to the creditors as compensation for the delay, the interest fixed in Articles (76) and (77), unless otherwise agreed.

 

ARTICLE (89)

For the accrual of delay interest, it is not a condition that the creditor proves  that he sustained damages as a result of such delay.

 

ARTICLE (90)

Interests for delay of payment of commercial debts shall accrue on mere maturity of such debts, unless it is otherwise provided for by law or agreement.

 

ARTICLE (91)

  1. A creditor may claim complementary damages, to be added to the delay interest, and shall not be required to prove that the damages in excess of said interest were caused by the debtor's cheating or gross fault.
  2. Where the creditor, when claiming his right, causes, in bad faith, the prolongation of the dispute, the Court may reduce the interest or it may not award any interest at all for the period of the unjustified prolongation.

 

 

ARTICLE (92)

  1. Any check for the payment of a sum of money or the delivery of goods, may be circulated by way of indorsement if payable to the order of the creditor or by handing in directly if payable to bearer.
  2. Indorsement or handing in directly shall result in the transfer of all rights arising from the check to the indorsee or new bearer.
  3. In case of indorsement, the indorser shall guarantee payment of the right established in the check on maturity date, unless it is agreed in the indorsement phrase to restrict the guarantee to the existence of the right at the time of indorsement.
  4. Where the check is drawn as a result of a commercial transaction, the signatories thereto shall be jointly liable, unless the indorsement phrase provides otherwise.
  5. In all cases, the debtor may not have an objection on the bearer of the check when the payment is based on a personal relationship existing between him and the drawer or the previous bearers, unless the bearer's intent upon receiving the check was to cause harm to the debtor, or unless the payment was related to the debtor's lack of capacity.
  6. The debtor may also refrain from paying the value of the check if such check is not delivered to him marked up with acquittance.

 

ARTICLE (93)

The possession by the debtor of the instrument of the debt constitutes a presumption that he has been discharged of the debt, until otherwise established.

 

ARTICLE (94)

Commercial obligation, whatever their amount, should be proved by all means of evidence, unless otherwise provided for by law or otherwise stipulated in the agreement.

 

ARTICLE (95)

The obligations of traders towards each other and concerning their commercial activities, shall not be hard when there is ....... or each of legitimate ....... on the lapse of ten years from the date on which the performance of the obligation falls due, unless the law stipulates a shorter period.

 

 

 

PART TWO

COMMERCIAL SALE 

CHAPTER ONE

GENERAL PROVISIONS

 

ARTICLE (96)

The general provisions stipulated in this chapter shall not apply to sales, concluded between traders concerning their trading affairs, unless it is otherwise stipulated.

 

ARTICLE (97)

Where the two contracting parties fail to fix the price, the sale shall be concluded at the price reckoned in their dealings, and if there were no previous dealing between them, then at the prevailing price in the market; all this unless it has been revealed from the .......... circumstances the necessity of adopting a different price.

 

ARTICLE (98)

Where both contracting parties agree that the sale price shall be at the market rate, then the ..... shall be ...... at that note on the date and at the venue where the contract is concluded, otherwise stipulated in the agreement, and in case of several market prices then the average price shall prevail.

 

ARTICLE (99)

The two contracting parties may agree to delegate a third party to fix the price of the item being sold. However, if such party fails to fix the price within the prescribed term or within a convenient period and if no prescribed term was stipulated, then the then current market price shall be applied on the date and at the venue where the contract was concluded.

 

ARTICLE (100)

Where the price is estimated on the basis of the weight, it shall mean the net weight, unless there is an agreement or custom to the contrary.

 

ARTICLE (101)

  1. Where it is agreed by both contracting parties that the purchaser may prescribe the form, volume or any other distinguishing features of the item being sold, the purchaser shall do so within the agreed period or within a convenient term if no fixed period is agreed upon.
  2. If the aforementioned time limit has lapsed and the purchaser did not prescribe the features of the item sold, the vendor shall have an option to claim for rescission of the contract and damages , or to prescribe himself the said features and notify the purchaser thereof. This determination shall be deemed final if the purchaser does not object thereto within ten days from his notification.

 

ARTICLE (102)

  1. Where a date is not fixed for delivery, it must be effected immediately upon conclusion of the contract, unless the nature of the item sold requires that it be delivered on another date.
  2. Where it is agreed that the purchaser may fix the date of delivery of the item sold, the vendor is bound to deliver it on such date, with consideration taken as to the period required for the preparation of the sold item being ...... for delivery and to its nature.

 

ARTICLE (103)

  1. The vendor shall bear the liability for the perishing of the sold item until effective or definite delivery thereof to the purchaser.
  2. Where the vendor, at the request of the purchaser, sends the item being sold to other than the designated venue for delivery, the liability for the perishing of the item shall be borne by the purchaser from the date of handing is the item sold to the carrier, unless otherwise agreed upon.
  3. Where the vendor fails to comply with the instructions of the purchaser regarding the method of despatch without a justifiable necessity, he shall be liable for such damages as are sustained by the item sold as a result of such breach.
  4. The purchaser shall, unless otherwise agreed, bear the expenses incurred in delivering the sold item in other than the venue designated for delivery.

 

ARTICLE (104)

Any shortage occurring to the sold item upon its delivery shall not be taken into consideration if custom allows such shortage.

 

ARTICLE (105)

Where the vendor fails to deliver the specific item sold, the purchaser may serve notice on the vendor insisting on performance within a suitable term. Where the vendor fails to perform that obligation, the purchaser shall have an option either to apply to the Court for order to compel the vendor to an execution in kind by delivering to him the sold item - if possible - with payment of damages if necessitated, or to consider the contract rescinded and claim for damages if necessited, or to buy at vendor's expense an object similar to the item sold and claim from him the difference between the price agreed upon and the price paid by him in good faith to obtain such object. Where the sale relates to an item having a known price in the market, the purchaser may claim from the vendor the difference between the price agreed and the market price on the date fixed for delivery, even though he did not buy an object similar to the item sold.

 

ARTICLE (106)

Where the two contracting parties agree that the sold item be delivered is batches, the purchaser may ask for the rescission of the contract if the vendor fails to deliver any of the batches on the fixed date. However, such rescission shall not apply to the batches already delivered, except where the purchaser sustains heavy damages due to the division of the item sold.

 

ARTICLE (107)

Where the purchaser does not pay the price on the date agreed upon, the vendor may, after serving notice to the purchaser, re-sell the goods. If the goods are sold in good faith at a price less than the price agreed upon, the vendor shall be entitled to claim from the purchaser the price difference. Furthermore, if the goods have a known price in the market, the vendor may claim from the purchaser the difference between the price agreed upon and the market price on the date fixed for payment of the price, even though the sale did not effectively take place.

 

ARTICLE (108)

  1. The purchaser, who has paid the full price, may ask the vendor to give him a list of the goods, where it is mentioned that the price has been paid.
  2. Any person, having expressly or implicitly accepted a list of the sold goods, shall be deemed as having agreed to its contents. Where the person receiving the list, does not object to its contents within eight days from the date of receipt, this shall be considered as an implicit acceptance, unless a longer period has been agreed upon.

 

ARTICLE (109)

  1. Where the purchaser refuses to take delivery of the item sold, the vendor may apply to the Court to establish this and grant him permission to sell same under the Court supervision after the lapse of a period fixed by it and notified to the purchaser. However, the Court may order that highly perishable items to be sold without delay and without notice.
  2. The total value of the sale shall be deposited in the treasury of the Court, after deducting therefrom all the expenses incurred by the vendor until the dispute between him and the purchaser is settled.

 

ARTICLE (110)

Save where an agreement or custom stipulates the rescission, if the quantity or type of the goods delivered is different from that agreed, or if the goods are defective, the purchaser may not apply for rescission of the contract unless the difference is so great as to render the goods delivered unsuitable for the purpose for which they were to be used, or difficult to be marketed. The Court may further, upon rejecting the application for rescission of the contract, decide to reduce or complement the price, depending on the deficiency or excess in quantity, the discrepancy in type or the degree of defect.

 

ARTICLE (111)

  1. The purchaser shall, in the cases mentioned in the previous Article, notify the vendor that there is a difference or a defect, within fifteen days of the date on which the item sold is effectively delivered to him, and he must file the action for rescission or reduction of the price within sixty days of such delivery date. However, if the defect is hidden and cannot be detected with the routine examination, the purchaser must then notify the vendor immediately when he discovers it, and lodge the action in warranty of the defect within six months of the date of actual delivery, unless there is an agreement to the contrary.
  2. Where the purchaser does not notify the vendor of the difference or defect, or if he does not file the action for rescission, price reduction or defect warranty within the period hereinabove referred to as the case may be, his action shall not be heard in case of denial or lack of legitimate excuse, unless the purchaser proves cheating on the vendor's part, in which case the action shall not be heard if lodged after the lapse of one year of the delivery date.
  3. The action instituted by the vendor to complement the price due to increase in quantity or in the item standard, shall not be heard after the lapse of sixty days of the date of actual delivery of the item sold.
  4. It is permissible to exempt the purchaser from the periods prescribed in the previous paragraphs or to amend such periods.

 

ARTICLE (112)

  1. Where the item sold is a commodity protected by a registered trade mark, it is permissible to agree that the purchaser may not sell it under a certain specific price.
  2. The Court may decide the non-compliance with this condition if it considers that the item sold to be necessary commodity.
  3. The purchaser's successors shall not be bound to observe the above condition, except if they came to know or they could have known about it.

 

ARTICLE (113)

It is not permissible to agree in supply contracts where the supplier grants certain advantages to the purchaser, to present the latter from buying similar goods to the item sold from another supplier during a period of five years from the date of agreement. Any agreement on a longer period shall be reduced to five years.

 

CHAPTER TWO

CERTAIN TYPES OF COMMERCIAL SALES

SECTION ONE

SALE BY INSTALLMENT

 

ARTICLE (114)

The contract of a sale by installment shall be executed in two copies and shall state the particulars which identify and determine the item sold, as well as the price, the period and conditions of the installment. The seller should handing the buyer one copy of said contract.

 

ARTICLE (115)

The installments shall be paid at the place of residence of the seller, as stated in the contract, unless otherwise agreed upon. Where the installments are collected from the purchaser's place of residence, the purchaser may not charge additional expenses, and acquittance of any installments shall be deemed a quitclaim of all the previous installments unless thee is an evidence to the contrary.

 

ARTICLE (116)

  1. Where the purchaser fails to pay any installment of the price agreed, the seller may, after notice served to the buyer, ask for rescission with damages if justified. However, if it is revealed to the Court that the buyer has executed the biggest part of his obligation, it may grant him a respite for payment and dismiss the claim of rescission if he performs within the prescribed period.
  2. Where a judgement of rescission is rendered, the buyer shall return the item sold to the seller and this latter return to the buyer the installments received after deducting therefrom charges equivalent to the benefit derived therefrom, in addition to an indemnity against the damage sustained by the item sold due to ordinary use thereof; all this unless there is a provision to the contrary in the sale contract and provided that the total amount received by the seller does not exceed the original price amount with its interests.

 

ARTICLE (117)

An agreement that the full price shall fall due, in case one of the installments is not paid on the maturity date, shall only be valid if the buyer fails to pay even though notice is served and seven days have lapsed from the date of notification.

 

ARTICLE (118)

  1. Where the ownership of the movable item sold is retained by the seller pending the payment of all installments, the buyer shall acquire such ownership on payment of the last instalment, and the purchaser shall bear the consequences of the perishing of the item sold from the time of its delivery to him.
  2. Without prejudice to the provisions stipulated in the Bankruptcy Part hereof, the condition related to the retention of ownership may not apply to a third party unless it is put in writing in the form of an agreem and prior to such third party's right.

 

ARTICLE (119)

 

Where the third party's right is subsequent to the sale by installment contract, the provision related to the retention of ownership may apply to such third party, if the said provision is made in writing in an agreement having a fixed date and prior to the execution proceedings undertaken by the creditors on the item sold.

 

ARTICLE (120)

A purchaser may not dispose of the item sold before he has paid all installments, save where the seller agrees to this in writing. Any disposal by the buyer in violation of this provision, shall not apply to the seller, unless the third party proves his good will, in which case the remaining installments shall fall due.

 

ARTICLE (121)

The provisions of the preceding Articles regarding sales by installment, shall apply even if the contracting parties have termed the sale as a lease.

 

SECTION TWO

OPTIONAL PUBLIC AUCTION SALE OF SECOND-HAND MOVABLES

 

ARTICLE (122)

  1. The provisions of this Section shall apply to optional sales by public auction of second-hand movables.
  2. Public auction sale shall mean any sale which any person may attend even if bidding is restricted to a specific group of persons.
  3. Second-hand movables shall mean all movable properties the possession of which was transferred to the consumer for any of the causes of property acquisition.

           

ARTICLE (123)

  1. Without prejudice to the provisions of the Civil Procedures Law and the laws organizing certain kinds of sales, the movables referred to in the preceding Article may not be sold by auction except through evaluation by an expert appraiser in a hall specially allocated for this purpose, or at the venue where the movables are originally located, or at such other venue where a licence therefor may be issued by the specialized authorities in the concerned Emirate.
  2. A bona fide buyer may request nullification of the sale effected contrary to the provisions of the preceding Article and the action in nullification may not be heard in case of denial and lack of legitimate excuse after the lapse of thirty days of the date of sale.
  3. The provisions of the two preceding paragraphs shall not apply to second-hand items, when the value of the part thereof offered for sale by public auction does not exceed (10,000) Ten Thousand Dirhams.

 

ARTICLE (124)

  1. The expert appraiser undertaking the sale by public auction shall keep a specific book in Arabic, where he shall enter all the items intended for sale, the initial estimation of their value and the names of those requesting sale. The appraiser shall further affix on the goods offered for sale labels whose numbers shall be entered in the said book and shall further register therein the outcome of each sale.
  2. Any person who violates the provisions of the preceding paragraph shall be penalized by a fine which may not exceed (10,000) Ten Thousand Dirhams. In case of repetition of the violation, the fine shall not exceed (20,000) Twenty Thousand Dirhams, in case of non-compliance to any other penalty or disciplinary sanction provided in the resolutions organizing the practice of the profession of appraiser.

 

ARTICLE (125)

Where the initial estimation of the second-hand goods offered for sale at a public auction exceeds the amount of Dhs 2000,000 (Two Hundred Thousand Dirhams), the appraiser shall publish the same in one daily or more - one of which in Arabic - issued in the State, seven days at least prior to the sale, and he shall fix one day before the sale date for inspection of the goods offered.

 

ARTICLE (126)

  1. The buyer who wins the auction shall pay half the price at the auction session and the balance when he takes delivery of the object for which he was the successful bidder, and the delivery must take place within one week of the date on which the auction was knocked down.
  2. Where the successful bidder does not pay the balance or he fails to appear on the date fixed in the preceding paragraph in order to take delivery of the item knocked down to him, the sale shall be repeated by public auction as well, within fifteen days of the delivery date, and the successful bidder of the first sale may not bid again in the second sale.
  3. Where the second auction is awarded at a price less than that awarded at the first auction, the buyer who failed to pay the balance price or to appear in order to take delivery of the item knocked down to him, shall be bound to pay the difference. However, where the second auction is awarded at a higher price, the increase shall be for the eventual seller.
  4. The price shall be paid to the appraiser who carried on the auction, and the appraiser shall be directly responsible for payment of such price to the person in favour of whom the auction was effected.
  5. The person requesting the sale may not, either personally or through others, bid on the goods offered by him for sale.

 

ARTICLE (127)

The hall owner or the appraiser, as the case may be, shall for the fee or commission to which he is entitled, have a right of lien over the price of the item he is selling at the public auction.

 

ARTICLE (128)

A decision of the Minister of Economy and Commerce, in consultation with the local specialized authorities shall be issued for the organization of the practice of the profession of appraisers.

Without compliance with any severer punishment stipulated in another law, any person violating the provisions of such decision, shall be inflicted to pay a fine not exceeding (5,000) Five Thousand Dirhams.

In all cases, the judge shall order that the office or hall be closed, and the billboards and panels which the violator had used be removed. Such Court order shall be published at the sentenced party's expense, in two Arabic dailies issued in the State.

 

SECTION THREE

PUBLIC AUCTION SALE AT REDUCED PRICES  AT COMMERCIAL STORES

FIRST: SALE BY PUBLIC AUCTION

 

ARTICLE (129)

Commercial stores shall be prohibited from selling their goods at public auction, except in one of the following cases and after obtaining the necessary authorization from the local authorities:

  1. -Final liquidation of the commercial store.
  2. -Discontinuation of trading once and for all with one or more of the items, which the commercial store deals with in its trade.
  3. -Liquidation of one of the commercial store's branches, unless such branch is located in the same city as the head office of the commercial store.
  4. -Moving the main store and branches thereof, from one Emirate to the other. In such case, the liquidation must be effected within four months at the most, and it shall result in a prohibition to carry on the activity discontinued due to the liquidation in such Emirate, before the lapse of one year at least from the date on which the auction was completed.
  5. -Clearance of the goods which have become defective due to fire, water leakage, humidity, insects raging or the like.

 

SECOND: SALE AT REDUCED PRICES (SALES)

 

ARTICLE (130)

  1. A commercial store and its branches located in the same city, may only sell at reduced prices the same goods, twice at the most during the same year in case of seasonal goods, and once for all other goods.
  2. Sales may not continue for more than thirty days, and seasonal sales may not start except after the lapse of five months at least after the end of the preceding seasonal sales.
  3. Any action with the purpose of announcing a sale at reduced price shall be considered as "Sales".
  4. Sales may only be effected or announced by any media means, after obtaining a permit therefor from the specialized authorities in the concerned Emirate, which shall state the starting and ending date of the sales and the selling prices prior to and during such period. Such permit may only be granted to those persons holding a valid trading license and registered in the concerned Chamber of Commerce.
  5. The trader shall also observe any rules and principles organizing sales and issued by the specialized Authority in the concerned Emirate.

 

ARTICLE (131)

The employees of the specialized Authority in the concerned Emirate shall have the right to control the implementation of the provisions of Articles (129) and (130) of this law. They are entitled to that effect to enter the commercial store which holds a permit to carry out the clearance or sales, and to ask for the papers and documents pertaining to the operation, subject of the permit, and to record any breaches of its provisions.

 

THIRD: THE PENALTIES

 

ARTICLE (132)

Any person who violating the provisions of Articles (129), (130) and (131) shall be penalized by a fine not exceeding (20,000) Twenty Thousand Dirhams. In case of repetition of the violation, a fine of (30,000) Thirty Thousand Dirhams at the most shall be inflicted upon him, and the violator may be prohibited from obtaining permits for sales for the period of three years from the date on which he committed the violation.

 

SECTION FOUR

CERTAIN KINDS OF INTERNATIONAL SALES

1- F.O.B. SALES

 

ARTICLE (133)

  1. An F.O.B sale is one by which the item sold is delivered at the port of shipping on board of the vessel designated by the buyer for its transport.
  2. The buyer shall in this kind of sale execute the sea transport contract, pay freightage and notify the seller within reasonable time of the name of the vessel designated for the transport, as well as the venue and date or time limit set for shipping.
  3. The buyer may entrust the seller with the execution of both transport and insurance contracts for the goods on behalf of the buyer,and the relationship between the seller and the buyer in this respect shall be governed by the provisions of the agency contract.

 

ARTICLE (134)

  1. The seller shall pack and transport the item sold to the port of shipping, and ship it on board of the vessel designated by the buyer, on the specified date and within the time limit set for shipping.
  2. The seller shall bear the expenses of packing and the costs of checking, measuring, counting or weighing the item sold before shipping it.
  3. The seller shall without delay notify the buyer that the item sold has been shipped and shall dispatch to him the papers evidencing this, but the buyer shall bear the costs of such notice and dispatch.

 

ARTICLE (135)

 

  1. Where the item sold needs an export permit for it to be exported outside the State, or any other governmental licence, the seller shall be bound to obtain same at his own expense.
  2. The buyer shall undertake to obtain at his own expense the import permit and other documents required for this purpose.
  3. The seller shall duly obtain a certificate of origin for the item sold and shall present it to the buyer, who shall bear the expenses related thereto, unless otherwise agreed upon.

 

ARTICLE (136)

The seller shall provide such assistance as will be needed to enable the purchaser to obtain the bill of lading and such other documents as should be issued in the country of shipping of the item sold, in order to enable the buyer to import it or make its passage in transit through another state easur; the buyer shall bear the expenses incurred for the obtaining of such papers.

 

ARTICLE (137)

The seller shall pay all the sums due in connection with the item sold, including the export charges and the shipping expenses upto the moment when the item sold crosses, during its shipping, the barrier of the vessel, as well as the liability for damages which may be suffered by the item sold until that stage. However, any sums due or damages sustained thereafter shall be borne by the buyer.

 

ARTICLE (138)

Where the arrival of the vessel, designated by the buyer for transporting the goods, is delayed beyond the expiry of the time limit set for shipping, or where the vessel departs the said port before expiry of the said time limit, or if the vessel is unable to ship the goods for a reason that cannot be attributed to the seller, the buyer shall be liable for the resulting additional costs and the damages suffered by the item sold from the expiry date of the time limit set for the shipping, provided that the item sold has been, on that date, designated per se.

 

ARTICLE (139)

Where the buyer fails to notify the name of the vessel at the appropriate time or if he reserves the right to fix the date of delivery during a set a time limit and he fails to do so or to designate the port of shipping but fails to issue specific instructions during such time limit, he shall be liable for the resulting additional costs and such damage as may be suffered by the item sold from the expiry of the date of notification or the time limit agreed upon to designate the date for delivery, provided that the item sold has been, on that date, designated per se.

 

ARTICLE (140)

Where it is agreed that the item sold shall be delivered on the dock of the port of shipping where the vessel designated by the buyer is anchored, the sale shall be termed F.A.S., and such sale shall be governed by the provisions of the F.O.B. sales, except the shipping of the goods on board of the vessel.

 

2 - C.I.F SALES

 

ARTICLE (141)

 

  1. A C.I.F. sale is one concluded against a lump sum price covering the price of the item sold, the maritime insurance charges and freight by vessel to the port of destination.
  2. The goods shall be considered as having been delivered to the buyer upon completion of shippment by the vessel, and the liability for the perishing shall from that moment be borne by the buyer.
  3. Where the seller fails to provide insurance cover, the sale shall be deemed a (C.&F.) sale.

 

ARTICLE (142)

The seller shall execute a transport contract for the goods with a reputable carrier, according to the usual (customary) conditions,and shall choose a suitable vessel to carry goods of the same type of the item sold. The seller shall further pay the freight and any other sums which the carrier might stipulate to be paid at the port of shipping.

 

ARTICLE (143)

  1. The seller shall buy an insurance policy for the item sold from a reputable insurer covering the risks of transport and he shall assume all the costs and expenses required therefor.
  2. The insurance policy shall be by a negotiable instrument and in accordance with the conditions of prevailing practice, provided that the insurance sum shall not be less than the price mentioned in the sale contract.
  3. The seller shall only be bound only to insure against the normal risks of transport, and he shall not be required to insure against additional risks  and the risks of war, except where an agreement to that effect is made with the buyer in the sales contract.
  4. The seller shall not bear any responsibility towards the buyer for the inability of the insurer to pay the insurance amount, if he has bought the insurance policy for the item sold from a reputable insurance company.

 

ARTICLE (144)

  1. The seller is bound to pack the item sold and ship it on board of the vessel within the time limit set for shipping, or within the period dictated by the practice. The seller shall further bear the expense of packing, the costs of checking, measuring, weighing or counting the item sold as is required for its shipping.
  2. The seller shall, without delay, notify the buyer of the name of the vessel and completion of shipping.

 

ARTICLE (145)

  1. Shipping of the item sold by the seller shall be proved by means of the bill of lading, where the word "shipment' is mentioned. However, if the bill of lading states  "under shipment", the buyer should prove the shipping did not  actually take place on the date mentioned in the bill.
  2. Where the bill of lading contains a statement, handwritten and signed by the captain of the vessel, certifying that the goods were actually shipped on the specified date, the buyer in such a case does not have to prove the contrary when dealing with the seller.

 

ARTICLE (146)

  1. The seller is bound to duly obtain a certificate of origin for the item sold  and shall present it to the buyer, who shall bear the expenses related thereto, unless otherwise agreed upon.
  2. The seller shall further provide such assistance as will be needed to enable the purchaser to obtain the necessary documents issued in the country of shipping of the item sold, in order to facilitate its import or passage in transit through another country.

 

ARTICLE (147)

  1. The seller shall pay all the sums due in connection with the item sold, until its shippment on the vessel, including the export fees.
  2. However, the buyer shall bear the import fees, and the charges and expenses to clear the item sold at the port of discharge.

 

ARTICLE (148)

The seller shall bear the consequences of the damage which may be sustained by the item sold, up to the moment when it crosses the barrier of the vessel; such liability shall thereafter devolve on to the buyer.

 

ARTICLE (149)

  1. The seller shall send without delay to the buyer, a clean negotiable bill of lading which is suject to circulation, addressed to the port designated for discharge, and there shall be attached to the bill of lading a list of the goods sold, their value, the insurance policy or a certificate in lieu thereof, in addition to any other documents required by the buyer. Where the bill of lading refers, certain matters, to the condition of the charter of the vessel, a copy of the latter shall also be attached to the bill of lading.
  2. A bill of lading is deemed to be clean if it does not contain any express additional conditions confirming the existence of defects in the item sold or in the method of its packing. But such additional conditions do not include a reference in the bill of lading to the prior use of the containers or the wrappings or the non-liability for any damage that may be sustained because of the nature of the item sold or of the carrier's ignorance of the contents or weight of the packages.
  3. The certificate substituting the original insurance policy, shall be issued by the insurer and shall include the basic conditions provided for in the original policy vesting unto the bearer the rights stated therein.

 

ARTICLE (150)

  1. The buyer shall not be bound to accept the documents sent to him by the seller, if they do not conform to the stipulations of the sale contract. The buyer shall be deemed to have accepted such documents if he does not raise any objection via the seller's accountant within seven days of the date of receipt. The objection shall be made by notice served in writing to the seller requiring him to send documents conforming to the conditions agreed upon within a reasonable time limit, and the buyer may after the expiry of said time limit, apply for rescission of the sale and payment of damages, if relevant.
  2. Where the buyer returns the documents for certain specified reasons or accepts them subject to reservations, he may not thereafter make any objection for other than the causes and reservations already made.
  3. Where the buyer returns the documents without any legitimate reason, he shall be liable to compensate the seller for whatever damage that may result therefrom.

 

ARTICLE (151)

Where the vessel carrying the item sold arrives before the arrival of the documents or where the documents are received incomplete, the seller shall immediately, upon being informed of the same, carry out whatever action necessary to enable the purchaser to obtain a copy of the documents which had not arrived or to replace the missing documents; the seller shall bear the required expenses and any damages, if relevant.

 

ARTICLE (152)

With consideration given prejudice to the provisions of Article (111), the buyer shall be bound to receive the item sold upon its arrival at the port of discharge agreed upon: and the buyer shall bear such sums as will be due on the item sold during its transport, and the expenses of discharge upon its arrival, save where the carrier has obtained such sums and expenses at the port of shipping or where it is agreed in the sale contract that they shall be borne by the seller (the sale being C.I.F. until the discharge).

 

ARTICLE (153)

Where the buyer reserves the right to fix a date for the shipping or to designate the port of discharge within a set time limit but fails to issue specific instructions during such time limit, he shall be liable any additional expenditure resulting therefrom and such damage as may be suffered by the item sold until the expiry of the time limit for shipping, provided that the item sold has been, on that date, designated per se.

 

ARTICLE (154)

Where it is revealed that the goods do not tally with the specifications stated in the documents and if the discrepancy does not exceed the limit allowed by custom, the buyer shall be bound to accept same with a reduction of the price amount to a sum to be assessed by the experts according to the practices prevailing at the port of arrival.

 

3 - ARRIVAL SALE

 

ARTICLE (155)

A contract which contains  such conditions as will render the seller liable for the perishing of the goods after shippment, or makes the performance of the contract conditional on the safe arrival of the vessel, or which vests the buyer with an option to accept the goods according to the contract or according to the proforma delivered to him at the time of contracting, shall neither be a C.I.F nor a F.O.B. sale, but shall be deemed to be a sale conditional upon delivery at the place of arrival.

 

4- SALE AT THE AIRPORT OF DEPARTURE

 

ARTICLE (156)

A sale at the airport of departure is one by which the goods sold are delivered at the airport of departure, by way of placing them at the disposal of the air carrier designated by the buyer or chosen by the seller.

 

ARTICLE (157)

The seller shall, after entering into the contract, undertake to deliver the goods at the airport of departure to the air carrier or to his representative at the place and on the date agreed upon or at the place designated by the buyer, according to the rules and practices applicable at the airport of departure.

The seller shall without delay notify the buyer that  the delivery of the goods was effected, by any means of wire or wireless communications.

 

ARTICLE (158)

  1. The seller shall conclude a transport contract for the goods, at the expense and responsibility of the buyer if it were requested by this latter; or the seller shall perform this in case the buyer has issued no instructions, within a reasonable time concerning the transport of the goods, and such act shall be according to the applicable commercial customs. The seller may refrain from concluding a transport contract, in which case the buyer shall by promptly notified thereof.
  2. Where the seller takes it upon himself to conclude a transport contract, he shall abide by the instructions issued to him by the buyer and choose an airplane suitable to carry goods of the same nature of the item sold, on the ordinary flight from the airport of departure to the airport of arrival designated by the buyer, or to the closest airport to the buyer's establishment.

 

ARTICLE (159)

  1. The seller is bound to pay all the costs and insurance on the goods as a result of their export.
  2. The seller is also bound to supply the buyer with all the documents needed for the receival of the goods, that would be at the disposal of the buyer

 

ARTICLE (160)

Where the air carrier or the other person designated by the buyer refrains from taking delivery of the goods at the airport of departure, or otherwise if the buyer does not provide the seller within a reasonable time with the instructions required for the transport of the goods, the seller shall as promptly as possible notify the buyer thereof.

 

ARTICLE (161)

In the event where the seller is not bound to conclude the transport contract for the goods, the buyer shall at his own expense be bound to organize the transport operation of the goods from the airport of departure to the airport of arrival. The buyer shall further designate the air carrier or his representative or any other person to whom the goods are to be delivered, and he shall notify the seller within a reasonable time thereof.

Where the buyer does not notify the seller, within a reasonable time, of the instructions required for the transport of the goods, the buyer shall bear all the additional costs arising therefrom, as well as any damage that may be sustained by the goods, from the date fixed for delivery, provided that the goods were allotted or designated per se.

 

ARTICLE (162)

Where the air carrier, or any other person designated by the buyer, refrains from taking delivery of the goods, the buyer shall bear all the additional costs arising therefrom, as well as any damage that may be sustained by the goods, from the date on which the goods had become ready for delivery, provided that the goods were allotted and designated per se.

 

ARTICLE (163)

The sale contract in the above international sales shall be separate and shall not affect the relations between the seller, the buyer and the carrier in the transport contract, or between the buyer and the bank in the documentary credit contract.

 

PART THREE

COMMERCIAL MORTGAGE

 

ARTICLE (164)

  1. A commercial mortgage is the one contracted on a movable property in security of a commercial debt.
  2. With the exception of the restrictions stipulated herein or in any other law, a commercial mortgage may be proved by all means of evidence in regard to the contracting parties and  against third parties.

 

ARTICLE (165)

  1. A commercial mortgage shall not be effective against the debtor or a third party, unless possession of the mortgaged article passes to the mortgagor or to such other person as is appointed by both contracting parties and remains in the possession of either such party receiving it until the lapse of the mortgage; or unless it is placed under joint possession in such manner as to prevent the mortgagee to dispose thereof without the knowledge of the mortgagor.
  2. The mortgagor or the person appointed by the contracting parties shall be deemed as having possession of the mortgaged article if it is placed at his disposal in such manner as will lead others to believe that the article has come into his custody; or if he receives a deed representing the mortgaged article vesting unto its holder the sole right to take delivery of such article.
  3. Possession of rights passes by the delivery of the cheques establishing them; and where a cheque has been deposited with a third party, the delivery of the deposit receipt shall be deemed as the delivery of the cheque itself, provided the cheque is adequately described in the receipt and provided that the depositary accepts possession thereof for the account of the mortgagor. In such case, the depositary shall be considered as having waived every right he had, to retain the cheque for his own account for a reason existing prior to the mortgage, unless he had reserved such right when he accepted to hold possession of the cheque for the account of the mortgagor.

 

ARTICLE (166)

  1. Where the mortgaged item consists of nominal cheques, mortgage thereof shall be made in writing with a waiver of such cheques stating that it is a security. This shall be marked on the cheque itself and such waiver shall be entered in the registers of the authority having issued the cheque. The rank of the mortgagor shall be determined as of the date of such entry.
  2. As for promissory notes, mortgage thereof shall be effected by an endorsement stating that the value is for mortgage, security or any other statement to that effect.

 

ARTICLE (167)

  1. A debtor who is indebted with a commercial debt may mortgage in favour of his creditor and by a written instrument a debt owed to him by a third party, in which case he shall have to deliver to the mortgagor the deed establishing the said debt.
  2. The mortgage of a debt shall not be valid as against the debtor on whose debt the mortgage was effected, unless such mortgage is notified to him or unless he accepts it. It shall not either be valid as against a third party, unless the mortgagor holds possession of the mortgaged debt deed. 3. The rank of the debt shall be determined as of the date of notification or acceptance.

 

ARTICLE (168)

A mortgagor is bound to take all the necessary measures to safeguard the mortgaged article and undertake maintenance thereof. Where the mortgaged article is an actual commercial paper, the mortgagor shall on the maturity date carry out the proceedings necessary to protect the right established therein and collect it. The mortgagee shall be bound to pay all expenses incurred by the mortgagor in this regard.

 

ARTICLE (169)

A mortgagor shall use on behalf of the mortgagee all the rights and  procedures relevant to the article mortgaged, to receive its value, profits, interests and any other sums resulting therefrom, he shall however deduct the sums received from the value of the expenses incurred on behalf of the mortgagor, then, from the interests, then, from the principal amount secured by the mortgage, save where the agreement provides otherwise.

 

ARTICLE (170)

A mortgagor shall, when requested by the mortgagee, deliver to him a receipt showing the nature, type, quantity, weight and other distinguishing features of the  mortgaged article.

 

ARTICLE (171)

  1. Where a mortgage is effected on a fungible article, it shall remain valid even if the mortgaged article has been replaced by another article of the same kind.
  2. Where the mortgaged article is non-fungible, the mortgagee may replace it by another article, provided that it is agreed upon to that effect in the mortgage contract and that the mortgagor accepts the substitute, without prejudice to the rights of a bona fide third party.

 

ARTICLE (172)

  1. Where the mortgagee fails to pay on the date of maturity the debt secured by the mortgage, the mortgagor may, after the lapse of seven days from the date of service of notice on the debtor to pay, submit a petition to the Court to the effect of authorizing him to sell the mortgaged article. The petition shall be looked into promptly and without delay and the Court shall determine the mode of payment.
  2. The mortgagor shall have priority right to collect his debt- principal, interests and expenses incurred in his claim of it - from the price resulting from the sale.

 

ARTICLE (173)

Where the mortgage is established on several properties, the mortgagor is entitled to designate the property to be sold unless otherwise agreed upon. In all cases, the sale may only cover what is needed to settle the mortgagor's right, except where the item sold is indivisible.

 

ARTICLE (174)

Where the market price of the mortgaged article decreases and becomes insufficient to secure the debt, the creditor may fix a suitable time limit for the debtor to complement the security; if the mortgagee refuses to do so or where the time limit expires and the mortgagee fails to complement the security, the creditor may cause the article mortgaged to be sold even before the maturity date by adopting the proceedings stipulated in Article (172).

 

ARTICLE (175)

Where the mortgaged article is subject to perishing, deterioration or decrease in value, or where its possession necessitates the incurring of exorbitant expenses and the mortgagee is unwilling to replace it by another article, either the creditor or the mortgagee may petition the Court requesting an authorization to sell it forthwith and determine the method of sale, in which case the mortgage transfers to the price resulting from the sale.

 

ARTICLE (176)

  1. An agreement concluded at the time or after the establishment of a mortgage which vests the mortgagor, in case the debtor does not settle the debt on the maturity date, with the right to acquire or sell the mortgaged article, without observing the provisions and proceedings provided for in Article (172).
  2. Nevertheless, after the maturity of the whole debt or an installment thereof, it may be agreed that the debtor shall assign to the creditor the whole or part of the mortgaged article in settlement of the whole debt or part thereof.

 

ARTICLE (177)

Where the mortgaged article is a cheque, the nominal value of which has not been paid in full, the mortgagee shall, when called upon to pay the unpaid portion, present to the mortgagor the sums of money needed to pay such portion at least two days before the maturity date; otherwise the mortgagor may sell the cheque according to the proceedings provided for in Article (172).

 

PART FOUR

DEPOSIT IN PUBLIC WAREHOUSES

 

ARTICLE (178)

  1. Deposit in public warehouses is a contract pursuant to which the warehouseman - whether an individual, a company or a public entity - undertakes to receive and store goods for the account of the depositor or any other person to whom ownership or possession thereof devolves pursuant to the cheques which represent them.
  2. No public warehouse vested with the right to issue negotiable instruments representing the goods deposited therein, may be constructed or exploited except by virtue of a licence issued by the competent authority in the concerned Emirate, and according to such terms and conditions as are laid down by the Minister of Economy and Commerce in consultation with the local competent authority.
  3. Any warehouse where goods are received for deposit and no storage and mortgage deed are issued against such goods, shall not be subject to the provisions of public warehouses.
  4. Any person exploiting a public warehouse shall cover it with an insurance against the risks of fire, perishing and theft.

 

ARTICLE (179)

  1. The warehouseman may not practice, on in any capacity, either for himself or for others any commercial activity having for object goods of the same kind as the goods which he is licensed to keep in his warehouse and issue documents representing such goods.
  2. The foregoing provision shall apply if the person in charge of exploiting the warehouse is a company where one of its partners who owns at least ten percent of its capital practices on a commercial activity included in the restriction provided in the preceding paragraph.

 

ARTICLE (180)

  1. The depositor shall provide the public warehouse with correct data about the nature, type, value and quality of the goods deposited.
  2. The depositor is entitled to examine the goods delivered in the public warehouse for his account and to take samples thereof.

 

ARTICLE (181)

  1. The warehouseman shall be responsible for the goods handed over to him upto an amount not exceeding that estimated by the depositor.
  2. The warehouseman shall not be liable for any loss or deficit sustained by the goods if resulting from a force majeure or from the nature of the goods or packing thereof.

 

ARTICLE (182)

The warehouseman may, after notifying the depositor, apply to the Court to which jurisdiction the public warehouse pertains to grant him permission to sell the goods deposited if they are subject to immediate damage, in which case the Court shall  designate the method of sale.

 

ARTICLE (183)

  1. The depositor shall receive from the warehouseman a storage receipt showing the depositor's name, occupation and domicile, as well as the type, nature and quantity of the goods deposited, the name and location of the warehouse, name of the insurer of the goods -if any- and such other particulars as are required to identify the goods and indicate their value.
  2. A mortgage deed stating all the data mentioned in the storage receipt shall be attached to each storage receipt.
  3. The warehouseman shall keep one true copy of the original of the storage receipt and the mortgage deed.

 

ARTICLE (184)

Where the goods deposited in respect of which a storage receipt and a mortgage deed have been issued are fungible, they may be replaced by goods of the same nature and quality provided that a stipulation to that effect has been included in both the storage receipt and the mortgage deed, in which case all the rights and privileges of the receipt or deed holder shall devolve upon the new goods.

 

ARTICLE (185)

  1. The storage receipt and the mortgage deed may be issued in the  name or to the order of the depositor.
  2. Where the storage receipt and the mortgage deed are made to the order of the depositor, he may assign them together or separately by endorsement.
  3. The endorsee of a storage receipt and a mortgage deed or of either may request that the endorsement be registered along with his domicile and occupation on the copy kept by the warehouseman. 

 

ARTICLE (186)

  1. The endorsement of the storage receipt and the mortgage deed must bear a date.
  2. Where the mortgage is found to be seperate from the storage receipt, the endorsement shall comprise, besides the provision of authority, the sum of the debt secured by the mortgage, the maturity date, the creditor's name, occupation, domicile and the signature of the endorser.
  3. The endorsee shall request that the mortgage deed endorsement as well as any relevant particulars be registered in the books of the warehouse and that the mortgage deed be marked up with such endorsement and particulars.

 

ARTICLE (187)

  1. The holder of both the storage receipt and the mortgage deed is entitled to take delivery of the goods deposited.. However, he may request that the goods be divided into several batches and the receival of a storage receipt and mortgage deed for each batch.
  2. The holder of the mortgage deed alone without the storage receipt shall have a right of mortgage on the goods deposited.
  3. The holder of the storage receipt alone without the mortgage deed has the right to recover the goods deposited provided that he pays the debt guaranteed by the mortgage deed if such debt is due, and if not, he may recover the goods before the maturity date of the debt, as long as he deposits with the warehouseman a sufficient sum to pay off the debt with its interest and expenses until it falls due. This provision shall apply if the debt is due and the holder of the mortgage deed does not appear to cash it. The recovery of the goods deposited may be restricted to one part thereof of after paying a sum that is proportionate to the value of such part.

 

ARTICLE (188)

Where the debt secured by the mortgage deed is not paid on the maturity date, the holder of the mortgage deed seperate from the storage receipt may request for the goods mortgaged to be sold, by adopting the proceedings stipulated in Article (172).

 

ARTICLE (189)

  1. The mortgagor shall have a priority right over all the creditors for collecting his right from the cost of the goods after deduction of the following amounts:  a. taxes and duties due on the goods;
    1. judicial expenses incurred for the joint interest of the creditors;
    2. expenses incurred for the safekeeping, storage and sale of the goods.
  2.  
  3. Any amount exceeding the sum due to the holder of the mortgage deed shall be paid to the holder of the storage receipt if he is present at the time of the sale of the goods. However, if he is not present, the same shall be deposited in the Treasury of the Court which has ordered the sale.

 

ARTICLE (190)

  1. The holder of a mortgage deed may not have recourse against the debtor or the endorsers until execution over the mortgaged goods has been effected and it has been established in that it is insufficient to pay off the debt.
  2. The holder of a mortgage deed must have recourse against the endorser within fifteen days from the date on which goods are sold, otherwise action shall be rejected in case of denial.
  3. In all cases, the holder of a mortgage deed shall forfeit his right of recourse against the endorsers if he fails to commence the execution proceedings over the mortgaged goods within thirty days from the maturity date of the debt.

 

 ARTICLE (191)

Where the goods suffer an accident, the holder of the storage receipt or the mortgage deed shall have all the rights over the value of the insurance which accrues upon the occurrence of such accidents as those he had over the goods.

 

ARTICLE (192)

  1. In case of loss or perishing of the storage receipt, the ex-holder thereof may apply to the Civil Court to which jurisdiction the public warehouse pertains, for an order to be issued to deliver a copy to him of the said receipt, provided that he establishes his ownership thereof and provides a sufficient guarantor or security.
  2. In case of loss or perishing of the mortgage deed, the ex-holder may obtain an order from the Court against the debtor for payment of the secured debt upon maturity; provided that he produces a sufficient guarantor or security. If the debtor fails to execute the order, the person in whose favour the order was issued may request that the goods mortgaged be sold by adopting the proceedings stipulated in Article (172), provided that the endorsement has been registered on the copy kept by the warehouseman, and that the notice requiring payment contains the particulars of such endorsement.

 

ARTICLE (193)

  1. A guarantor who has been presented in case of loss of the storage receipt shall be discharged of liability upon recovery  of the goods or with the lapse of three years if no claim for the recovery of the goods is submitted to the warehouse.
  2. A guarantor who has been presented in case of loss of the mortgage deed shall be discharged of liability with the lapse of three years from the date of entering the endorsement in the books of the public warehouse.

 

ARTICLE (194)

  1. Where the depositor fails to recover the goods on the expiry of the deposit contract, the warehouseman may request the sale thereof by adopting the proceedings provided for in Article (172); he shall collect the sums due to him from the proceeds of the sale and hand over the balance to the depositor or deposit such balance in the Court Treasury for the depositor's account.
  2. The provision of the preceding paragraph shall also apply if the deposit term is not fixed and one year after the depositor failing to apply for the recovery of the goods or expressing  his wish to carry on with the deposit contract. 

 

ARTICLE (195)

  1. Without compliance with to any severer punishment, any person who establishes or exploits a public warehouse without obtaining the licence stipulated in paragraph (2) of Article (178) shall be sentenced to imprisonment and a fine ranging between (5,000) Five Thousand Dirhams minimum and (20,000) Twenty Thousand Dirhams maximum or with either penalty.
  2. The Court may, in case of conviction, order the closure of the warehouse until the violator obtains the required licence, or it may also decree the liquidation of the warehouse.

 

 

PART FIVE

STOCK EXCHANGE MARKET

 

ARTICLE (196)

A market for stock exchange may not be opened in the State except pursuant to the approval of the Council of Ministers and a Federal Law shall be enacted to regulate the stock exchange market.

 

PART SIX

COMMERCIAL AGENCY

 

CHAPTER ONE

GENERAL PROVISIONS

 

ARTICLE (197)

An agency shall be commercial when it relates to commercial activities.

 

ARTICLE (198)

  1. A commercial agency shall be deemed subject to remuneration, save where otherwise agreed upon.
  2. Where the agent's fee has not been fixed in the agreement or has not been stated in the law, it shall be determined according to customs, and in the absence of custom the Court shall estimate it.

 

ARTICLE (199)

The fee shall accrue to the agent by the mere execution of the transaction assigned to him, or if he proves that it was not executed due to reasons attributed to the principal. In all other cases, the agent shall only be entitled to a remuneration for his efforts and expenses in accordance with customs -if any- or pursuant to the Court's estimation.

 

ARTICLE (200)

The commercial agency, even though it has a general power of attorney, shall apply only to commercial business, save where otherwise agreed upon.

 

ARTICLE (201)

Where the commercial agency is granted for a specific commercial transaction, the agent may carry out all the actions required to execute such transaction without the need to obtain an authorization from the principal.

 

ARTICLE (202)

  1. The agent shall abide by the compulsory and express instructions of the principal , and if he violates them without an acceptable excuse, the agent may refuse the transaction. However, in case of advisory instructions issued by the principal, the agent shall have the exclusive authority to act within the scope of the general objective set by the principal for the agent.
  2. Where no express instructions are issued by the principal concerning the  transaction, the agent shall delay its execution and request instructions from the principal, unless the delay in implementing the transaction may cause damage to the principal or unless the agent is authorized to act without instructions from the principal.

 

ARTICLE (203)

Where the agent implements the tasks assigned to him under conditions that are more beneficial than those stipulated in the agency, he may not acquire the difference which in such a case belongs to the principal, save where otherwise agreed upon.

 

ARTICLE (204)

Where the goods or items held by the agent for the account of the principal are highly perishable or are subject to a drop in value and no instructions were received from the principal in this respect within a reasonable time, the agent may petition the Court requesting a prompt authorization to sell them and determine the method of sale.

 

ARTICLE (205)

The agent may refrain from performing the work entrusted to him where performance requires exorbitant expenses which have not been paid by the principal, unless otherwise agreed upon between the two parties or unless there previous dealing between them which is to the contrary, and provided that the agent such expenses.

 

ARTICLE (206)

Where the agent refuses to execute the transaction entrusted to him, he has to forthwith notify the principal thereof. In such a case, the agent shall safekeep the goods and other things which he keeps for the principal until he receives instructions in this respect. If the instructions are not received within a reasonable time, the agent may request the Court to authorize him to deposit the goods and other things with a trustee to be appointed by the Court.

 

ARTICLE (207)

The agent is liable for such damages and losses as are suffered by the goods and other items which he keeps for the principal, save where such damages or losses result from a foreign cause beyond the agent's control or from a defect that is inherent to the goods or items.

 

ARTICLE (208)

The agent shall not be bound to insure the articles which he keeps for the principal unless the latter so requires, or where insurance is obligatory according to the law or the custom, or if the nature of the article so dictates.

 

ARTICLE (209)

1. The agent may not constitute himself as a second party to the transaction assigned to him for execution except in the following cases:

  1. If the principal authorizes him to do so.
  2. If the principal's instructions concerning the transaction are express and specific, provided the agent has implemented them accurately.
  3. If the transaction is related to a commodity which has a fixed price in the market and the agent has bought it for himself or has sold it to the principal from his own money at such price.
  4. The agent shall not be entitled to any fee against the agency in the foregoing cases.

 

ARTICLE (210)

A third party dealing with the agent may request the right to peruse the agency contract, the correspondence and other documents establishing the agent's authority. Any restrictions to the agent's authority may not be opposed to a third party, except if it were established that such party had knowledge of such restrictions at the time of contracting.

 

ARTICLE (211)

The agent shall inform the principal of the transactions he concludes for the principal's account.

 

ARTICLE (212)

The agent shall submit to the principal on the agreed date or on the date fixed by the custom or by their previous dealing an account of the business carried out for his account. Said account shall be in conformity with the facts; if false particulars have been premeditadely included therein, the principal may reject the relevant transactions, and shall further be entitled to claim damages. The agent shall not receive any fee for the said transactions.

 

ARTICLE (213)

The agent may retain possession of the goods and other articles dispatched to, deposited with or delivered to him, as a security for the fees and expenses due to him from the principal.

 

ARTICLE (214)

Either party to the commercial agency contract may terminate it at any time, and no compensation is due except if the termination occurs without prior notice or at an inconvenient time. Where the contract has a fixed term, it may only be terminated for a serious and acceptable reason, otherwise compensation will be required.

 

ARTICLE (215)

Where the principal does not have a known domicile in the State, the domicile of his agent shall be deemed to be his domicile; he may be litigated and official papers served on him, in regard to the business conducted by the agent on his behalf.

 

ARTICLE (216)

Anything related to the organization of the commercial agency business shall be governed by the ad hoc laws.

 

CHAPTER TWO

CERTAIN TYPES OF COMMERCIAL PROXY (POWER OF ATTORNEY)

I - CONTRACTS PROXY

 

ARTICLE (217)

A contracts proxy is a contract pursuant to which a person undertakes to carry on continuously against remuneration, in a specific area of activity, instigation and negotiation in order to enter into transactions for the benefit of the principal and in return of a fee.  The agent's task may include the execution and implementation of transactions in the name of the principal and for his account.

 

ARTICLE (218)

The contracts agent shall carry out the business of his proxy and manage his commercial agency in an independent manner, and shall bear alone the expenses necessary to conduct such business.

 

ARTICLE (219)

Where the contract stipulates that the contracts agent is to set up showrooms or warehouses  for the goods or maintenance and repair installations, the contract term may not be less than five years, except if otherwise agreed upon.

 

ARTICLE (220)

  1. The contracts agent may not receive the principal's rights, unless the principal grants him this right, in which case the agent may not make any reduction or grant a respite without obtaining a special authorization therefor.
  2. The contracts agent may receive such applications as are related to the implementation of the contracts entered in through him, as well as any complaints concerning the non-implementation of such contracts. He shall further be deemed as the representative of his principal in the cases relevant to said contracts, whether lodged by or against him in the area of activity of the agent.

 

ARTICLE (221)

  1. The principal must pay the agreed remuneration to the agent.
  2. Such remuneration may be a percentage of the transaction value, to be calculated on basis of the sale price to the customers, unless otherwise agreed upon.

 

ARTICLE (222)

The contracts agent shall be entitled to a remuneration for the transactions concluded or for those whose non-conclusion is due to the principal's act, unless the contract stipulates otherwise.

 

ARTICLE(223)

The principal shall provide the agent with all the information necessary for the implementation of the agency.

 

ARTICLE (224)

  1. The contracts agent shall be bound to safeguard the principal's rights and he may take all the precautionary measures to that effect. He must as well provide the principal with the information pertaining to the market conditions in the area of his activity.
  2. The contracts agent may not, even after termination of the contractual relationship, divulge the principal's secrets which may come to his knowledge as a result of the execution of the proxy.

 

ARTICLE (225)

In the event where the principal replaces the contracts agent by a new agent, this latter shall be jointly responsible with the principal for the payment of the indemnities decided by the court to the previous agent whenever it is established that the dismissal of the previous agent was a result of collusion between the principal and the new agent.

 

ARTICLE (226)

As an exception to the rules of jurisdiction provided for in the Civil Procedure Code, the Court within which jurisdiction lies the place of implementation of the contract, shall be competent to look into any conflicts arising from the contracts proxy contract.

 

ARTICLE (227)

A distribution contract whereby a trader undertakes to promote and distribute the products of an industrial or commercial establishment in a specific area on an exclusive distributorship basis, shall be considered as a contracts proxy and be governed  by the provisions of Articles (220), (225) and (226) hereof.

 

ARTICLE (228)

In case of denial and lack of legitimate excuse, all cases arising from a contracts proxy contract may not be heard after the lapse of three years from the  termination of the proxy.

 

II - PROXY BY COMMISSION _

 

ARTICLE (229)

  1. A proxy by commission is a contract pursuant to which the agent undertakes to carry out in his own name a legal act for the account of the principal against a commission to be received from the principal.
  2. Where the commission agent carries out the legal act in the name of the principal, he shall be subject to other general provisions of the commercial agency.

 

ARTICLE (230)

  1. Where the commission agent sells at a lower price or buys at a higher price than that fixed by the principal, and this latter wishes to refuse the transaction, the principal must notify the agent thereof within one week from the date on which he was informed that said transaction was concluded, otherwise he shall be considered as having accepted the price.
  2. The principal may not reject the transaction if the agent accepts to bear the price difference.

 

ARTICLE (231)

  1. Where the commission agent buys for the account of the principal, goods of a type or category that is different from that requested by the principal, this latter shall not be bound to accept them.
  2. Where the commission agent buys goods which are in conformity to the goods requested but in a bigger quantity, the principal shall be bound to accept only the quantity which he had requested.

 

ARTICLE (233)

  1. Where  a commission agent who is assigned to sell, grants the buyer without the permission of the principal, a respite for payment of the price or makes the price payable by installments, the principal may require the agent to pay the whole price immediately, in which case the commission agent may retain for himself the price difference and its interests -if any.
  2. Nevertheless, the commission agent may grant a respite for payment of the price or makes the price payable by installments without the principal's permission, if it is the custom to do so in the area where the sale was effected, save where the principal's instructions bind the agent to sell on immediate payment basis.

 

ARTICLE (234)

Where the instructions of the principal bind the commission agent to sell against payment on term and this latter sells for immediate  payment at a lesser price, the principal may not require him to pay the price until maturity of the term fixed by him, in which case the commission agent shall be bound to pay the price on the basis of sale on term.

 

ARTICLE (235)

  1. A commission agent may not change the trade marks affixed on the goods received by him from the principal or for the principal's account.
  2. Where the commission agent has possession of a whole bunch of goods of the same kind which were dispatched to him by different principals, he must put a label on each batch of goods that is distinctive of it.

 

ARTICLE (236)

  1. A commission agent may disclose the name of the principal for whose account he enters into contract unless the principal requires him not to do so. The disclosure of the principal's name shall not result in a change in the nature of the proxy as long as the commission agent enters in contract in his name.
  2. The commission agent must disclose to the principal the name of the third party with whom he contracts if the principal requires him to do so, and if he refrains from doing so without an acceptable excuse he may be considered as having guaranteed the implementation of the transaction.
  3. In all cases, the commission agent shall be bound to establish the existence of the third party with whom he contracted if the principal requires him to do so.

 

ARTICLE (237)

  1. A commission agent shall be directly bound to the third party with whom he entered into contract; such third party shall also be directly bound to the commission agent.
  2. A third party with whom the commission agent has entered into contract may not have direct recourse against the principal, neither may this latter have direct recourse against such third party unless there is a legal provision to the contrary.

 

ARTICLE (238)

  1. The agent shall  have - in addition to his right of seizure - a right of lien over such goods and other articles which are dispatched to, deposited with or delivered to him by the principal.
  2. The right of lien shall secure the agent's remuneration and any expenses and sums he pays on behalf of the principal or he lends them to him, along with their interests and other sums that may accrue to the agent on account of the proxy, irrespective whether such amounts have been paid before delivery of the goods and articles or while they were in the possession of the agent.
  3. The said lien is established without regard to whether the debt has arisen from business related to the goods or articles which are still in the agent's possession or to other goods or articles which had previously been deposited with, delivered to or dispatched to the agent.

 

ARTICLE (239)

1. The agent shall not have any right of lien as is mentioned in the foregoing Article, unless he is in possession of goods or articles for the principal's account; and such possession shall be realized in the following cases:

  1. Where the agent has effectively received the goods or articles.
  2. Where the goods or articles were placed at his disposal in a public warehouse or customs.
  3. Where he legally had possession of the goods before their arrival pursuant to the bill of lading or any other bill of carriage.
  4. Where he has exported the goods and has retained possession thereof pursuant to a bill of lading or any other bill of carriage.

2. In case the goods or articles subject of the right of lien have been sold and delivered to the buyer, the agent's lien shall pass on to the price.
 

ARTICLE (240)

The agent's lien shall have priority over all other liens, except judicial expenses and sums due to the Government.

 

ARTICLE (241)

  1. The execution proceedings adopted for a commercially mortgaged item shall apply to the execution on goods and articles held in possession of the agent.
  2. However, where the agent is assigned to sell the goods or articles held in his possession, he may obtain execution thereon by selling them without  having to comply with the proceedings referred to in the preceding paragraph, unless he fails to abide by the principal's express instructions issued in respect of the sale.

 

ARTICLE (242)

  1. Where the commission agent who is assigned to sell is declared bankrupt before cashing in the price, the principal may claim payment of the price directly from the buyer.
  2. Where the commission agent who is assigned to buy is declared bankrupt before he received the item bought, the principal may claim delivery of the item bought directly from the seller.

 

ARTICLE (243)

  1. A commission agent shall not guarantee the fulfillment of his obligations by the third party with whom he contracted, unless he assumed expressly this guarantee, or if such guarantee is stipulated by law, or if it is customary in the area where he carries on his activity to do so.
  2. A commission agent who is guarantor of the fulfillment by the contractee of his obligations, shall be entitled to an additional remuneration to be  determined by the Court where there is no agreement or custom in this respect.

 

ARTICLE (244)

A commission agent may not delegate to a third party the business entrusted to him , unless he obtains the permission of the principal to do so, and if he fails to comply with this provision the person delegated shall have no right of seizure or lien except to the limit of the debt due to the original commission agent.

 

 

III - COMMERCIAL REPRESENTATION

 

ARTICLE (245)

The commercial representation is a contract pursuant to which the commercial representative undertakes to enter into transactions in the name and for the account of his principal, on a permanent basis and within a specific area.

 

ARTICLE (246)

The commercial representative shall not warrant the implementation of the transactions concluded through him, unless he had expressly agreed to such guarantee or in case the custom in the area where he carries on his activity dictates such a guarantee.

 

ARTICLE (247)

  1. The trader shall be liable for any transactions and contracts entered into by his representative within the limits of the authority conferred to him by the trader.
  2. Where the representative is delegated by several traders, they shall be jointly responsible.
  3. If the representative is delegated by a company, the company shall be responsible for his action and the partners' responsibility shall depend on the type of company.

 

ARTICLE (248)

  1. Where the limits of the authority vested in the commercial representative have not been determined, the authority shall be deemed general and comprehensive for all the transactions related to the kind of trade which the representative has been authorized to carry out.
  2. The trader may not plead against a third party that the authority is limited unless he establishes that such third party was aware of such limitation.

 

ARTICLE (249)

The commercial representative shall carry on in the name of the trader who delegated  him the commercial activities which he has been authorized to undertake; when signing he shall place next to his name in full, the full name of the trader and shall indicate his capacity as commercial representative; otherwise he shall be personally liable for his own action. Nevertheless, third parties may have direct recourse against the trader in regard to the transactions concluded by the representative in connection with the trade which he has been authorized to carry on.

 

ARTICLE (250)

A commercial representative may represent the trader in the lawsuits arising from the commercial transactions carried on by him.

 

ARTICLE (251)

The commercial representative shall be jointly liable with the trader for observing the law provisions related to unfair competition.

 

ARTICLE (252)

A commercial representative may not effect any commercial transaction of the kind for which he is authorized, for his own account or for the account of a third party without obtaining an express approval to do so from the trader who had  appointed him.

 

ARTICLE (253)

Where it is agreed that the commercial representative shall be the exclusive general representative for the trader in the agreed area, the representative shall be entitled to a commission for each transaction entered into for the account of the trader in such area, even if the if trader has concluded it by himself or if it were concluded through a person other than the commercial representative.

 

PART SEVEN          

BROKERAGE

 

ARTICLE (254)

Brokerage is a contract pursuant to which a broker undertakes to another person to look for and mediate in the negotiations with a second party in order to execute a specific contract in consideration of a remuneration.

 

 

ARTICLE (255)

  1. Where the broker's remuneration is not fixed in the law or the agreement, it shall be determined according to the customs; in the absence of a custom the judge shall estimate it commensurately with the effort exerted by the broker and the time spent by him in carrying out the work assigned to him.
  2. The judge may reduce the remuneration agreed if it is not commensurate with the nature of the transaction and the effort exerted by the broker. No reduction may be decided if the remuneration was agreed upon or if it were willingly paid by the customer after execution of the contract which has resulted from the broker's mediation.

 

ARTICLE (256)

  1. A broker shall not be entitled to a remuneration unless his mediation results in the execution of the contract between the two parties; the contract shall be deemed to be executed once both parties have agreed on all the substantial matters therein.
  2. The broker shall be entitled to receive his remuneration by the mere execution of the contract even it were not implemented, unless otherwise stipulated by the law or the custom.
  3. Where the contract is made conditional upon a suspended condition, the broker shall receive his remuneration only when the condition is realized.
  4. Where the contract cannot be executed for a reason attributable to the customer, the broker shall be entitled to a compensation commensurate with the effort exerted.

 

ARTICLE (257)

Where the contract  which has resulted from the broker's mediation is rescinded, the broker may claim payment of his remuneration or keep it in case he had already received it, unless fraud or gross error is established on his part.

 

ARTICLE (258)

Where the broker mediates for the execution of a legally prohibited transaction, he shall not receive any remuneration in consideration of such transaction.

 

ARTICLE (259)

  1. The broker shall be entitled to receive a remuneration only from the party to the transaction who has delegated him.
  2. Where the broker has been delegated by both parties, each of them shall be severally liable to the broker for payment of the remuneration due from him, even if they had agreed that either party will bear the broker's remuneration in full.

 

ARTICLE (260)

A broker, even when he is delegated by one of the transaction parties, shall submit a faithful offer to them and inform them of all circumstances known to him; he shall be liable to them for any fraud or fault committed by him.

 

ARTICLE (261)

A broker may not recover the expenses incurred by him in the execution of the task assigned to him unless otherwise agreed, in which case said expenses shall be payable even if the contract has not been concluded.

 

ARTICLE (262)

A broker may not claim his remuneration or recover his expenses if he has caused damage to either contracting party in favour of the other contracting party who did not assign him to mediate on his behalf or where he has obtained a promise from such other party contrary to the dictates of good faith in order to obtain a benefit for himself.

 

ARTICLE (263)

A broker may not constitute himself as second party to the contract for which he is mediating unless the contracting party authorizes him to do so, and in such case he shall not receive any remuneration.

 

ARTICLE (264)

  1. A broker shall enter into his books all the transactions entered into through his endeavors and must keep the relevant documents; he shall further deliver a true copy of the original of all the foregoing to any contracting party requiring them; said books shall be governed by the same provisions as those governing commercial books.
  2. In case of sale according to samples, the broker is required to keep the sample until the goods are accepted by the buyer without any reservation or until all conflicts are settled between the two parties in this respect.

 

ARTICLE (265)

A broker shall be liable to compensate any damages resulting from the perishing or loss of documents, papers or items delivered to him and related to the transaction for which he is mediating, unless he proves that such perishing or loss was due to a force majeure.

 

ARTICLE (266)

A broker may not mediate for persons who are reputed for their insolvency or if he knew them to be unqualified.

 

ARTICLE (267)

  1. A broker shall not be required to guarantee the affluence of the two parties to the transaction in which he mediates, and he shall bear no liability for its implementation or for the value and quality of the goods related thereto, unless an act of fraud or fault is established on his part and he is held for guarantee under the agreement or the law.
  2. Notwithstanding the foregoing, the broker shall be jointly liable for the implementation of the transaction with the contracting party if he has an interest therein in addition to his remuneration.

 

ARTICLE (268)

  1. Where a broker delegates another person to perform the task assigned to him without being authorized to do so, he shall be liable for the proxy's action as if such action had emanated from him; and both the broker and his proxy shall bear joint liability.
  2. Where the broker is authorized to appoint a proxy without any designation of the person of such proxy, the  broker shall only be liable for his fault in choosing his proxy or his fault in the instructions issued by him to the proxy.
  3. In all cases, the person who has assigned the broker may have direct recourse against the proxy.

 

ARTICLE (269)

Where several brokers have been assigned for one contract, they shall be jointly liable for the task entrusted to them, unless they have been authorized to act severally.

 

ARTICLE (270)

Where several persons assign one broker for a joint task, they shall be jointly liable for the performance of such task, unless otherwise agreed upon.

 

ARTICLE (271)

Brokerage in the stock exchange and goods markets shall be governed by the ad hoc laws and regulations.

 

PART EIGHT

CARRIAGE

 

CHAPTER ONE

GENERAL PROVISIONS

 

 ARTICLE (272)

A carriage contract is one by which the carrier undertakes to carry by his own means a person or a thing from one place to another in consideration of a remuneration.

 

ARTICLE (273)

With the exception of sea shipment, the provisions stipulated in this Part shall apply to all kinds of carriage regardless of the carrier's capacity, without prejudice to those provisions stipulated in the special laws concerning certain kinds of carriage and in the international carriage conventions applicable in the State.

 

ARTICLE (274)

The provisions of this Part shall apply to carriage even if it is associated with operations of another nature, as long as such operations do not constitute the main objective of the contract.

 

ARTICLE (275)

  1. A carriage contract and a proxy by commission for carriage contract is concluded by the mere association of an offer and an acceptance, unless both parties agree to defer such conclusion until the time of delivery. The contract may be proved by all means of evidence.
  2. The receipt by the carrier of the thing subject of carriage shall be deemed as an acceptance from him of the offer made by the consignor.
  3. Also, boarding the means of transport by the passenger shall be considered as an acceptance of the offer made by the carrier, unless it is established that the passenger's intention was not to conclude a carriage contract.

 

ARTICLE (276)

  1. Where the carrier uses different forms of contracts and the two parties have not agreed to adopt a specific form, the contract shall be deemed to have been concluded according to the form which includes the general conditions.
  2. Where the two parties agree to adopt a specific form, the conditions stated therein shall be indivisible.

 

ARTICLE (277)

  1. Where the carrier holds a monopoly over one kind of carriage or over the exploitation of specific lines of transport, he shall be bound to accept all the applications submitted to him, save where an application is contrary to the prescribed carriage conditions or where it is impossible for the carrier to execute it for reasons beyond his control.
  2. Where the carriage applications exceed the capacity of the means of carriage which the carrier is licenced to use, he shall accept such applications according to their dates of submission, so that the application first submitted shall have precedence over subsequent applications, unless some of such applications have priority pursuant to the carriage conditions.

 

ARTICLE (278)

The carrier's liability shall cover his acts and those of his subordinates when such acts are committed by them in the course of rendering their services. All persons employed by the carrier for the performance of his obligations under the carriage contract shall be considered as his subordinates.

 

ARTICLE (279)

  1. Explosion of the carriage means, their burning, derailing, collision or any other accidents attributed to the tools and machines used by the carrier in the performance of the carriage, shall not be considered a force majeure in the performance of the carriage contract, even if the carrier establishes that he has adopted precautionary measures to guarantee the suitability of said carriage means for work and to prevent the occurrence of damage.
  2. Neither shall be considered a force majeure the accidents attributed to sudden death, or physical or mental weakness which befall the carrier's subordinates at work, even if the carrier proves that he had taken precautionary measures to  guarantee their physical and mental fitness.

 

ARTICLE (280)

A carrier shall not be liable to compensate any damage arising from the disruption of carriage, deviation from the route set due to necessity to provide assistance to any sick, injured or endangered persons.

 

ARTICLE (281)

 

  1. Fraud in the performance of the carriage contract shall mean every act or omission committed by the carrier or his subordinates with the intent to cause damage.
  2. Gross fault shall mean every act or omission committed by the carrier or his subordinates with imprudence coupled with awareness of the damage which may be caused.

 

 

CHAPTER TWO

CONTRACT OF CARRIAGE OF THINGS _

 

ARTICLE (282)

  1. The consignor shall be required to provide the carrier with the particulars concerning the consignee's name and address, destination of the carriage, kind of things intended for carriage, as well as their value, weight, volume, quantity, mode of packing and wrapping, number of parcels included, and any other particulars as are sufficient to identify the thing required to be transported, in addition to the delivery term and the route to be followed.
  2. The consignor shall be answerable for any damages arising from the false or insufficient particulars provided by him.

 

ARTICLE (283)

1. The bill of lading shall contain, in particular, the following data:-

  1. Date of the bill and the venue where it was edited.
  2. Names and places of residence of the consignor, consignee, carrier and the carriage commission agent - if any.
  3. Place of departure and destination.
  4. The particulars related to the identification of the things carried and their value.
  5. Date fixed for the performance of the task.
  6. The freight and other expenses with an indication of whether they are payable by the consignor or the consignee.
  7. The conditions pertaining to the loading and unloading, type of transport means required to be used for carriage, the route to be followed, a determination of the responsibility and any other special conditions which may be included in a carriage contract.

2. The bill of lading may be made out in the name or to the order of a specified person or to bearer.

3. The carriage deed shall be negotiated according to the rules of the bill of exchange where it is nominative, by endorsement if made out "to order" and by delivery where it is made out "to bearer", this not being concerned with the carriage of the goods or possession thereof.

 

ARTICLE (284)

  1. The consignor may require the carrier to hand him a copy of the bill of lading.
  2. Where no bill of lading is made out, the consignor may require the carrier to deliver to him a receipt signed by this latter purporting to the receipt of the thing carried. Such receipt shall be dated and must include the sufficient particulars to identify the thing carried and the freight.

 

ARTICLE (285)

The bill of lading and the receipt issued and signed by the carrier purporting to the receipt of the thing carried shall constitute a means of evidence of the particulars stated therein; any person claiming the contrary to such particulars shall have to establish same.

 

ARTICLE (286)

  1. The rights and obligations arising from the carriage contract shall not bind the consignee unless he accepts such rights and obligations either expressly or implicitly.
  2. The receipt by the consignee of the bill of lading or of the thing intended for carriage, as well as his requiring to deliver the same to him or to issue instructions in this respect, shall be deemed as an implicit acceptance of the rights and obligations arising from the carriage contract.

 

ARTICLE (287)

  1. The consignor shall deliver to the carrier the thing to be carried and the documents necessary for the performance of the carriage. The consignor shall be answerable where such documents are insufficient or not corresponding to the truth, and he shall as well be liable for the loss of such documents or, in case of negligence, in using them or any abuse thereof.
  2. Where the carriage requires special preparations,the consignor shall notify the carrier accordingly within sufficient time prior to the delivery of the thing to be carried.
  3. Delivery shall take place at the place of business of the carrier, unless otherwise agreed upon.

 

ARTICLE (288)

  1. Where, owing to the nature of the thing, special preparations should be made for its carriage, be it is its packing or wrapping the consignor shall have to take such precautions as would protect it from perishing or being damaged and would not expose the other persons or things carried with it to injury or damage respectively. Where the carriage conditions impose a specific mode of packing or wrapping, the consignor shall be required to abide by them.
  2. The consignor shall be further liable for the damages arising from the defect in packing or wrapping, and the carrier shall be jointly responsible with the consignor for such damages if he has accepted to perform the carriage with his knowledge of the defect. The carrier shall be deemed to be aware of the defect where it is apparent or where it is of the type which cannot be concealed to an ordinary carrier.
  3. A carrier may not exonerate himself from the liability for the perishing or loss of one of the things carried, by proving that the damage has arisen from a defect in the packing or wrapping of another thing, and any agreement to the contrary shall be null and void.

 

ARTICLE (289)

  1. A carrier has the right to examine the things to be carried, in order to verify their condition and the authenticity of the particulars provided by the consignor in this respect.
  2. Where such an examination requires the opening of the wrappings or containers, the consignor shall be notified to attend the examination. Where the consignor fails to show up on the date fixed, the carrier may undertake the examination in his absence and have recourse against the consignor for the examination costs, unless otherwise agreed upon.
  3. Where the examination shows that the condition of the thing does not allow its carriage without damage, the carrier may refuse to transport it or may carry it after taking from the consignor a declaration that he is aware of the condition of the thing to be carried and that he agrees to its being transported. In such case, it is required to establish in the bill of lading the condition of the thing and the consignor's declaration.

 

ARTICLE (290)

The receipt by the carrier of the things to be carried without any reservations, shall constitute an evidence that he received them in good condition and in conformity with the particulars stated in the bill of lading. Where the carrier claims the contrary, he shall be required to prove it.

 

ARTICLE (291)

  1. The carrier is bound to ship the thing to be carried and stack it on board of the ordinary means of carriage, unless otherwise agreed upon.
  2. Where the consignor requires the shipping to be made on board a specific type of means of carriage, the carrier shall not be liable for the damage resulting from the use of such type of means of carriage.

 

ARTICLE (292)

  1. The carrier must follow the route agreed upon, and in the absence of an agreement for a specified route, the carrier shall take the shortest route.
  2. However, a carrier may change the route agreed upon or take a longer one where a necessity arises compelling him to do so. In such case, the carrier shall bear no responsibility for the delay and other damages which may result from the change of route, unless fraud or gross fault is established on his part or on the part of his subordinates.

 

ARTICLE (293)

  1. The carrier shall be responsible for the safety of the thing during the performance of the carriage contract.
  2. Where the safekeeping of the thing during carriage necessitates re-packing, repair of the wrappings, increase or decrease thereof or any other necessary measures, the carrier shall undertake this and pay any costs required therefor, unless otherwise agreed upon. Notwithstanding the foregoing, the carrier shall not be committed to take any extraordinary measures in the transport such as supply  food and water to animals, provide medical services or other services or irrigate the plants, unless otherwise agreed upon.

 

ARTICLE (294)

  1. The carrier shall unload the thing on arrival, unless unloading is carried out by the consignee or another person, pursuant to an agreement, a law, regulation or instructions. In such case, the carrier shall not be liable for any damages resulting from the unloading.
  2. In all cases, the carrier shall bear the unloading costs unless otherwise agreed upon.

 

ARTICLE (295)

  1. Where the delivery is not required at the place of the consignee, the carrier shall notify him of the arrival of the thing carried and of the time on which he may take delivery thereof.
  2. The consignee shall receive the thing on the date fixed by the carrier, otherwise he shall bear the storage fees. On the expiry of the time limit set for delivery, the carrier may carry the thing to the consignee's place in consideration of an additional freightage.
  3. The consignee may require to examine the thing before receiving it, and if the carrier fails to enable him to do so, the consignee may refuse to receive the thing.

 

ARTICLE (296)

  1. Where the thing to be carried is in possession of the carrier, the consignor may order him to refrain from executing the carriage, to stop it or to return the thing to him, or to direct it to a person other than the original consignee or to any other place or issue any other instructions, provided that the consignor shall pay the freight and costs of that part performance of the carriage and compensate the carrier for any damage he may have sustained as a result of the new instructions. Where the consignor had received a copy of the bill of lading, he should return it to the carrier so that he enters therein the new instructions which shall be signed by the consignor, failing which the carrier may refrain from implementing such instructions.
  2. The right to issue instructions concerning the thing carried, shall pass on to the consignee by the mere fact that  he receives the bill of lading or when he accepts expressly or implicitly the carriage contract, in which case, also, the bill of lading should be returned to the carrier to enter therein the new instructions which shall be signed by the consignee, failing which the carrier may refrain from implementing same.
  3. No new instructions related to the thing to be carried may be issued, after arrival of the thing and notification of the consignee to receive it or to appear in order to receive it.

 

ARTICLE (297)

The carrier is bound to execute the instructions issued to him by whomever is entitled to do so pursuant to the provisions of the foregoing Article, unless the carriage conditions prohibit same, or unless it is impossible for the carrier to execute such instructions, or if execution thereof would cause a disturbance in the traffic, or if the value of the thing carried is not sufficient to cover the expenses incurred by the  carrier due to execution of the instructions. In all such cases, the carrier shall notify the person who issued the new instructions of his abstention from execution, the reason for such abstention, and the carrier shall not be liable for said abstention, unless it is unreasonably withheld.

 

ARTICLE (298)

  1. Where an obstacle prevents the commencement of carriage, or if the transport is disrupted during its execution, or if the consignee does not appear to take delivery of the thing carried, or if he reports but refuses to receive it or pay the freightage or expenses due, the carrier shall notify the consignor accordingly and seek further instructions; and as an exception to the provisions of Article (296), the carrier must in this case implement the instructions received by him from the consignor, even if he fails to return the copy of the bill of lading given to him by the carrier.
  2. Where the consignor fails to issue instructions in due time, the carrier may apply to the Court to certify the condition of the thing and to authorize him to deposit it with a trustee for the account of the consignor and at the consignor's responsibility.
  3. Where the thing is subject to perishing, deterioration of value, or when its maintenance costs are exorbitant, the Court may order that it be sold in the manner specified by it and the price deposited in the Court Treasury for the account of the persons concerned.

 

ARTICLE (299)

The consignor shall pay to the carrier the freight and other costs which may accrue, save where it is agreed that they be borne by the consignee, in which case, both the consignor and consignee shall be jointly liable to pay them to the carrier.

 

ARTICLE (300)

No freight shall accrue to the carrier in respect of such things carried which may perish by a force majeure.

 

ARTICLE (301)

  1. Where a force majeure prevents the execution of carriage no freight shall accrue to the carrier. However if said force majeure hinders the carriage from being completed, the carrier shall be entitled to receive the freight for the part performance of the carriage.
  2. In all cases, a carrier may claim payment of the loading and unloading costs and other necessary expenses.

 

ARTICLE (302)

The right to claim for the recovery of the sum paid in surplus to the freightage agreed or prescribed in the carriage conditions shall be vested in the person who paid the freight.

 

ARTICLE (303)

  1. The carrier may withhold the thing carried until payment of the freight, expenses and other sums as are due to him because of the carriage.
  2. The carrier shall have a right of lien over the price resulting from the sale of the things carried to collect the freightage and other sums as are due to him because of the carriage; the provisions relative to the procedures of execution on commercially mortgaged things shall apply in this regard.

 

ARTICLE (304)

  1. From the moment the carrier receives the thing to be carried, he shall be liable for its perishing in whole or in part, its damage and the delay in delivering same.
  2. The thing shall be deemed totally perished if the carrier fails to deliver it or to notify the consignee to appear in order to receive it within thirty days of the expiry of the time limit set for delivery, or if no date for delivery has been fixed, within thirty days of the expiry of the time limit usually required by an ordinary carrier for the carriage had he been in the same circumstances.

 

ARTICLE (305)

The carrier shall not be liable for the perishing or impairment of the thing after delivery thereof to the consignee, to the customs agreed upon or to the trustee appointed by the Court as depositary of the thing, save where fraud or gross fault is established on the part of the carrier or his subordinates.

 

ARTICLE (306)

  1. The carrier shall not be answerable for any decrease in weight or volume that occurs to the thing during carriage owing usually to its nature, unless it is proved that such decrease has resulted from another cause.
  2. Where the bill of lading covers several things divided into groups or parcels, the decrease allowed shall be determined on basis of the weight of each group or parcel, in case such weight has been specified separately in the bill of lading or if it could have been specified.

 

ARTICLE (307)

Where the thing is carried in the custody of the consignor or consignee, the carrier shall not be liable for its perishing or deterioration, unless fraud or gross fault is proved on his part or on the part of his subordinates.

 

ARTICLE (308)

The carrier may not exonerate himself from liability regarding the perishing or deterioration of the thing, or the delay in delivering it, save where he proves a force majeure, a defect inherent to the thing carried, a fault committed by the consignor or consignee, or an act of the government.

 

ARTICLE (309)

  1. Any provision exonerating the carrier from liability for total or partial perishing or deterioration of the thing, shall be null and void; also, any provision exonerating the carrier from said liability if arising from the acts of his subordinates shall be null and void. Any condition which tends to bind the consignor or consignee, in any capacity whatsoever, to pay all or part of the insurance expenses against the carrier's liability, shall be deemed as an exoneration from liability.
  2. However, the carrier may stipulate his total or partial exoneration from liability for the delay.

 

ARTICLE (310)

  1. The carrier may determine his liability for the total or partial perishing or deterioration of the thing, provided that the indemnity agreed shall not be fictitious and remains subject to the Court's estimation in case of conflict.
  2. The consensual indemnity shall not be payable, if the carrier proves that the consignee did not sustain any damage.
  3. Where the damage value is less than the amount of the consensual indemnity, the judge may reduce such amount to make it equivalent to the damage value. Nevertheless, where the damage exceeds the consensual indemnity amount, it is not permissible to claim for more than such amount, unless it is established that the carrier or his subordinates have committed fraud or a gross fault, in which case the carrier shall be bound to compensate for the damage in full.

 

ARTICLE (311)

The condition for determination of or exoneration from liability for delay shall be in writing, otherwise it shall be considered as null and void. Where the carriage contract is made out on printed forms, the said condition must be clear and written in a manner which draws the attention, failing which the Court may consider it null and void.

 

ARTICLE (312)

The carrier may not cling to the condition of determination of, or exoneration from, liability for delay where fraud or gross fault is proved on his part or on the part of his subordinates.

 

ARTICLE (313)

  1. Where the thing to be carried perishes or deteriorates and its value is not indicated in the bill of lading, the indemnity shall be assessed on basis of its real value at the venue time of arrival, unless otherwise stipulated by law or agreement. Save where the perishing is total, the indemnity shall be estimated while taking into account the decrease permitted in persuance to the provision of Article (298).
  2. Where the value of the thing carried is indicated in the bill of lading, the carrier may contest such value and prove by all means of evidence the real value of the thing.
  3. With the exception of the two cases of fraud and gross fault committed by the carrier or his subordinates, the carrier shall not be liable for the loss of the thing entrusted to him for carriage, where such thing consists of money, bonds and securities, jewelries or any other valuable thing, except to the extent of the express written particulars provided by the consignor at the time he delivered the thing for carriage.

 

ARTICLE (314)

  1. Indemnity for total perishing and indemnity for delivery may not be cumulated.
  2. Indemnity for delay may not be adjudged in case of partial perishing except for the part which did not perish.
  3. In all cases, the indemnity adjudged may not exceed the amount which would accrue in the event of total perishing of the thing.

 

ARTICLE (315)

Where the thing deteriorates, perishes in part or its delivery is delayed, such as it may not serve anymore the purpose for which it was carried, and if the carrier's liability for such deterioration, perishing or delay is established, the claimant for compensation may waive the thing to the carrier against an indemnity to be estimated on basis of the total perishing of the thing.

 

ARTICLE (316)

  1. Where the compensation is paid due to perishing of the thing, then within one year of such payment the thing is found, the carrier shall notify forthwith the person who received the compensation, inform him of the thing's condition and invite him to inspect it, at his own discretion, at the place where it was found, the place of departure or the place of destination.
  2. Where the person who received the compensation fails to send his instructions within fifteen days of his notification, or if he sends the instructions but fails to report on the date fixed by the carrier for inspection, or if he reports but refuses to recover the thing, the carrier may then dispose of the thing thereof.
  3. Where the person who received the compensation requests that it be returned to him, he is bound to reimburse the compensation received after deduction therefrom of the expenses of the claim and a sum equivalent to the damage sustained due to the delay in delivering the thing.

 

ARTICLE (317)

  1. Receipt of the things carried and payment by the consignee of the freightage shall invalidate any lawsuit against the carrier if the defect that had occurred therein is apparent. However, where such defect is not apparent, it may be proved, but the case lodged for said defect shall be admitted only if notice is served regarding the defect within seventy hours of the time of receipt, and if the claim is submitted to the Court within thirty days, adding to such two time limits the time required for the distance.
  2. The condition of the goods shall be established either by the specialized authorities or by an expert appointed by the Court without delay.
  3. The provisions of this Article shall not apply where it is established that the defect was a result of fraud or gross fault committed by the carrier or his subordinates, or where it is established that the carrier and his subordinates have intentionally concealed the defect.

 

ARTICLE (318)

  1. Where several carriers undertake successively the performance of one carriage contract, the first carrier shall be liable towards the consignor and consignee for the whole operation, and any provision to the contrary shall be null and void.
  2. Each of the carriers subsequent to the first one shall not be liable towards this latter or towards the consignor or consignee, except for the damage that has occurred in that part of carriage performed by him. Where it is impossible to determine the part during which the damage occurred, the compensation shall be divided between all the carriers in proportion to each carrier's share in the freight, and in case one of such carriers is insolvent, his share shall be divided between the others in accordance with the same proportion.
  3. The carrier who proves that the damage did not occur during the part of carriage executed by him, shall be exempted from liability therefor.

 

ARTICLE (319)

Each of the consecutive carriers may require that the thing be examined and its condition established on delivery thereof to him by the previous carrier. Where he receives it without making reservations, it shall be assumed that he received it in good condition and in conformity to the particulars stated in the bill of lading, until the contrary is proved.

 

ARTICLE (320)

The last carrier is responsible towards the preceding ones for claiming payment from the consignee of the sums due because of the carriage. He has the right to collect such sums on their behalf and take all the legal proceedings for collection thereof, including the use of the right of withholding the thing and the right of lien over the thing that is subject of carriage.

 

ARTICLE (321)

Where there is denial and lack of legitimate excuse the following cases may not be heard:-

  1. The cases lodged against the carrier on ground of delay, perishing or damage arising from a contract of carriage of things after the lapse of six months in respect of carriage inside the State, and after the lapse of one year in respect of overseas carriage, as of the date of delivery of the thing to the consignee, or the customs or to the trustee appointed by the Court as depositary of the thing. In case of total perishing of the thing carried, the period shall run from the expiry of the date stipulated in paragraph (2) of Article (304).
  2. The case lodged by one carrier as a recourse against the consecutive carriers pursuant to paragraph (2) of Article (318) after the lapse of sixty days of the date of payment of the compensation or of the date on which official claim for compensation was filed.

 

ARTICLE (322)

Any person or subordinate of a person having committed fraud or gross fault may not cling to the plea of "non hearing" stipulated in the foregoing paragraph.

 

CHAPTER THREE

CONTRACT OF CARRIAGE OF PERSONS

 

ARTICLE (323)

  1. The passenger shall pay the fare on the date agreed, or the date stated on the carriage schedules or as is customary; he shall further abide by the carrier's instructions in regard to the carriage.
  2. The carrier shall transport the effects carried by the passenger during the trip, and the passenger shall not be bound to pay any fare for the transport of his effects, except where they exceed the limit set in the carriage tariff or the limit recognized by customary usage.

 

ARTICLE (324)

  1. Where a force majeure prevents the commencement of carriage or where before execution of carriage, circumstances occur rendering such carriage a danger to people's lives, the carrier shall not be liable for indemnity due to non-execution, neither shall he be entitled to receive the fare.
  2. Where the force majeure or the danger to people's lives arise after commencement of execution of carriage, the carrier shall receive only the fare due for that part of carriage which was executed.

 

ARTICLE (325)

Where carriage is impossible because of the death or illness of the passenger or due to other compelling impediments, the carriage contract is rescinded and the fare shall not be payable.

 

ARTICLE (326)

  1. Where the passenger gives up the idea of travelling before commencement, he shall notify the carrier of his renunciation before the date set for execution of the carriage and in case of extreme necessity, such notice can be served on the same day.
  2. Where the notification is effected according to the preceding paragraph, the carrier's fare shall not be payable. However, he may claim for compensation of the damage sustained by him due to the fact that the passenger has given up the idea of travelling.

 

ARTICLE (327)

Where the passenger gives up the idea of pursuing the trip after commencement thereof, the full fare shall be payable, unless his renunciation is attributed to extreme necessity, in which case he shall only pay the fare corresponding to the executed part of carriage.

 

ARTICLE (328)

Without prejudice to the provisions of the two foregoing Articles, where the passenger fails to report on the time fixed for carriage, he shall pay the full fare and he may, whether he paid the full fare before or after the date fixed, require that the carriage be executed on a later date; all this unless otherwise agreed upon.

 

ARTICLE (329)

  1. Where carriage is cancelled prior to commencement or completion thereof due to a reason which is attributable to the carrier, his subordinates or the means of carriage used by him, the passenger shall not be bound to pay the fare, without prejudice to his right for compensation - if justified.
  2. Where carriage is disrupted after commencement for a reason attributed to the carrier, his subordinates or the means of carriage used by him, the passenger may renounce to pursue the trip and the carrier shall in this case bear the costs of carrying the passenger to the place agreed. However, the passenger may choose to wait until the carriage traffic resumes and he shall not be required in such case to pay any additional fare.

           

ARTICLE (330)

The passenger may, before commencement of execution, relinquish the carriage ticket, unless it is made out in the passenger's name or it is issued to him or based on special considerations.

 

ARTICLE (331)

  1. The carrier shall prepare for the passenger a seat in the class agreed upon, and this latter may recover from the carrier the difference in case he is compelled to travel in a lower class than the one indicated on his ticket.
  2. Where the passenger pays an additional fare against special advantages, he may claim that such additional fare be reimbursed to him if the carrier fails to provide the corresponding advantages.

 

ARTICLE (332)

  1. The carrier may withhold the passenger's effects to secure payment of the fare and the price of food or other things served on him during the performance of the carriage contract.
  2. The carrier shall have a priority right over the price of the passenger's effects which accrue to him by reason of the carriage; the proceedings of execution on things which are commercially mortgaged shall apply in this respect.

 

ARTICLE (333)

  1. The carrier is bound to carry the passenger and his effects up to the destination of arrival on the date agreed upon, and if no date is specified then within the time limit required by an ordinary carrier had he been in the same circumstances.
  2. The carrier may, prior to carriage commencement or during the trip, examine the passenger's effects in his presence to ensure their conformity to the carriage conditions.

 

ARTICLE (334)

  1. The carrier shall secure the safety of the passenger for the duration of the performance of the carriage contract, and any agreement exonerating the carrier from such liability shall be null and void.
  2. Performance of the carriage contract covers the period between the moment the passenger starts to board the means of transport  at the place of departure, until he disembarks at the place of arrival. Where there are quays or platforms for the means of transport to lay by, the performance of the contract shall cover the period lying between the moment the passenger embarks the quay or platform at the place of departure and his exit therefrom at the place of arrival.
  3. Where necessity arises during the trip to change the means of transport, the liability shall not cover the period of transfer of the passenger from one means of transport to the other without the custody of the carrier or his subordinates.

           

ARTICLE (335)

  1. The carrier shall be liable for the delay in arrival and for such bodily or non-bodily injuries sustained by the passenger during the performance of the carriage contract.
  2. The responsibility stipulated in the preceding paragraph shall not be exonerated paragraph, except by the carrier proving that the delay or injury is due to force majeure or the passenger's or third party's fault.

 

ARTICLE (336)

  1. Any provision which exonerates fully or partially the carrier from liability in regard to bodily injuries sustained by the passenger, shall be null and void.
  2. Any condition which aims to make the passenger,in any way, pay all or some of the insurance expenses against the carrier's liability shall be deemed as being an exoneration from liability.

 

ARTICLE (337)

  1. The carrier may place & condition for being exonerated completely or partly from liability for the delay of the passenger or other than bodily injuries which may be suffered by him during carriage.
  2. The condition exonerating from liability shall be in writing, otherwise it shall be considered null and void. Where the carriage contract is executed on printed forms, the condition must be clear and written is such manner as to draw the attention, failing which the Court may consider it null and void.
  3. The carrier may not cling to the condition exonerating from liability in full or in part where fraud or gross fault if proved on the part of the carrier or his subordinates.

 

ARTICLE (338)

  1. The passenger shall be bound to watch over the effects and animals which he is permitted to carry with him, and the carrier shall not be liable for any loss or damage which may be sustained thereby, save where the passenger proves that such loss or damage is due to fault by the carrier or his subordinates.
  2. The passenger shall be liable for the damage caused to the carrier or to third parties as a result of the effects or the animals which he carries with him.
  3. As for the effects which are delivered to the carrier, carriage thereof shall be governed by the provision stipulated in relation to the carriage of things.

 

ARTICLE (339)

  1. Where a passenger dies or falls ill in the course of performance of the carriage contract, the carrier shall take such measures as are deemed necessary to safekeep his effects until they are delivered to the persons concerned.
  2. Where any of the persons concerned is present at the place of occurrence of death or illness, he may intervene to supervise the measures adopted by the carrier to safekeep  the effects and request from the carrier to deliver to him a declaration that the passenger's effects are in his custody.

 

ARTICLE (340)

The heirs and dependents of the passenger may, in execution of alimony, lodge an action for liability arising from the carriage contract, in case of death of the passenger, regardless of whether the death occurred directly after the incident or after the lapse of a period of time.

 

 

CHAPTER FOUR

PROXY OF COMMISSION FOR CARRIAGE

 

ARTICLE (341)

  1. Proxy by commission for carriage is a contract by which the agent undertakes to enter into a carriage contract in his own name and for the account of his principal, and where necessary, to carry out such operations as to relate to the carriage, in consideration of a commission received from the principal. A commission agent for carriage shall be in regard to the consignor in the same stature as a carrier.
  2. Where the commission agent undertakes carriage by his own means, he shall be governed by the provisions of the carriage contract, unless otherwise agreed upon.

           

ARTICLE (342)

With the exception of the provisions stipulated in this Chapter, the provisions of proxy by commission shall apply to proxy by commission for carriage.

 

ARTICLE (343)

The principal may at any time cancel the order for carriage before the commission agent enters into the carriage contract, in which case he shall be bound to reimburse to the commission agent, the expenses incurred by him and compensate him for any work performed.

 

ARTICLE (344)

  1. The commission agent shall execute his principal's instructions, and in particular those instructions as related to the date of carriage, the selection of the carrier, the carriage means and the route to be followed.
  2. The commission agent may not charge his principal any fare/freightage exceeding the one agreed upon with the carrier, and any advantages obtained from the carrier by the commission agent shall benefit to the principal, unless otherwise agreed upon in the proxy contract or dictated by the custom.

 

ARTICLE (345)

The commission agent for carriage shall guarantee the safety of the passenger or the article carried, and any agreement to the contrary shall be null and void.

 

ARTICLE (346)

  1. Where the carriage relates to goods, the commission agent shall as of the time of receiving the goods be wholly or partly liable for the perishing thereof, damages suffered thereby or the delay in the delivery of such goods. He may not deny his liability, unless he proves a force majeure, an inherent defect of the goods, or a fault of the principal or the consignee.
  2. Where the carriage relates to persons, the commission agent shall be liable for the delay of arrival, and for such bodily or non-bodily injuries as are suffered by the passenger in the course of performing the carriage contract. The commission agent may not deny his liability, except by proving a force majeure or a fault committed by the passenger.
  3. In all cases, the commission agent may have recourse against the carrier where relevant.

 

ARTICLE (347)

  1. Any provision exonerating wholly or partially the commission agent for carriage, from the bodily injuries suffered by the passenger, shall be null and void.
  2. A provision which tends to impose on the passenger in any manner whatsoever, the payment of all or some of the insurance costs against the liability of the commission agent, shall be deemed to have the status of the exoneration stipulated in the preceding paragraph.

 

ARTICLE (348)

  1. The commission agent for carriage may place & condition that he be exonerated wholly or partially from the liability which arises from the perishing, damaging or delay in the delivery of the goods carried, as well as from the liability arising from the delay of the passenger's arrival or bodily injuries sustained by him during carriage.
  2. The condition of exoneration from liability shall be in writing, otherwise it shall be considered null and void. Where the proxy by commission contract is executed on printed forms, such condition must be clear and written in such manner as to draw attention, otherwise the Court may consider it null and void.
  3. The commission agent for carriage may not cling to the condition of total or partial exoneration from liability in cases of fraud or gross fault committed by him or his subordinates, or by the carrier or his subordinates.

 

ARTICLE (349)

  1. The principal and passenger shall each have direct recourse against the carrier to claim the rights arising from the carriage contract. The carrier shall also have direct recourse against each of the principal and passenger to claim such rights. In all cases, the commission agent must be intromitted in the case.
  2. The passenger in the carriage contracts of persons and the consignee in the carriage contract of things shall have direct recourse against each of the principal, carrier and commission agent for carriage for the rights arising from the carriage contract.

 

ARTICLE (350)

Where the commission agent pays the fare/freightage to the carrier, he shall subrogate him in his rights.

 

ARTICLE (351)

The original commission agent is a guarantor of the commission agent for carriage appointed by him, except where the consignor has appointed the commission agent in the agreement concluded by him with the original principal.

 

ARTICLE (352)

The provisions of Articles (321) and (322) hereof, shall apply to the non-hearing of the cases arising from proxy by commission contract for carriage.

 

CHAPTER FIVE

PROVISIONS PERTAINING TO AIR CARRIAGE

 

ARTICLE (353)

  1. Air carriage herein means the carriage of persons, luggage and goods by airplanes in consideration of a freight/freightage.
  2. Luggage referred to in the foregoing paragraph, means articles which the passenger is allowed to carry with him in the airplane or which are delivered to the carrier for safe custody during the carriage.

 

ARTICLE (354)

Without prejudice to the international conventions to which the State is a party, the provisions of this Part shall apply to air carriage, with due consideration to the specific provisions stipulated in the following Articles.

 

ARTICLE (355)

An air carrier shall be held liable for such damage as is sustained as a result of a passenger's death, wound or bodily injury occurring during air carriage or during any of the operations of the passenger's boarding or disembarkation of the airplane.

 

ARTICLE (356)

  1. An air carrier shall be held liable for such damage as is sustained due to the perishing, loss or damaging of the registered luggage and goods, if the accident which caused the damage occurred during the air carriage.
  2. Air carriage includes the period when the luggage and goods are in the custody of the carrier during the flight or during the presence of the airplane at the airport or in any place where the airplane has landed.
  3. Air carriage shall not cover the period when the luggage or goods are being carried by land, sea or river outside the airport. However, where such carriage is necessary to ship the luggage or goods, to deliver them or to transfer them from one airplane to another, in implementation of an air carriage contract, it shall be presumed that the damage resulted from an accident which occurred during the air carriage period until the contrary is proved.

           

ARTICLE (357)

An air carrier shall be held liable for such damage as may result from the delay in the  arrival of the passengers or the registered luggage or the goods.

 

ARTICLE (358)

An air carrier shall not be liable for such small personal articles which are retained in the custody of the passenger during the travel, and the carrier shall not be questioned about some unless the passenger proves that the carrier or his subordinates failed to take the necessary measures to prevent the occurrence of the damage.

 

ARTICLE (359)

  1. In case of carriage of persons, the compensation adjudged for payment by the carrier where the passenger dies or is injured, shall not be less than the amount of the prescribed Sharia blood money, but it may be agreed to exceed this amount.
  2. In case of carriage of luggage and goods, the compensation amount may not exceed Dhs 150 (One Hundred Fifty Dirhams) for each kilogram, unless it agreed to exceed this sum. Nevertheless, where the consignor on delivering the luggage or goods submits a specific statement indicating that he attaches special importance to the delivery of the same in safe condition at the place of arrival, due to its value, and if he pays such additional freightage as is required by the carrier for the same, the carrier shall be bound to pay compensation according to the value indicated by the consignor, save where the carrier proves that such value exceeds the real value of the luggage and goods.
  3. Where one parcel is lost, damaged or delayed and this has an effect on the value of the other parcels covered by the same carriage application form, the total weight of such parcels shall be taken into consideration upon determination of the liability extent.
  4. As regards such personal or small articles as would remain in the custody of the passenger during the flight, the compensation adjudged to each passenger for the perishing or damaging of such articles, may not exceed the sum of Dhs 3000 (Three Thousand Dirhams).
  5. An air carrier may not plead the limitation of liability as is stipulated in this Article where it is proved that the damage was the result of an act or omission by the carrier or his subordinates, either with intent to cause damage or due to imprudence coupled with awareness that a damage might result therefrom. Where the act or omission is committed by the subordinates, it must be also established that it was committed in the course of performance of their duties.

 

ARTICLE (360)

An air carrier shall be held liable within the limits set in the preceding Article, irrespective of the capacity of the litigants in the action of liability.

 

ARTICLE (361)

  1. Where an action for compensation is brought against one of the carrier's subordinates, he may plead the limitation of liability stipulated in Article (359), where it is proved that the act which has caused the damage was perpetrated by him during the performance of his services.
  2. However, no subordinate of the carrier may plead the limitation of liability, where it is proved that the damage was the result of an act or omission by him, either with intent to cause damage or with imprudence coupled with awareness that a damage is likely to result therefrom.

 

ARTICLE (362)

  1. The airway bill shall contain a statement that the carriage is being made in accordance with the limited liability provision stipulated in Article (359), otherwise the carrier or his subordinates shall not have the right to cling to such provision.
  2. Any condition exonerating the air carrier from liability or determining it at less than what is specified in Article (359), shall be null and void, except where the article carried has perished or has sustained damage due to its nature or to an inherent defect.

 

ARTICLE (363)

Where the consignee receives the luggage or goods at the place of arrival without having any reservation, it shall constitute a presumption that he has received them in good condition and in conformity to the conditions of the airway bill, unless otherwise proved.

 

ARTICLE (364)

  1. Where the luggage or goods arrive damaged, the consignee must serve a notice on the carrier immediately upon discovery of the damage within no more than seven days in regard to luggage and twenty four days in regard to goods, from the date of their receipt. In case of delay, the notice must be sent within twenty one days at the most from the day on which the luggage or goods are placed at the disposal of the consignee.
  2. The notice may be addressed in the form of an objection as a protest written in the airway bill upon taking delivery of the luggage or goods.
  3. The action for liability against the carrier may not be admitted where the notice is no served within the time limits specified in this Article, unless the plaintiff proves that the carrier or his subordinates  have exercised cheating or fraud in order to evade such time limits or to conceal the damage sustained by the luggage or goods.

 

ARTICLE (365)

  1. Where the carriage is free of charge, the air carrier shall not be held liable, unless it is proved that he or his subordinates have committed a fault, in which case the carrier shall be liable with the limits stipulated in Article (359).
  2. Carriage shall be deemed to be free of charge where it is performed without consideration and the carrier is not a professional carrier. However, where the carrier is a professional one, the carriage shall not be considered free of charge.

 

ARTICLE (366)

The aircraft pilot may impose compulsory measures upon all the persons on board, and he may decide to take out any person or article whose presence on board the aircraft might constitute a threat to its safety or a breach to the regulations.

 

ARTICLE (367)

An air carrier shall be exonerated from liability if he proves that all the damage was due to the fault of the injured person. The carrier's liability may be reduced by the Court, where it is proved that the fault of the injured person has contributed to cause the damage.

 

ARTICLE (368)

The plaintiff shall have an option to file his case before one of the following courts:

 

  1. The court within whose jurisdiction the carrier's domicile is located.
  2. The court within whose jurisdiction the head office of the carrier's activity is located.
  3. The court within whose jurisdiction the carrier has a corporation or an establishment which has entered into the carriage contract on his behalf.
  4. The court of the place of destination.

Any stipulation bringing an amendment to the rules of jurisdiction hereinabove referred to, shall be null and void, unless provided for before occurrence of the damage.

 

ARTICLE (369)

 

In case of consecutive carriage performed by several successive carriers, each carrier shall be deemed a party to the carriage contract in regard to the period performed by him. However, the carrier having entered into the consecutive carriage contract shall assume the liability for all the period agreed in the contract, even if he has not personally performed it in whole or in part.

 

ARTICLE (370)

The right to bring the action in liability against the air carrier or any of his subordinates may not be heard after the lapse of two years from the day on which the airplane arrives or was supposed to have arrived, or from the day on which the carriage was stopped.

 

Jebel Ali Free Zone Regulations

Implementing Regulations No. 1/92

Issued pursuant to Law No. 9 of 1992

Of H.H. Shaikh Maktoum Bin Rashid Al-Maktoum, Ruler of Dubai

 

1. These Implementing Regulations are issued by the Jebel Ali Free Zone Authority Pursuant to Law No. 9 of 1992 of H.H. Shaikh Maktoum Bin Rashid Al-Maktoum. Ruler of Dubai. Concernign the formation of legal establishments at the Jebel Ali Free Zone.

2. In these Implementing Regulations the following expressions shall have the following meaning:

“Authority”

The Jebel Ali Free Zone Authority

 

“Free Zone”

The Free Zone of the Port of Jebel Ali

 

“FZE”

A Free Zone Establishment formed and registered ( or to be formed and registered) pursuant to these Implementing Regulations

 

“FZE Conditions”

Conditions relating to Free Zone Establishments issued or to be issued by the Authority, as the same may be amended by the Authority from time to time.


“FZE Department” 

The department of the Authority having responsibility for the formation, registration and regulation of FZE’s hereunder.

 

Owner

The person, whether an individual, company or other establishment, which is the single shareholder of any Free Zone Establishment formed and registered in accordance with these Implementing Regulations.

 

“Owner’s Declaration”

A Declaration in writing by the owner as regards any matter

decided by the owner in respect of the Free Zone

Establishment as described in this Implementing Regulations

Formation and registration
 
3. Any company or any other establishment or person wishing to form a Free Zone Establishment must complete, execute and submit to the FZE Department an application form as prescribed from time to time by the Authority and provide the FZE Department with all such information and documentation as it may from time to time require.
 
4. Approval of any application to form any Free Zone Establishment shall be at the discretion of the Authority which reserves the right to reject any application or to require that such undertakings or guarantees be provided by or on behalf of any applicant as a condition to permission being given by the Authority for the formation of any Free Zone Establishment or as regards its registration or continuation of its registration in the FZE Register as the Authority in its sole discretion, may consider appropriate.
 
5. The Authority shall notify each applicant of the Authority’s decision as to whether or not permission is granted for the formation of any Free Zone Establishment and regards what (if any) undertakings or guarantees it requires as condition to such permission being granted pursuant to paragraph 4 above within 30 days of receipt by the FZE Department of a valid application form from the applicant in question duly completed and executed by or on behalf of the applicant and together with all such other information and documentation as the Authority shall have required.
 
6. Upon permission being granted by the Authority for the formation of a Free Zone Establishment and the Authority being satisfied that the relevant share capital of the Free zone Establishment to be formed has been fully contributed in accordance with paragraphs 8 to 10. Below, the Authority shall cause all relevant details concerning such Free Zone Establishment to be entered in the FZE Register and for a Certificate of Formation, duly executed by or on behalf of the Authority, to be issued.
 
7. Each Certificate of Formation shall specify, among other things, the date of registration of such Free Zone Establishment in the FZE Register. A Free Zone Establishment shall be deemed duly formed with effect from the date of registration thereof in the FZE Register. Each such Free Zone Establishment Shall then be capable of exercising all the functions of a Free Zone Establishment but with such liability on the part of its shareholder to contribute to its assets in the event of its being deregistered pursuant to these Implementing Regulations being limited to the full extent of the shareholder’s share capital contribution to such Free Zone Establishment.
 
Share Capital
 
8. The capital of each Free Zone Establishment shall be denominated in UAE Dirhams. The minimum capital of a Free Zone Establishment shall be Dhs.1 Million or such other amount as the Authority may from time to time determine.
 
9. The capital of each Free Zone Establishment shall be divided into shares. Each share shall be numbered and shall be for UAE Dhs. 1 Million or multiples thereof. Each share shall be represented by a share certificate in such form as the Authority may prescribe from time to time.
 
10. The share capital of a Free Zone Establishment may only be paid in cash unless the Authority otherwise authorizes that the share capital be paid by way of contribution in kind or by a combination of cash and in kind contribution. Any such authorization shall be subject to such conditions as the Authority may require.
 
11. The share capital of a Free Zone Establishment may be altered by Owner Declaration subject to the prior approval of the Authority. Details of each alteration in the share capital of a Free Zone Establishment shall be entered in the FZE Register and shall take effect from the date of such registration.
 
Name
 
12. The name of a Free Zone Establishment must end with the initials FZE. A Free Zone Establishment shall not be registered in the FZE Register with a name which is not approved by the Authority. A Free Zone Establishment may change its name by Owner’s Declaration subject to the proposed new name being approved by the Authority. The new name of the Free Zone Establishment shall be entered in the FZE Register and a Certificate of Change of Name issued by the FZE Department. Each Certificate of change of Name shall specify, among other things, the date of registration of the new name in the FZE Register, being the date on which such new name shall take effect.
 
 
Registered Office
 
13. Each Free Zone Establishment shall at all times have an office in the Free Zone to which all communications and notices may be addressed. Details of such office, which shall be its registered office, and of any change of address, shall be notified within 7 days to the FZE Department and details thereof promptly entered in the FZE Register.
 
Sign-Name Plate
 
14. Every Free Zone Establishment shall affix, and keep affixed, its name on the outside of every office or place in which its business is carried on in a conspicuous position and in letters easily legible in accordance with the requirements of the Authority.
 
Business letters etc.
 
15. Every Free Zone Establishment shall have its name mentioned in legible characters in all its business letters, notices and other official publications, on all promissory notes, cheques and other bills of exchange and orders for money, goods or services purporting to be signed by or on behalf of the Free Zone Establishment and on all its parcels. Invoices , receipts , letters of credit and guarantees.
 
16. Every Free Zone Establishment shall mention its registered office in legible characters in all its business letters and order forms.
 
Shares
 
17. No share in a Free Zone Establishment may be issued unless the capital thereof is fully paid.
 
18. No Free Zone Establishment shall have more than one shareholder.
 
19. All shares issued by a Free Zone Establishment shall be of the same class.
 
20. No Free Zone Establishment may acquire its own shares. However any Free Zone Establishment may own all of the shares in any other Free Zone Establishment or shares in any company or other establishment subject to compliance with all applicable laws.
 
21. Every Free Zone Establishment shall complete and issue a share certificate to the owner in respect of all shares held by it of such Free Zone Establishment forthwith upon the share capital in respect of such share being duly contributed in accordance with these Implementing Regulations.
 
22. The secretary shall enter in the Free Zone Establishment’s share register details concerning the number, amount and owner of all shares issued by it. No shares shall be issued in bearer form.
 
 
 
Share Transfer 
23. Any purported transfer any share or shares in any Free Zone Establishment shall be invalid unless a duly executed instrument of transfer has been delivered to the Free Zone Establishment’s secretary and details registered in the FZE Register. Any share transfer shall be effective as from the date of registration thereof in the FZE Register.
 
24. No share in any Free Zone Establishment may be transferred without the prior approval of the Authority.
 
Directors and Secretary 
 
25. Each Free Zone Establishment shall have at least one director, and at least one secretary although the offices of director and secretary may be held jointly by a single person. Each director and secretary shall be individuals and at least one of the directors, and the secretary, must be resident in the Emirate of Dubai.
 
26. The persons named in the FZE Register as directors or secretary of the Free Zone Establishment are, on the formation of the Free Zone Establishment, deemed to have been respectively appointed as its first directors and secretary.
 
27. Every Free Zone Establishment shall keep at its registered office a register of directors and secretary and the register shall contain details as to the identity and address of the directors and secretary of the Free Zone Establishment, and of any changes thereto. Any such changes shall be notified to the FZE Department within 7 day thereof and details promptly entered in the FZE Register in the prescribed form.
 
28. Any Director and the secretary may be appointed and removed by way of Owner’s Declaration subject to the provisions of paragraph 25 above.
 
29. The acts of a director, secretary or manager are valid notwithstanding any defect that may afterwards be discovered in his appointment, that such an appointment should be made by an Owner’s Declaration.
 
Directors’ Meetings
 
30. The business of a Free Zone Establishment shall be managed by the directors who may exercise all the powers of the Free Zone Establishment. The directors may regulate their proceedings as they think fit. Any director may call a meeting of the directors and any question arising at a meeting of the directors shall be decided by majority of votes, each director having one vote. The directors may elect a chairman and may vest in him a casting vote. Any director may appoint any other director as his alternate who shall be entitled to vote in accordance with the appointing director’s instructions (if any) separately  from his own vote.
 
31. A resolution signed by a majority of all the directors shall be as valid and effectual as if passed at a valid meeting of the directors and may consist of several documents in like form each signed by one or more directors.
 
32. A director shall not be entitled to vote nor be counted as part of the quorum in relation to any resolution which concerns a matter in which he has any direct or indirect or duty which is material and which conflicts or may conflict with the interests of the Free Zone Establishment unless his interest has been disclosed in writing to the other directors in sufficient detail to provide an accurate statement thereof and the other directors (or a majority of them) resolve that such director should be entitled to vote and / or be counted as part of the quorum.
 
33. The secretary shall cause minutes to be kept in books kept for the purpose of each meeting of the directors and of all appointments of directors or secretary.
 
Objects
 
34. The objects of each Free Zone Establishment shall be to carry on all such business within the area of the Free Zone as the Authority may permit under the terms of the Special licence issued in respect of the Free Zone Establishment (as the same may be amended from time to time by the authority) and elsewhere in accordance with all applicable laws and regulations, and all business and other matters ancillary, conducive or related thereto. Such matters will include power for each Free Zone Establishment to borrow, grant security, guarantee any obligation of any person or indemnify any person, to enter into all types of banking and financial transactions, to issue, make endorse or draw any negotiable instruments (such as sheques, bills of exchange, promissory notes or bills of lading) in relation to its business and Power for each Free Zone Establishment to make, alter or dispose of any investments (whether or not within the UAE) in relation to its business.
 
Seal
 
35. A Free Zone Establishment may have a Seal but is not required to have one. A Free Zone Establishment which has a Seal shall have its name engraved in legible characters on the Seal.
 
Contracts etc.
 
36. Any contract may be made by a Free Zone Establishment by writing (a) under its Seal together with the signature of any director of the Free Zone Establishment or (b) with the signature of any director and expressed in whatever form of words to be executed by the Free Zone Establishment. Any contract may be made by a Free Zone Establishment by writing on its behalf by any person acting under the authority of the Free Zone Establishment whether such authority be express or implied.
 
37. Any contract which purports to be made by or on behalf of a Free Zone Establishment if made, accepted or endorsed in the name of, and by or on behalf of or on account of, the Free Zone Establishment by a person acting under its authority.
 
38. A promissory note, cheque or other bill of exchange is deemed to have been made, accepted or endorsed on behalf of a Free Zone Establishment if made, accepted or endorsed in the name of, and by or on behalf of or on account of, the Free Zone Establishment by a person acting under its authority.
 
Accounts etc.
 
39. Every Free Zone Establishment shall keep accounting records sufficient to show and explain the transactions of such Free Zone Establishment and be such as to disclose with reasonable accuracy, at any time, the financial position of the Free Zone Establishment at that time and enable the directors to ensure that any balance sheet and profit and loss account of the Free Zone Establishment prepared under these Implementing Regulations complies with the requirements of these Implementing Regulations.
40. The accounting records shall in particular contain a record of the assets and liabilities of the Free Zone Establishment and entries from day to day of all sums of money received and expended by the Free Zone Establishment and the matters in respect of which the receipt and expenditure takes place.
 
41. The accounting records of each Free Zone Establishment shall be kept at its registered office in the Free Zone and shall at all times be open to inspection by the officers of the Free Zone Establishment Department and by its Owner and representatives of the Owner.
 
42. The first “financial year” of each Free Zone Establishment shall commence on the date of its registration as disclosed in its Certificate of Formation. The Owner may determine the length of the financial year of its Free Zone Establishment by Owner’s Declaration (a copy of which shall be delviered to the FZE Department within 7 days of being made and details thereof promptly entered in the FZE Register) provided that no first financial year may exceed 18 months or be for less than 6 months. Subject to the provisions of paragraph 43 below successive financial years shall be of 12 months duration beginning immediately after the end of the previous financial year.
 
43. The Owner of a Free Zone Establishment may alter the financial year of its Free Zone Establishment by Owner’s Declaration (a copy of which shall be delivered to the FZE Department and details thereof promptly entered in the FZE  Register) save that in no case may the financial year of a Free Zone Establishment exceed 15 months or be shorter than 6 months.
 
44. The directors of every Free Zone Establishment shall prepare for each financial year of the Free Zone Establishment a balance sheet as at the last day of its financial year and a profit and loss account.
 
45. The balance sheet shall give a true and fair view of the state of affairs of the Free Zone Establishment as at the end of the financial year and the profit and loss account shall give a true and fair view of the profit and loss of the Free Zone Establishment for the financial year.
 
46. The Authority reserves the right to require that the balance sheet and profit and loss account of each Free Zone Establishment comply with provisions to be set down by it from time to time.
 
47. Where any Free Zone Establishment owns any other Free Zone Establishment or owns more than half the shares in or otherwise controls any other company or establishment the first mentioned Free Zone Establishment shall also prepare group accounts on a consolidated basis. Where any Free Zone Establishment neither owns less than half the shares in Company or other establishment (not being a Free Zone Establishment) nor controls such company or establishment but nevertheless is in a position to exercise a significant influence over such company or other establishment, then such company or other establishment shall be treated as an associated company for accounting purposes.
 
48. The annual accounts of each Free Zone Establishment shall be approved by its directors and signed by or on behalf of the directors. At  least one director shall sign the balance sheet and profit and loss account of the Free Zone Establishment.
 
49. A copy of the annual accounts of each Free Zone Establishment shall be delivered to the FZE Department within 3 months of the end of the financial year of the Free Zone Establishment. Or such longer period as the Authority may determine.
 
50. Each Free Zone Establishment shall be required to appoint auditors from among those approved by the Authority to make a report to the Owner of the Free Zone Establishment on all annual accounts of the Free Zone Establishment on all and state whether, in the auditor’s opinion, such annual accounts have been properly prepored in accordance with these Implementing Regulations and whether a true and fair view is given (a) in the case of the balance sheet of the Free Zone Establishment of the state of affairs of the Free Zone Establishment at the end of its financial year, (b) in the case of the profit and loss account of the Free Zone Establishment, of the profit and loss of the Free Zone Establishment for the financial year and (c) in the case of annual accounts of the Free Zone Establishment prepared on a consolidated basis, of the state of affairs as at the end of the financial year and the profit or loss for the financial year of the undertaking included in the consolidation.
 
51. The Free Zone Establishment shall deliver a copy of the auditor’s report (duly signed by the auditors) to the FZE Department, together with the annual accounts pursuant to paragraph 45 above.
 
52. Where the net assets of a Free Zone Establishment fall below 75% of its share capital the director (s) shall, not later than 15 days from the earliest day on which that fact is known to a director, duly notify the FZE Department and the Owner which shall, within 7 days of such notification to it, take such steps as may be appropriate to remedy the situation so as to ensure that the net assets of such Free Zone Establishment are restored to at lest 75% of its share capital as soon as reasonably practicable.
 
Distributions
 
53. A Free Zone Establishment shall not make a distribution, whether in cash or otherwise, to its Owner except out of profits available for that purpose or where the share capital of the Free Zone Establishment is reduced in accordance with the provisions of these Implementing Regulations or where the Free Zone Establishment is deregistered and its assets distributed to its Owner. The profits of a Free Zone Establishment available for distribution are its accumulated, realised profits less its accumulated, realised losses. No distribution shall be made other than pursuant to an Owner’s Declaration a copy of which shall be delivered to the FZE Department within 7 days of being made and details of which shall promptly be entered in the FZE Register.
 
Ownership
 
54. Every Free Zone Establishment shall keep a register in which details shall be entered as regards the Owner of the Free Zone Establishment and as regards the ultimate ownership of the Free Zone Establishment and details thereof (and of any changes therein) shall be notified to the FZE Department within 7 days after it is made and promptly entered in the FZE Register.
 
Owner’s Declarations
 
55. A copy of every Owner’s Declaration shall be provided to the Free Zone Department within 7 days after it is made and details thereof shall promptly be entered in the FZE Register.
 
Security interests 
 
56. The Owner may pledge or otherwise charge all (but not only some) of its shares in its Free Zone Establishment to any creditor in security for any debt or other obligation incurred or to be incurred by or binding upon the Free Zone Establishment. Such pledge or other charge over any shares in a Free Zone Establishment will be void if details thereof in the prescribed form are not delivered to the FZE Department within 7 days of the date of such pledge or other charge. Details of any such pledge or other charge shall be entered promptly in the FZE Register.
 
57. Every Owner of a Free Zone Establishment shall cause its Free Zone Establishment to keep at its registered office a register of charges and to enter in it details of any pledge or other charge of the Owner’s shares in the Free Zone Establishment.
 
58. A Free Zone Establishment may grant any security interest permitted under the laws of Dubai from time to time to any creditor in security for any debt or other obligation incurred or to be incurred by or binding upon the Free Zone Establishment or any other person. Any such security interest will be void if details in the prescribed form are not delivered  to the FZE Department within 7 days of the date of such security interest. Details of any such security interest shall be entered promptly in the FZE Register.
 
59. Upon any pledge, charge or other security interest as specified in paragraphs 56 and 58 above being discharged or upon any alteration in the name of the creditor or creditors in whose favour such pledge, charge or other security interest operates, details thereof shall be notified to the FZE Department within 7 days and entered promptly in the FZE Register.
 
Power to investigate
 
60. The Authority may appoint one or more competent persons as inspectors to investigate the affairs of any Free Zone Establishment and report to the Authority in such form and within such time as it may direct. Such appointment may be made on the application of the owner, or of the Free Zone Establishment or by the Authority acting unilaterally or by any other person provided the Authority is satisfied that good reason has been shown or circumstances arisen for requiring the investigation.
 
61. Any inspector appointed by the Authority pursuant to paragraph 60 above shall have such powers of investigation as the Authority may vest in him.
 
62. If the FZE Department has reasonable cause to believe that any Free Zone Establishment is not carrying on business or in operation, it may deregister the Free Zone Establishment after enquiry in writing of the Free Zone Establishment to ascertain if it is carrying on business or in operation and such Free Zone Establishment either failing to respond to such enquiry within 7 days thereof or failing to demonstrate to the satisfaction of the Authority that it is carrying on business or in operation.
 
63. When a Free Zone Establishment is deregistered all property and rights vested in it and not owned by the Authority or any other person are deemed held by its Owner, save where such deregistration is as a consequence of any breach of these Implementing Regulations or of an FZE Condition or the terms of the Special Licence relating to the Free Zone Establishment when, and in any such case, all such property and rights shall be and become forfeited to and vested in the Authority without compensation of any kind.
 
Deregistration
 
64. A Free Zone Establishment shall be deregistered from the FZE Register upon and in accordance with any order therefor being issued by any Court in the Emirate of Dubai.
 
65. Upon deregistration of a Free Zone Establishment all trading and other business operations of such Free Zone Establishment must cease and the Owner must ensure that the Free Zone Establishment’s afairs are wound up under the supervision of an accountant licensed to conduct business as such in the Emirate of Dubai as liquidator so as to (a)ensure that such winding up is conducted in a timely and organised way, taking account of all assets of the Free Zone Establishment and the claims of all creditors and employees thereof and ensuring the payment, or provision for payment of, or to discharge, all claims, debts, liablitities and obligations of the Free Zone Establishment subject to the limitation of liablitity of the owner specified in paragraph 7 above, (b) distribute any surplus assets of the Free Zone Establishment to the Owner, (c) cause to be prepared by the liquidator a statement of account in respect of his actions and transactions and (d) ensure that a copy of such report is delivered to the FZE Department within 7 days of such report being made. Details of such report shall be promptly entered in the FZE Register.
 
FZE Department 
 
66. The Authority has designated a department known as the FZE Department, for the registration of Free Zone Establishment under these Implementing Regulations and various other matters as described herein. In particular the FZE Department shall maintain the FZE Register, being a register in written or computerised form (as the Authority may determine), in which shall be entered details concerning each Free Zone Establishment as described  herein.
 
FZE Register
 
67. The FZE Register shall be open to public inspection subject to the Department’s prior approval.
 
68. A Free Zone Establishment shall be deregistered from the FZE Register upon application being made therefor by the Owner or the Free Zone Establishment to the FZE Department in the prescribed form or upon the Free Zone Establishment or the Owner being in breach of any of these Implementing Regulations or any FZE Condition or the terms of the Free Zone Establishment’s Special Licence and where, if such breach is capable of remedy by the owner or Free Zone Establishment, such breach has not been remedied within 7 days (or such other period as the Authority may agree) of notification by the FZE Department in writing to the owner or to the Free Zone  Establishment as regards such breach.
 
Fees
 
69. The Authority may require the payment to the FZE Department of such fees as the Authority may require in respect of the formation and registration of a Free Zone Establishment, the receipt and review of documents, maintaining and updating the FZE Register and the cost of any inspection and investigation carried out pursuant to paragraphs 60 to 63 above. In addition the Authority may require the payment to the FZE Department of such fees as the Authority may determine on an annual or other periodic basis in respect of any FZE.
 
70. In the case of any default by the Free Zone Establishment or its Owner in compliance with these Implementing Regulations or any FZE Condition or the terms and conditions of the Free Zone Establishment’s Special Licence the Authority may, in addition to all other rights and privileges hereunder, impose a fine on the Free Zone Establishment and / or the Owner of Dhs.10,000 per day during the period of such non-compliance.
 
71. Each Free Zone Establishment shall be required to comply with all FZE Conditions and with the terms of the Special Licence issued or to be issued by the Authority in relation to the Free Zone Establishment in question.
 
Miscellaneous
 
72. The Authority reserves the right to alter, cancel, supplement and vary any or all of these Implementing Regulations as it may consider appropriate from time to time. 
 
73. The Authority also reserves the right to relax or waive, either in whole or in part and either unconditionally or subject to such conditions as it deems appropriate, any or all of the requirements specified in these Implementing Regulations or any FZE Conditions if it considers it appropriate to do so.