Financial assistance-Policy and Perspective

Analysis

Amongst the most talked about new concepts of the UAE Commercial Companies Law is the prohibition on financial assistance. In this article, we look at the likely policy reasons for the introduction of a financial assistance prohibition, and at which entities and transactions are most likely to be affected.

The new Commercial Companies Law (Federal Law No. 2/2015) (the Companies Law) brought into force, for the first time in the UAE, the concept of financial assistance. Article 222 relating to shares, bonds and sukuk of Public Joint Stock Companies (PJSCs), states the following:

The company or any of its subsidiaries may not provide financial assistance to any shareholder to enable the shareholder to hold any shares, bonds or sukuk issued by the company. In particular, financial assistance shall include:

1 Providing loans;

2 Providing gifts or donations;

3 Providing the assets of the company as security; and

4 Providing a security or guarantee of the obligations of another person.