A Limited Liability Company (“LLC”) is the most common type of corporate structure that is used in the UAE by investors who intend to carry on business in the mainland.
- Article 92 of the Commercial Companies Law states that an LLC is required to have an Annual General Meeting (“AGM”) at least once a year within the four months after the expiry of the financial year of the LLC.
- The meeting should be called by the General Manager (or its management board) and attended by all of the partners.
- All the partners of an LLC are required to attend the AGM irrespective of the number of shares that they hold. If a partner is not able to attend, s/he can appoint any other partner or party (other than the General Manager of the LLC) as his proxy to attend on his behalf.
The failure to convene within the period specified in the Commercial Companies Law can result in penalties consisting of fines ranging from AED50, 000 to AED 100,000. Further, if the losses of an LLC reach half of its capital, the fines resulting from the failure to hold an AGM can range from AED50, 000 to AED1m.
Although the above is a legal requirement, we regularly encounter situations where companies have either never held an AGM or an AGM has only been held on one occasion in the lifetime of the company. It is important that partners of an LLC (licensed and registered in the UAE), ensure that they remain compliant with the law and hold the AGM annually in order to ensure that their interests are continually protected.
The agenda of the Annual General Meeting usually consists of:
- Reviewing the manager’s report on the activities and the financial position of the LLC;
- Approval of the balance sheet and profit & loss;
- Distribution of dividends to partners;
- Appointment of manager and fixing of his remuneration;
- Appointment of the auditor and fixing their fees; and
- Any other pending matters which are highlighted in accordance with the provisions of the Commercial Companies Law or the Memorandum of Association.