Enhanced Penalties for violations under the Corporate Commercial Law
December 29, 2022
Cabinet Decision No. 102/2022 on the issuance of the Regulation on the Administrative Penalties for Acts committed in violation of the provisions of the Federal Decree Law No. 32 of 2021 on Commercial Companies
In order to ensure better compliance the Ministry of Economy and the Competent Authority in charge of the corporate affairs have been given the power to impose administrative penalties to whoever commits any acts in violation of the provisions under the Federal Decree Law No. 32/2021 on Commercial Companies Decree Law.
The provisions of this decision shall apply to commercial companies that are established in UAE, foreign companies and branches of foreign companies, and to the representative offices and investment funds. Companies that are exempted by the provisions of the Law include professional civil, foreign companies and companies operating in the Free Zones.
As per the Cabinet Decision, the penalties will be imposed in the following order:
- In case of a first-time violation, a written warning notice;
- In case of a second-time violation, an administrative penalty shall be imposed;
- In case of a third-time violation, the administrative penalty shall be doubled ;
- In case of a fourth-time violation, the administrative penalty shall be increased three times in addition to a temporary administrative closure for a period not exceeding six (6) months, renewable for one time only.
Important Violations covered under this decision are:
| S.No. | Description of Violation | Administrative Penalty Involved |
| 1. | Breach of Corporate Governance Rules | Fine upto AED Ten million (10,000,000) |
| 2. | Failing to invite a member of the board of directors or the managers to the meetings of the board. | Fine of AED three thousand (3,000). |
| 3. | Failing to keep accounting records. | Fine of AED fifteen thousand (15,000). |
| 4. | Data and Documents of the company and refusal to inform the concerned persons of them | A company that refuses to make available to the partner the minutes of the general meeting of the company’s books and documents, or any documents or records related to a transaction that the company has concluded with one of the relevant parties shall be liable to a fine AED five thousand (5,000), which could go up to AED one hundred thousand (100,000). |
| 5. | Breaching the obligation to convene the annual general assembly meeting | The Director or the chairman of the board of management or his representative in the company who fails to convene the general meeting of the company within the period specified in the law or if the meeting is convened without obtaining the approval of the Competent authority shall be liable to a fine of AED five thousand (5,000) which could go up to two hundred thousand (200,000) |
| 6. | Failing to invite the General Assembly to convene in case of losses. | The director or the chairman of the board of management or his representative in the company shall be liable to a fine of AED fifty thousand (50,000), if the losses of the company amount to one-half of its capital and the said person fails to invite the general assembly to convene according to the provisions of the Decree-Law. |
| 7. | Violating the provisions of the decree law and its implementing decision where no administrative penalty is laid down | A fine of AED Ten thousand (10,000) shall be imposed for any other acts and violations not previously mentioned in the table. |
| 8. | Non- Registration and Non-Licensing of a foreign Company | A foreign company or its office or branch in the state that fails to register with the Registrar and obtain the license, or fails to submit copy of balance sheet, the final accounts, and the auditor’s report if any to the Competent authority and ministry shall be liable to a fine of AED one hundred thousand (100,000) |
| 9. | Exercise of a commercial activity by the representative office | A representative office of a foreign company in the state that carries on a commercial activity in the state shall be liable to a fine of AED fifty thousand (50,000) |