The Jebel Ali Free Zone Authority (‘JAFZA’ / the ‘Authority’) has recently issued JAFZA Offshore Companies Regulations, 2018 (‘New Regulations’) applicable to the Offshore Companies formed with the Authority and shall repeal and replace the JAFZA Offshore Companies Regulations, 2003 (‘Old Regulations’).
Following are the key changes in the New Regulations as compared to the Old Regulations:
The New Regulations provide that an offshore company is permitted to hold a lease of a property to be used as a registered office or to own a property in one of the designated freehold areas as approved by the Authority. The offshore company may also own a stake in another operating company in the UAE. There was an ambiguity on the same, as the Old Regulations were silent about the matter, but the New Regulations have provided clear guidelines.
The Old Regulations did not provide for different classes of shares. The New Regulations permit issuance of different classes of shares by the offshore companies.
Furthermore, the New Regulations provide that a transfer of shares shall only be given effect upon the approval of the Authority and upon payment of the applicable fee before the transaction is initiated. This was being practiced even though the Old Regulations did not provide for the same.
Another welcome change in the New Regulations is that the offshore company which owns a property in a designated freehold area may apply to the Authority for a residence visa for its members, subject to the approval from the Authority.
Under the Old Regulations, it was mandatory for every offshore company to have a registered agent at all times. However, under the New Regulations, for offshore companies holding an office space in the JAFZA Zone, it is optional to appoint a registered agent.
Furthermore, the Authority shall soon prescribe guidelines for the registered agents. These guidelines shall provide the roles, responsibilities, duties of the registered agent, obligation to maintain offshore company records, and accountability of the registered agent towards the Authority.
The Old Regulations made it mandatory for an offshore company to appoint at least two directors. However, the New Regulations provide for one mandatory director, subject to the memorandum and articles of association of the offshore company.
The New Regulations also provide for the appointment of a nominee director, which means a body corporate as well, other than the registered agent, and as approved by the Authority.
Records of the Offshore Company
The New Regulations provide that the Authority may ask the offshore company or its registered agent to submit the accounting records. There is another new provision in the New Regulations stating that an offshore company must keep a copy of its records with the registered agent. Hence, the offshore company is now required to maintain the accounting records even with the registered agent.
Transfer of Incorporation
A new concept and part have been introduced in the New Regulations about the Transfer of Incorporation. A foreign company may transfer from its existing jurisdiction to the JAFZA zone, if it is approved by the law of the existing jurisdiction. JAFZA will then issue a certificate of continuation, with the rights and liabilities continuing with it as well.
Similarly, if a JAFZA offshore company intends to transfer to another jurisdiction, it may do so by providing a resolution and if authorized by the Authority and the law of the jurisdiction to which the offshore company intends to transfer itself.
Conversion of the Offshore Company
Yet another new part introduced in the New Regulations is on Conversion of Offshore Companies registered with the Authority to a free zone company with the Authority, by passing a resolution and submitting the same to the Authority. Upon conversion, such company will then have to adhere to the JAFZA Free Zone Companies Regulations, and its existence will continue from its original date of incorporation (as of the date of formation of the offshore company). The Authority may issue further guidelines on this.
The New Regulations provide that a resolution means a resolution passed by 75% of the members, entitled to vote in person or by proxy. On the other hand, the Old Regulations provided for a simple majority that is 51% of the members.
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