Impact of new Commercial Companies Law on LLCs

Federal Law No. 2 of 2015 Concerning Commercial Companies (CCL) came into force on 1 July 2015, replacing the previous Commercial Companies Law (Federal Law No. 8 of 1984). The CCL contains a number of incremental improvements and modifications to the old law, but the practical application of some of these changes is still being studied.

Article 104 of the CCL provides that “Unless otherwise provided by this law, the provisions concerning joint stock companies shall apply to the limited liability company [LLC]. The expression ‘competent authority’ shall substitute for the term ‘authority’ wherever it appears.” This article will have a material impact on LLCs as they will become subject, to a large extent, to the regulations and rules of public joint stock companies (PJSCs). The authors will highlight the key provisions of the rules of PJSCs that could potentially apply to LLCs.

Shareholders’ compliance. Article 111 of the CCL provides that the constitutional documents of the company must be binding on all of its shareholders. The amounts due from a shareholder to the company as per the constitutional documents must also be a debt payable by the shareholder to the company. While article 111 has specific application to PJSCs, article 104 extends its application to LLCs. Consequently, partners in the LLCs will be bound by the provisions of the constitutional documents of the company.