The decision by the UAE Ministry of Economy to extend compliance with the new Commercial Companies law by one year to June 30, 2017 will help to facilitate a smoother transition for companies. The extension was made after firms and various authorities faced difficulties in getting various approvals to comply with the new law.

The Federal Law 2 of July 2015 concerning Commercial Companies (the new Act) is set to improve corporate governance by strengthening the legal and regulatory landscape of doing business in the region. Those that do not comply with the new deadline will be fined Dh2,000 a day according to article 357.

Mandatory changes under the terms of the new law include rules regarding shareholders’ permissibility to pledge shares and modernising changes made to shareholders’ general meetings. Such changes include the basis on which the quorum and voting rights at a general meeting is calculated, unlimited general managers, and expert valuation of shares.

In addition, the government has stated that there are now five official types of companies that can be set up in the UAE — Limited Liability Company, Partnership Company, Limited Partnership Company, Private Joint Stock Company and Public Joint Stock Company — a move which is likely to boost entrepreneurship.

This move towards a robust framework is a positive step for the UAE in creating a sustainable model for private sector growth. The new law is expected to boost capital markets in the UAE because it will lower the minimum requirement for companies to sell shares to the public to 30 per cent of company equity instead of 55 per cent.

In contrast to the old Act 8 of 1984, the new one has been implemented to contribute to the development of the working environment by regulating companies according to international norms, protection of minority shareholders, the support of foreign investment and promotion of corporate social responsibility.

Continuing to ensure the highest level of corporate governance and overall market transparency will prove key to the UAE’s ongoing growth by enhancing the country’s status as an attractive business environment that adheres to global market standards. Currently, more than 25 per cent of the world’s 500 largest companies have already chosen the UAE as their operational headquarters within the Middle East and North Africa region.

By creating a business environment that ensures economic and social stability, the UAE is set to become even more attractive to foreign investors. Much can be accredited to the country’s strategy to diversify the national economy by 2021 and encourage growth in the non-oil sectors. In 2015, the Ministry of Economy declared that 70 per cent of the country’s GDP was generated by the non-oil sectors and that the value of the UAE’s non-oil foreign trade reached Dh1.75 trillion ($476.4 billion), a growth of 10 per cent on the previous year.

The UAE’s economic diversification strategy continues to create foreign investment opportunities, and although the UAE Government remains committed to supporting and developing local enterprise, it also recognises the importance of bringing in external manpower and expertise to achieve ongoing, sustainable growth.

This is particularly true in the construction and engineering sectors where specialist experience in health care, education, hospitality, green building, transport and logistics is being sought.

The implementation of the new Commercial Companies Law is a promising move by the UAE Government and will continue to aid business development, and specifically raise levels of good corporate governance, protection of shareholders and promotion of social responsibility of companies.

Ensuring that companies have adequate time to comply with the new law signals to us the willingness of the government to support private sector growth.

The writer is the founding Partner at Links Group.