New UAE Company Fines Explained: From Sharia Compliance to AGM Rules

Understanding the legalities of running a business in the UAE is crucial for any onshore company's success. A recent development, the Administrative Penalties Regulations (the "Penalties Regulations"), established a framework of fines for violations of the UAE's Companies Law (Federal Decree-Law No. 32 of 2021). This blog post simplifies the key points of the Penalties Regulations (Cabinet Resolution No. 102 of 2022) and offers practical advice to ensure your company stays compliant.

Who Needs to Comply?

The Penalties Regulations apply to all commercial companies established onshore in the UAE, including:

• Foreign companies
• Branches of foreign companies
• Representative offices
• Investment funds subject to the Companies Law

Exemptions:

Companies operating in free zones are not subject to these regulations.

The Penalty Structure: A Graduated Approach

The Penalties Regulations take a progressive approach to penalties, meaning the fines increase with repeated offenses:

• First Offense: A written warning notice is issued.
• Second Offense: An administrative penalty is imposed.
• Third Offense: The administrative penalty is doubled.
• Fourth Offense: The penalty triples and the company may face a temporary administrative closure of up to six months.

Common Violations and Corresponding Penalties:

Here's a breakdown of some notable violations and their associated fines:

• Breaching Corporate Governance Rules: Up to AED 10 million fine.
• Failing to Provide Company Data to Shareholders: Up to AED 100,000 fine.
• Operating Through a Representative Office for Commercial Activities: AED 50,000 fine.
• Not Maintaining Proper Accounting Records: AED 15,000 fine.
• Non-Compliance with Sharia Law: AED 7,000 fine.
• Not Convening an Annual General Meeting: AED 5,000 fine.
• Failing to Invite Board Members or Managers to Meetings: AED 3,000 fine.

Taking Action for Compliance

With the introduction of the Penalties Regulations, it's vital for UAE onshore companies to proactively assess their administrative and operational procedures. Here at RAS Corporate Advisors , we can help:

• Our team of legal and compliance specialists can review your company procedures and advise on administrative matters related to the Penalties Regulations.
• We can address any corporate compliance queries you may have to safeguard your company from penalties.

Important Note: This blog post is intended for informational purposes only and should not be construed as legal advice. It's advisable to consult with a qualified legal professional familiar with the latest updates to the UAE Companies Law and the Penalties Regulations for specific guidance.

Feel free to reach out to Ras Corporate Advisors at [email protected] for a consultation.

Blog Credits: Nehan Zehra