As we are approaching the end of the first quarter of 2020, which for various companies marks the end of their fiscal year, shareholders and managers begin to plan their annual general meetings. At the same time, this also marks the deadline for the ratification of financial statements for corporate entities in the UAE formed under UAE Federal Law No. 2 of 2015 on Commercial Companies (the “UAE Commercial Companies Law”). Due to various restrictions in place to address the impact of Covid-19, shareholders and managers of corporate bodies are considering alternative arrangements to ensure business continuity for their various activities.
Companies are also inquiring as to the best structure they can implement to ease the convening of shareholders and managers meetings in the context of travel limitations and remote working initiatives widely adopted due to present circumstances.
Many business owners are now asking whether it is permitted to hold official shareholders and managers meetings virtually and whether such decisions are binding. There are two main documents which need to be considered when examining these questions:
- The first is the UAE Commercial Companies Law, particularly Article 92 on the formation of the general assembly, which allows shareholders to agree on the protocol for the determination of the time and place where meetings shall be held. Article 92 reads as follows: “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”.
- The second is the Memorandum of Association (“MOA”) that was enacted at the time when the company in question was established and any subsequent addendums thereto to verify the procedures to call for meetings. In the event where the MOA is not clear enough to cover the possibility of calling for virtual meetings via video or audio conference calls, or otherwise restricts the use of such means, the shareholders will always have the ability to pass a written resolution by circulation to confirm their consent for such a mechanism to be put in place with immediate effect. Decisions passed remotely will have the same effect as the decisions taken during actual meetings held in person. The minutes and any extracts thereof can be circulated for signature when in need.
For the avoidance of doubt, the quorum and voting rights will continue to apply as per the MOA and where the MOA is silent on these matters, the minimum terms of the UAE Commercial Companies Law on this will apply.
If your MOA is not updated to address this issue, we recommend that you have an update made as soon as possible to address this gap and ensure that your shareholders and managers are able to convene remotely.
Please do reach out to us if you have any queries on the above or if you need any legal assistance in the meantime.
Authored by Partner Rima Mrad