Tim Elliot: Hello and Welcome to Lawgical, the U.A.E.’s first, and we believe the only regular legal podcast. My name’s Tim Elliot. Lawgical comes to you from the offices of the Dubai-based legal firm, HPL Yamalova & Plewka. As ever, the Managing Partner is here and that is Ludmila Yamalova. It’s good to see you.
Ludmila Yamalova: Good to see you too, Tim.
Tim Elliot: Ludmila, this time we’re looking at a new law. There are not a lot of questions to be answered, but it is a fascinating new law, I think. It regards public registry for company information that has been issued. The new law is officially in legal speak, and I’ll ask you to translate this in a second, Cabinet Decision #107 of 2022 issuing the executive regulations to Federal Decree Law #37 of 2021 concerning the commercial registry. What does that mean?
Ludmila Yamalova: Indeed. Ultimately, this relates to the U.A.E. companies law. These are two separate legal authorities, as you rightfully said. One was issued in 2021 concerning just the commercial registry, and then the latest one was just literally a few weeks ago it became available but it is dated at the end of 2022, and that is basically an add-on or further explanation to the previous law and the commercial registry and, in particular, how this commercial registry of companies in the U.A.E. will be managed.
Now, this is not a law or a set of laws that been talked much about, but I find it, from a professional standpoint, fascinating because ultimately what the latest Cabinet Resolution #107 of 2022 states is that now in the U.A.E., for the first time ever, there will be a public registry of all companies. It’s important to perhaps take a few steps back to explain what this means and why it is such a huge development.
Historically, and to this day actually in the U.A.E., we don’t have what is called a federal company or a U.A.E. company, for example, a company license that allows you to operate all over the U.A.E. The U.A.E. is physically a small country geographically, but there are seven emirates. If you want to operate in the U.A.E. in all of these emirates, you ultimately need to have seven different companies or seven different licenses. If you want to be based in Dubai, you have to have a Dubai license. If you want to be in Abu Dhabi, you have to have an Abu Dhabi license. If you want to be in Ajman, you need to have a third Ajman license. Now all these licenses can be ultimately connected. You can have a holding company, let’s say in Dubai, and then the Dubai entity will have a branch in Abu Dhabi and then will have a branch in Ajman or Ras Al Khaimah, or anywhere else you are in the U.A.E. But in any event, each one of these entities will be a separate legal entity. In other words, if you want to operate in any one of these emirates, you have to have a special dedicated legal entity that is based and registered in each one of these emirates. You cannot just have one U.A.E. company that allows you to work and operate in the U.A.E. in general.
Because of this historical system, every emirate has the ability to regulate its own company law, and as a result, every emirate has its own registry of companies. But to add another layer to it is that historically we have had what is called the mainland companies or are often called LLCs, and then you had the free zone companies. That distinction was especially important in the past because historically the mainland companies, if you had a business on the mainland, you needed to have local Emirati ownership of at least 51%. The majority of the mainland companies or LLCs in the past were required to have a U.A.E. national as a 51+% shareholder in every company. Therefore, the authorities created specialized free zones that were based around the mainland, and those free zones did not have the restriction of Emirati ownership, so the companies within the free zones could be owned 100% by expats.
That was the historical backdrop of why free zones were introduced and also why they were so popular. Again, this is a very high level debrief or review of mainland companies versus free zone companies. There are a few more nuances, but basically in relevant terms, there are the main differences. With a mainland company, you needed to have a U.A.E. or Emirati national as one of the owners of 51%, not a small ownership. In free zones, it was freely available for expats to own whatever percentage they wanted.
Now as a result, what ended up happening is that in addition to every emirate having its own company laws and company registry, they would also have within each one of these economic zones, there were their own registries. The mainland has its own registry, and the mainland companies are under the authority and jurisdiction of what is called the Department of Economic Development (DED). All the mainland companies or LLCs were licensed and regulated by DED. Every emirate has its own DED. Abu Dhabi has its own DED registry and then Dubai has its own registry. Ras Al Khaimah and Ajman have their own DED registry, and so on and so forth.
Now in addition to the DED registry, every free zone had its own registry. Let’s say if you are in the Silicon Oasis free zone, or in TECOM, or in DMCC, or in Jafza, each one of these free zones had its own registry of companies. Then in Dubai, some of these free zones over the years have consolidated, but there at any given time there are at least 20 different free zones. As a result, what would happen, and we will take Dubai as an example, because Dubai had the largest number of free zones, and other emirates would have just two or three. You would have, if you will, several different registries. You would have the mainland DED registry of companies. You would have the DMCC registry of companies, the Jafza registry of companies, the DIFC registry of companies, and so on and so forth.
Even within the emirates, there was not one centralized database of all companies. It has been very fragmented. If you wanted, for example, to find out where a particular company was based or whether a particular company exists in the U.A.E., there was not one centralized place to go and see whether such and such company was registered in the U.A.E. It was historically because of this evolution of company laws and company registries, and it was all fragmented.
Even within each one of these company registries, the information that was available to the public was extremely limited. All you could do, for example, if you went to the DED company registry on the website, all you could see was the name of the company, maybe their address, maybe a P.O. Box, but not much more detail. Then as time went on, in some of the economic zones, there was a little bit more level of detail. In some places you could even see who the manager was, but again it was not very comprehensive. Ultimately, the rest of the information about these companies was not disclosed publicly. In other words, it was very, very limited to almost nonexistent public information about businesses or companies in the U.A.E. and that is unlike so many other countries. If you were in Europe or in the UK or in the US or Australia, if you want to know anything about a particular company, you could on Google or other internet search, type in the name of the company, and it will pop up and show you where it is registered, who the owners are, what shareholding structure they have, directors, and so on and so forth. Basically, all of that data was publicly available. In the U.A.E. that was never the case. In fact, there was even this mindset that had developed where any such information about the company was considered to be confidential.
Let’s say even in legal terms, for us as legal practitioners here, whenever you are trying to negotiate any kind of a contract or assign a contract, and you are asked as part of this contract, can we please see your trade license to make sure that you basically (a) have a legal entity and (b) that you are the authorized representative of this entity, and then (c) that you actually have the signatory authority to bind this entity. Just getting a copy of the trade license, even in that kind of a commercial transaction, it was a nonstarter. People will think you are crazy, like you are asking to enter their bedroom and find out their bedroom secrets. The mindset had been created such that this was very much shrouded in mystery and secrecy. Perhaps this was also one of the reasons why the U.A.E. has been so popular with so many people coming and setting up companies here, because there was no public disclosure of information.
Well, interestingly enough, and I will come back to this law that we are discussing today. A few year ago, all of a sudden, and it wasn’t really talked about much, and we just basically stumbled upon it, to be honest with you, there appeared to be what is called the U.A.E. Economic Registry. For the first time, there appeared to be a centralized database of companies listed in the U.A.E. That just appeared out of nowhere. We just stumbled upon it by accident, and there it was. We were like, wow, what is this? Because previously if you wanted to know anything about any company, you had to literally go zone by zone, website by website. All of a sudden, there is this U.A.E. Economic Company Registry, and this registry basically became the database, more or less a U.A.E. centralized database of all the companies in the U.A.E.
It was pretty obvious at that point in time it was still being populated when we discovered it about two to three years ago. But it was certainly a step in that direction of creating a consolidated database of all businesses and companies set up in the U.A.E. That meant in specific terms that it included all the mainland companies in every emirate, and all of the free zone companies. My law firm is listed there as well. All these details, all of these companies that are set up in different emirates, in different economic zones, different free zones, they were now being populated in this one database of companies. We thought wow, that is pretty amazing and so helpful for us. In legal terms, this was extremely helpful because we can now, all of a sudden, just go to one place, one source, to find information about one company or another. We thought that was extremely valuable, at least for us as legal practitioners, but also in terms of residents in the U.A.E. to have this one portal of information.
Once again, in terms of the level of detail and what is available in this portal, it’s perhaps more specific than what existed before, but it is still fairly limited. In general terms, it would just have the name of the company and maybe where it was based, which free zone or which economic zone, which emirate, whether in Dubai in the DED, or Dubai in the DMCC or Jafza, maybe an address, and in some cases, we could see who the manager was, but again it was quite limited. It seemed to be that if some companies offered to disclose publicly to begin with, maybe that is the data that appeared on that list.
This was still a big development in terms of just having one centralized list and database of all U.A.E. companies, but in terms of what you can find out about them, it was still fairly limited, until this new law or this new Cabinet Decision #107 of 2022 came to be. Now still, this is just the law and just the authority. In terms of its implementation, it will take some time, but the law is already in effect. As per this law, now all information about company ownership in the U.A.E. will become public.
Now that means all the details that we have previously not had access to will ultimately become publicly available. As per this law, what it does is it creates this public registry of companies. We are assuming maybe it will be the same U.A.E. Economic Registry that will be used as the portal or maybe it will be a spin off from that. But as per this law, these are the details that will now have to be publicly available. All company details, including and not limited to, addresses, license details, legal form – a limited liability company or a limited liability partnership or a sole establishment, whatever the legal form may be, and the manager’s name. All of those details will have disclosed and publicly available about the company. That is one level.
Furthermore, all about the owners, this public registry will have all the owners names and the details, such as contact details, mobile phone number, email address, and check this out – on this, I still have a big question mark – Emirati ID and passport number.
Tim Elliot: Publicly available?
Ludmila Yamalova: That is what the law states. Now we will see how – maybe it will not be the entire number, maybe it will be some numbers blocked off, but yes, basically the law clearly states this is public, and a public registry of companies will include this information about the owners, including Emirati ID and passport numbers, in addition to the contact details, phone number and email.
Tim Elliot: So, a full, correct up-to-date list of company information, freely available in the public domain is what you are saying.
Ludmila Yamalova: Basically. But there is another layer. One is the company and the owner. The third layer is management.
Tim Elliot: Okay.
Ludmila Yamalova: Now the registry will also include, and by the way, the law is unequivocal in its terms. It says, “must include.” It is pretty unequivocal. Must include the management details, which includes directors’ names and their details, including Emirati ID numbers and/or passport numbers and the ultimate beneficial owners or UBOs.
Tim Elliot: Okay. This is an extremely transparent approach.
Ludmila Yamalova: Absolutely. In a way, the U.A.E. is not going to be brought onto the same level perhaps in terms of company laws and company registries that have existed in other countries, Europe, the US, Australia, and more western countries. Yes. Historically, in those countries, all of this information has been publicly available, apart from, as you recall, the off-shore companies. That is the definition of off-shore company is you could never get to the details of who owns the off-shore companies. This is the definition and the whole reason perhaps behind the off-shore company setup is that they were registered through agents and who the owners were, this was completely not available, secret information, and not available to the rest of the world until you remember, the Panama Papers, and the Pandora Papers, which have basically leaked all of that information. But in those cases, those off-shore companies are, by their design, meant to be basically kind of secretive in terms of ownership and management and who the ultimate beneficiaries are. That is by their design. But even then, obviously, with these leaks, that design is coming apart at the seams and the whole off-shore world is becoming perhaps less so than it was before. But it was still limited to just the off-shore structures.
Now the U.A.E. has had it basically that kind of a shroud or perhaps a lack of transparency with regards to just companies in general, including on shore and off shore until basically this new law. As per this new law, as you said, it will be extremely transparent.
Now this is what the law states, how it is going to be implemented, how soon, but we are speculating given having seen how this current public registry is being developed or evolved, as I just described, I would speculate at least that the information has been gathered over the last several years. Also, we have seen some of this transparency and steps toward transparency over the last several years with all of the anti-money laundering laws and the economic substance laws that we have talked in one of these podcasts. We have a special dedicated podcast to each one of these topics. We will talk more about them because there have been more updates. But as far as the anti-money laundering laws, we have seen in fact a lot of these economic zones and Jafza, off shore in particular, requesting more and more information about the UBOs or the ultimate beneficial owners. We have been scratching our heads, trying to figure out to what end. Why is this information being gathered? Well now, perhaps it has all become more clear and will make sense that over the last several years the authorities have been gathering this information and collecting obviously with some kind of ultimate objective in mind. I would say that perhaps this is the objective. It is making this information publicly available to the rest of the world. This will be interesting because historically the U.A.E. has been very popular for a lot of businesses and a lot of individuals setting up many, many different structures here because of this opaqueness in terms of who own it, who manages it, and the people who are behind the scenes. With this new law, I would assume and I anticipate that this will change tremendously and that all that information, once it becomes publicly available, perhaps it will change the dynamic of the U.A.E. and that comes in light and along with other efforts and initiatives the U.A.E. has been so insistent about in terms of becoming more included at the level of the big boys, so to speak, on the economic and the world’s scene in terms of how it is perceived as an economy and as a business center so it does not have these kind of blemishes of being too opaque or being too secretive and so it’s in line with all of these initiatives to be taken off the gray list, which every so often the U.A.E. end up on there. They have been introducing this money laundering laws, the economic substance requirement laws, and a number of central bank laws and the new company laws, and now on the back of this new company laws there is a public registry.
I would anticipate the U.A.E. business foundation or framework change significantly in the next year or so in light of this new law.
Tim Elliot: That is fascinating. That’s another episode of Lawgical, the new law regarding a public registry for company information here in the U.A.E. Our legal expert, as always, Ludmila Yamalova, managing partner here at Yamalova & Plewka. Thank you
Ludmila Yamalova: Thank you, Tim.
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