Accounting entries for exercising stock options dubai
However, in the event of the decision passed by the majority, the members who object to such decision shall not be held liable provided they state their objection in writing in the minutes of the meeting.
Absence from a meeting at which the decision has been passed shall not be deemed a reason to be relieved from liability unless it is proven that the absent member was not aware of the Decision or could not object to it upon becoming aware thereof.
The company shall be bound by the acts of the member of the Board as against a bona fide third party, even if it is found thereafter that the procedures of election or appointment of the member are invalid or the applicable conditions for such election or appointment are not available. The Court may appoint one or more experts to provide a report on one or more transactions of management.
The Court may issue a judgment to annul the act or omission to act, the subject matter of the application, or to continue to do any act that it omitted to do.
The company may file a liability lawsuit against the Board of Directors due to the errors that may result in damages to all the shareholders, under a decision issued by the General Assembly to appoint a representative of the company to initiate the lawsuit in the name of the company. Every shareholder may file the liability lawsuit individually against the Board of Directors if not filed by the company, provided that the error may cause private damage to him as a shareholder and that such shareholder shall notify the company of his intention to file the lawsuit.
Every provision in the Articles of Association of the company to the contrary shall be invalid. Any decision passed by the General Assembly to relieve the Board of Directors shall not prevent the filing of the liability lawsuit against the Board of Directors due to the errors committed by them during the performance of their duties. If the act giving rise to liability has been presented to and approved by the General Assembly, the liability lawsuit shall be forfeited upon the expiry of one year from the date of such meeting.
However, if the act ascribed to the members of the Board is a criminal act, the lawsuit shall not be forfeited until the public case is forfeited. In such event, the General Assembly shall elect new members of the Board instead of those dismissed, subject to the provisions of Articles and of this Law. The Authority and the Competent Authority shall be notified of such election. The General Assembly may resolve not to deduct such penalties if it finds that such penalties are not due to omission or error by the Board of Directors.
Filing the lawsuit shall not prevent the execution of the decision, unless the Competent Court orders otherwise. The Board may invite the General Assembly to convene as the Board may deem fit. This shall also apply as necessary. In such event, the auditor shall lay and publish the agenda.
Other than the meeting of the General Assembly adjourned due to absence of quorum in accordance with the provisions of Article of this Law, invitation shall, subject to the consent of the Authority, be sent to convene the General Assembly to all the shareholders by a notice in two daily local newspapers, one of them issued in Arabic, under registered letters or according to the method of notification as determined by the Authority in this respect, at least 15 fifteen days prior to the scheduled date to hold the General Assembly.
The notification of the invitation shall include the agenda. A copy of the papers of the invitation shall be sent to the Authority and the competent authority. A rticle Valid Notification of the Invitation of the Shareholders. A rticle Request by the Shareholders to invite the General Assembly. The General Assembly shall be convened within at least 15 fifteen days, but not exceeding 30 thirty days from the date of invitation to the meeting.
The Board of Directors shall invite the General Assembly to convene on demand by the auditor. If the Board fails to send the invitation within 5 five days from the date of the application, the auditor shall send the invitation.
Authority, the Authority shall give the invitation to the meeting at the expenses of the company. In particular, the annual General Assembly of the company shall consider the following issues and take decisions in their regard:. Any shareholder that has the right to attend the General Assembly may delegate any person elected by such shareholder, other than a member of the Board, under a special written proxy.
Shareholders who are minors or interdicted shall be represented by their legal representatives. The delegated person shall have the powers as determined under the delegation decision.
The presence of such controllers shall be stated in the minutes of meeting of the General Assembly. The General Assembly may not consider other than the issues listed in the agenda. The Authority may issue a decision determining the applicable conditions to list a new issue on the agenda of the General Assembly.
The shareholders shall enter their names in a special record prepared for such purpose at the head office of the company prior to the scheduled time to hold the meeting of the General Assembly.
Such record shall include the names of the shareholders, the number of the shares represented by them and the names of the holders of such shares, and the instrument of proxy shall be provided.
The shareholder shall be given a card to attend the meeting, in which the number of the votes held by such shareholder in person or by proxy is stated. Deputy Chairman are absent, any shareholder so elected by the other shareholders by way of voting by any means as determined by the General Assembly, shall chair the General Assembly. The General Assembly shall also appoint a secretary for the meeting. If the General Assembly considers any issue related to the Chairman of the meeting, whoever he is, the General Assembly shall elect from the number of the shareholders a Chairman of the meeting during the discussion of this issue.
If quorum is not present at the first meeting, the General Assembly shall be adjourned to another meeting to be held after at least 5 five days, but not exceeding 15 fifteen days from the date of the first meeting. Quorum at the adjourned meeting shall be present irrespective of the number of the present shareholders. A rticle Withdrawal from the Meeting of the General Assembly. If any of the shareholders or their representatives withdraws from the meeting of the General Assembly upon the presence of quorum thereat, such withdrawal shall not, irrespective of the number of the shares withdrawing, affect the validity of the General Assembly, provided that the decisions shall be passed by the applicable majority in this Law.
The members of the Board and the auditor shall reply to the questions to the extent that may not cause damage to the interest of the company. The Decision by the General Assembly shall be enforceable. However, voting shall be secret if related to the election, dismissal or accountability of the Directors. The minutes shall include the names of the shareholders present in person or those represented, the number of the shares held by them, in person or by proxy, the votes held by them, the Decisions passed, the number of the votes for or against such Decisions and an adequate summary of the discussions at the meeting.
The minutes shall be signed by the Chairman and the secretary of the meeting, the canvasser and the auditor. The persons who sign the minutes of meetings shall be responsible for the authenticity of their contents.
A rticle Execution of the Decisions of the General Assembly. The Chairman of the company shall execute the decisions of the General Assembly and notify a copy thereof to the Authority and the Financial Market where the shares of the company are listed and to the competent authority in accordance with such conditions laid by the Authority in this respect.
Any shareholder may inspect such minutes free of charge within the applicable working hours. The Authority may issue an order to the company to deliver the required copies to the person or persons who demand such copies.
At the end of the financial year, the temporary Board of Directors shall invite the General Assembly of the company to elect the members of the Board. If such General Assembly fails to elect the members of the Board, the Authority shall refer the issue to its Chairman, upon consultation with the competent authority and the entities supervising the activity conducted by the company in the State, to take the appropriate Decision, including the dissolution of the company.
This limit may be increased under a Decision by the Cabinet on a suggestion made by the Chairman of the Authority. However, the company may under a special Decision, subject to the consent of the Authority, resolve to add a premium to the nominal value of the share and determine the amount of such premium. Such premium shall be added to the legal reserve; even if the reserve exceeds half the capital thereby. Any provision to the contrary in the Articles of Association of the company or the Decision to increase the capital shall be void.
The Board of Directors of the Authority shall issue the Decision regulating the conditions and procedures of selling the pre-emption right.
Any balance shares thereafter shall be offered for public subscription, in accordance with such conditions as determined by the Authority. Under a special Decision, the reserve may be merged in the capital of the company by creating bonus shares to be distributed to the shareholders pro rata to the shares held by each of them, or by the increase of the.
The shareholders shall not bear any financial obligation as a result thereof. Bonds or Sukuk shall be converted to shares according to the prospectus and conditions as approved by the. The approval by the Central Bank shall be obtained in the event of companies licensed by it. The capital of the company may not be decreased without the consent of the Authority and issuing a special decision upon hearing the report of the auditor.
The capital may be decreased in either of the following cases:. The Board of Directors of the company shall, within 5 five working days from the effective date of the decision to increase or decrease its capital, enter such decision with the Authority, the competent authority and the registrar. The company shall not issue different classes of shares.
The shares shall be nominal. No shares to bearer shall be issued. The shares shall be negotiable. The method and conditions of disposal of shares shall be determined in accordance with the provisions of this Law, the Regulations and Decisions issued by the Authority and the Articles of Association of the company, provided that the disposal of the shares shall not lead to the decrease of the share of the UAE nationals in the capital of the company below the applicable limit according to this Law.
Shares may be mortgaged by the delivery thereof to the creditor or its representative upon following the applicable procedures in this respect. A mortgagee creditor shall collect the profits and use the rights attached to the share, unless agreed otherwise in the mortgage contract. Title to the shares of the company listed in any of the financial markets licensed in the State shall be transferred in accordance with the applicable procedures of the Authority and the Financial Market where such shares are listed.
Such entry shall be marked on the share and the transfer shall be effective against the company or third parties only from the date of such entry.
The transferee shall use the rights derived from such transfer from the date of such registration. If title to a share is vested in several heirs or a share is held by several persons, they shall choose one of their number as their representative against the company. Such persons shall be jointly liable for the obligations arising from the title to the share. If such holders fail to agree on the choice of their representative, any of them may resort to the competent Court to appoint such representative.
A rticle Limitations to Trading in the Shares of the Founders. Such shares shall be marked as founders' shares. The provisions of this Article shall apply to the subscriptions by the founders in the event of increase of the capital prior to the expiry of the prohibition period.
The funds of the company may not be attached due to debts payable by a shareholder. However, the creditors of the shareholder may attach its shares and the profits derived from them.
A share shall be marked in the share register and in the Financial Market where the shares of the company are listed. If the shareholder fails to make payment within 30 days, the company may sell the share at a public auction or according to the Decisions issued by the Authority. The company shall have the right of recourse against the shareholder from his own funds if the sale proceeds cannot settle the rights of the company, and the shares shall be entered in the share register in the name of the purchaser.
Such obligation may not be set off against any rights of the shareholder from the company. In such event, such shares shall have no vote in the deliberations of the General Assembly or a share of the profits. The shares purchased for the purpose of resale thereof shall have no vote in the deliberations of the General Assembly or a share of the profits until the resale of such shares. If the name of any person or the number of the shares held by such person is omitted to be entered in the register of the shareholders of the company, or in the event of any unjustified failure or delay to enter the incident that any person is not a shareholder, the affected person or any shareholder of the company may demand the company to amend the particulars of the register, and the company may reject the request for amendment.
In such event, the affected person may resort to the Court. The company or any of its subsidiaries may not provide financial aid to any shareholder to enable the shareholder to hold any shares, bonds or Sukuk issued by the company. In particular, financial aid shall include:. A rticle Conditions of Contribution by the Strategic Partner. A rticle Encouraging the Personnel of the Company to hold Shares. Such certificates shall substitute the shares. The shares representing contributions in kind may not be delivered until the transfer of title to such contributions in kind to the company.
The owner shall publish the numbers of the lost or destroyed certificates and their quantity in two daily local newspapers, one of them issued in Arabic. Such new certificate shall entitle its holder all the rights and impose on him all the obligations connected with the lost or destroyed certificate. If conversion is decided, the holder of the bond or Sukuk alone shall have the right to accept the conversion or to collect the nominal value of the bond or Sukuk.
Any condition to the contrary shall be invalid. Subject to the provision of Clause 5 of Article of this Law, bonds or Sukuk shall be issued only upon:. The General Assembly may authorize the Board of Directors to determine a date to issue bonds or Sukuk, provided that such date shall not exceed one year from the date of approval of the authorization.
Upon issuing a special Decision to issue bonds or Sukuk convertible to shares and until the date of such conversion or payment of their value, the company may not decrease its capital or increase the rate decided to be distributed as a minimum limit of profits to the shareholders.
In the event of decrease of the capital of the company due to the losses by way or forfeiture of a number of shares or the decrease of the nominal value of the share, the capital shall be decreased, as if the holders of the bonds were shareholders.
Shares received by the holders bonds or Sukuk converted into shares in the capital of the company shall have a share of the profits resolved to be distributed for the financial year during which the conversion is made, from the date of such conversion until the end of the financial year. The company may not advance or delay the date of payment of bonds or Sukuk unless otherwise provided by the Decision issuing the bonds or Sukuk and the prospectus. However, if the company is dissolved other than for merger, the holders of bonds or Sukuk may demand to pay the value of their bonds or Sukuk prior to their maturity date.
The company may also offer such payment to them. In either event, if payment is made, interests shall not be payable for the balance period of the loan. The rights of the holders of bonds or Sukuk issued by the company, which are not offered for public subscription in the agreement creating such bonds or Sukuk shall be determined.
Such agreement shall also include procedures needed from the holders of bonds or Sukuk to hold meetings and appointing any committees, voting rights and all the other related issues and the conditions of converting them to shares in the company if they were convertible.
The Authority may issue a Decision regulating the rights of the holders of bonds or Sukuk. Such accounts shall give a true and fair view of the profits or losses of the company for the financial year and the affairs of the company at the end of the financial year and shall comply with any other requirements in this Law and the relevant Decisions issued by the Authority.
Such accounts shall be approved by the Board of Directors and presented to the General Assembly together with the auditor's report, within 4 four months from the end of the financial year of the company. The International Accounting Practices and Standards shall be applied by the companies upon preparing their periodical and annual accounts and determining the dividends.
The balance sheet and the profits and losses account shall be published in two daily local newspapers, one of them issued in Arabic, within 15 fifteen days from the date of approval thereof by the General Assembly. A copy of the balance sheet and the profit and loss account shall be provided to the Authority and the competent authority.
The voluntary reserve may not be used for other purposes except under a Decision by the General Assembly of the company. Upon the expiry of two financial years from the date of its incorporation and making profits, the company may, under a special Decision, give contributions. The Board of Directors of the company may not be authorized for such purpose. The founders of the company may, at the time of incorporation, appoint one or more auditors as approved by the Authority to perform its duties until the convention of the first General Assembly.
The Board of Directors may not be delegated to this effect, provided that such fees are reflected in the accounts of the company. The Board of Directors of the Authority shall issue a Decision of the conditions to approve the auditors of. The Authority may require providing a professional insurance by the auditor.
If the company has more than one auditor, they shall distribute the duties among themselves and each of them shall provide a separate report on the issues of the task assigned to such auditor, and then all the auditors shall prepare a common report for which they shall be jointly liable.
The auditor shall state his name on the report and sign it. The auditor shall provide a report as a result of such inspection to the General Assembly and dispatch a copy of the report to the Authority and the competent authority.
The auditor may require such explanations as the auditor may deem necessary to perform his duties. The auditor may also verify the assets, rights and obligations of the company. If the Board of Directors fails to facilitate the task of the auditor, the Board of Directors shall send a copy of the report to the Authority. The auditor shall keep the confidentiality of the particulars of the company inspected by him by way of performing the duties of his job with the company.
The auditor may not disclose such particulars to third parties or to the shareholders other than during the General Assembly, failing which the auditor shall be dismissed, without prejudice to the civil and penal liability, as applicable.
A rticle Prohibition of Trading in Securities by the Auditor. The auditor and his personnel may not purchase the securities of the company whose accounts are audited by him or sell such securities directly or indirectly or provide any consultancies to any person in connection with such securities, failing which the auditor shall be dismissed, without prejudice to the civil and penal liability, as applicable.
The auditor shall read his report at the General Assembly of the company when the balance sheet of the company is considered, provided that his report shall state whether the auditor has inspected the information that he deems necessary for the satisfactory performance of his duties and prepared the accounts in accordance with the provisions of this Law, and that such accounts reflect, in particular, the following issues:.
Such notice shall be deemed as termination of his task as an auditor of the company from the date of giving the notice or on any later date as determined in the notice.
The Board of Directors of the company shall invite the General Assembly to convene within 10 ten days from the date of filing for resignation to consider the reasons for resignation and to appoint another auditor and to determine the fees of such substitute auditor. The auditor shall be liable to the company for the audits and the validity of the statements in his report and to indemnify the damage incurred by the company due to his acts upon performing his job.
If there is more than one auditor, each of them shall be liable for his own fault that caused the damage. The liability lawsuit against the auditor of the company shall be time barred upon the expiry of one year from the date of holding the General Assembly at which the auditor's report is read. If the act attributed to the auditor constitutes a crime, the liability lawsuit shall not be time barred until the public lawsuit is time barred.
The capital of the company shall be divided into shares of the same nominal value, to be paid in full without offering any shares for public subscription, by the execution of the Memorandum of Association and compliance with the provisions of this Law in connection with registration and incorporation. The name of the company shall be followed by the expression "Sole Proprietorship - Private Joint Stock". The provisions of the Private Joint Stock Company as set forth in this Law shall apply to such owner to the extent not in conflict with the nature of such company.
Such limit may be amended under a Decision by the Cabinet on a proposal made by the Minister. Law shall be excluded from the minimum limit of capital as set forth in Clause 1 of this Article.
In the event of a sole proprietorship, the founder shall act as the committee. A rticle Application for Incorporation provided to the Competent Authority. The omission by the Competent Authority to issue its initial approval during such period shall be deemed as rejection of the application for incorporation. A rticle Application for Incorporation provided to the Ministry. The Founders Committee shall complete any deficiency or make such amendments as the Ministry may deem.
Then, the Ministry shall meet with the Competent Authority within 5 five working days from the date of sending a copy the application to the Ministry. Such register shall be delivered to the shares register secretariat. The application shall be accompanied with:. Controller if the company conducts its business in accordance with the provisions of the Islamic Shariah;.
Ministry of the incorporation certificate make its registration procedures before the Competent Authority. Such disposal shall be effective against the company or third parties only from the date of such entry with the shares register secretariat.
The provisions of this Article shall apply in the event of increase of the capital prior to the expiry of the prohibition period. Other than the provisions of public subscription, unless specifically provided, all the provisions of this Law concerning public Joint Stock Companies shall apply to the Private Joint Stock Companies, and the term "Ministry" shall replace the term "Authority" wherever it may appear therein. A Holding Company shall take the required procedures to ensure that the subsidiaries keep the required accounting records to enable the Board members or the Board of Directors of the Holding Company to confirm that the financial statements and the profits and losses account are compliant with the provisions of this Law.
Any allocation or transfer of any shares in a Holding Company to any of its subsidiaries shall be invalid. The Holding Company shall, at the end of every financial year, prepare a consolidated balance sheet, the profits and losses account and the cash flows of the Holding Company and all its subsidiaries and shall present them to the General Assembly, together with the relevant notes and statements, in accordance with the internationally accepted accounting and audit practices and standards.
The investment fund shall have an independent legal personality, legal entity and financial liability. Subject to the provisions of Article of this Law, it is conditional for the conversion of a company into a. The value of the shares or stocks shall be paid according to their market or book value on the date of conversion, whichever is higher.
Subject to the provisions of Article of this Law, the company shall provide a copy of the Decision for conversion to the Ministry or, as applicable, the Authority and the competent authority, together with:.
If the value of the shares or stocks of a partner is less than the applicable minimum limit of the nominal value of the new shares or stocks, the difference shall be completed in cash, failing which such partner shall be deemed to have withdrawn from the company. The value of his shares or stocks shall be paid according to their market or book value on the date of conversion, whichever is higher. Such conversion shall not discharge the acting partners from the obligations of the company prior to the conversion, unless the creditors agree thereto in writing.
The conversion shall be effective from the date of issuing the commercial licence. The merger contract shall determine the conditions and method of merger. In particular, it shall determine the following issues:. Merger shall be made under a special Decision by such companies, passed by the applicable majority to amend the Memorandum of Association of each company.
In the event of disagreement on such assessment, the issue shall be referred to a committee formed by the competent authority for this purpose in respect of all companies prior to resorting to the Court. A rticle Notification of the Creditors of the Merger Decision.
Every merging company or merged company shall notify its creditors within 10 ten working days from the date of approval of the merger by the General Assembly, provided that such notice shall:.
Merger means that the merged company or companies shall cease to be a legal person s and that the merging company or the new company shall substitute such company or companies in all their rights and obligations.
The merging company shall be a legal successor of the merged company or companies. A rticle Contravention of the Appropriation Rules and Procedures. Without prejudice to the right of the damaged parties to resort to the Court, if it is established that any person contravened the provisions of Article of this Law or the Decision issued by the Authority in this respect, the Authority may take either of the following Decisions:.
The Appropriation Decision shall be published in two local daily newspapers issued in the State, one of them issued in Arabic, at the expense of the appropriating company. Subject to the Provisions concerning the termination of companies, a company shall be dissolved for any of the following grounds:. If the dead partner is an acting partner and the heir is a minor, the minor shall be deemed as a silent partner to the extent of his share from the estate.
In such event, the continuity of the company shall not be conditional by issuing a court order to keep the assets of the minor in the company. The partners shall enter such agreement with the competent authority within the above sixty days. Such partner or his heirs shall have no share in the rights of the company upon such withdrawal other than to the extent such rights are derived from transactions made prior to his withdrawal from the company. The Court may also rule to dissolve the company on demand of a partner due to the failure by a partner to perform his undertakings.
In such event, the company shall continue as between the other partners and shall deduct the share of the partner upon its assessment in accordance with the last inventory or by any means that the Court may determine to follow.
However, the company shall not be terminated by the death of the natural person in a Sole Proprietorship Company if the heirs choose to continue in the company, upon adjusting its position in accordance with the provisions of this Law. Such heirs shall choose a representative to manage the company on their behalf, within no later than six months from the date of death. The death of a partner in a Limited Liability Company or his withdrawal by a judgment of interdiction or declaring his bankruptcy or insolvency shall not lead to its dissolution unless the Memorandum of Association of the company so provides.
The share of a partner shall be transferred to his heirs. A legatee shall be considered as an heir. The dissolution Decision shall be passed by the applicable majority to amend the Memorandum of Association of the company. The dissolution of the company shall not be effective against third parties until the date of such registration.
L i quidation of the Company and the Division of its Assets. Unless the Memorandum of Association or Articles of Association of the company provides for the method of liquidation or the partners agree otherwise upon the dissolution of the company, the provisions of this Law shall apply to the liquidation of the company.
The authority of the Managers or the Board of Directors shall terminate by the dissolution of the company. However, they shall continue to manage the company and they shall be considered as liquidators to third parties until a liquidator is appointed. The management of the company shall remain in existence during the period of liquidation, and to such extent, and within the powers as the liquidator may see required for the liquidation process.
In all events, the task of the liquidator shall not be terminated by the death, declaration of bankruptcy, insolvency or interdiction ordered against the partners, even if the liquidator is appointed by the partners.
If there is more than one liquidator, their acts shall not be valid without the unanimous consent of the liquidators, unless the document appointing them provides otherwise.
This condition shall not be effective against third parties until the registration thereof in the Commercial Register. The liquidator shall enter the Decision appointing him and the agreement of the partners or the Decision issued by the General Assembly concerning the method of liquidation or the judgment issued for such purpose in the Commercial Register.
The appointment of the liquidator or the method of liquidation shall not be effective against third parties other than from the date of entry thereof in the Commercial Register. The liquidator shall charge such fee as determined in the document appointing him, failing which the Competent Court shall determine such fee. Any decision or judgment to dismiss a liquidator shall include the appointment of a new liquidator. A rticle Inventory of the Assets and Liabilities of the Company.
The liquidator shall, immediately upon his appointment, shall prepare an inventory of all the assets and liabilities of the company. The managers or the Chairman shall provide to the liquidator the books, documents and assets of the company. The liquidator shall issue a detailed list of the assets and liabilities of the company and its balance sheet to be signed by the managers of the company or its Chairman.
The liquidator shall keep a book to enter the liquidation procedures. The liquidator shall do everything required to maintain the assets and rights of the company and collect the debts of the company from third parties and shall deposit the amounts collected in a bank for the account of the company under liquidation immediately upon such collection.
However, the liquidator may not demand the partners to pay the balance value of their shares other than as required for the liquidation process and provided that the partners are treated equally. However, the liquidator may not sell the assets of the company all at once without permission from the partners or the General Assembly of the company. All the debts payable by the company shall become immediately outstanding upon its dissolution.
The notice shall be published in two local daily newspapers; one of them is issued in Arabic. In all events, the notice of liquidation shall include a period granted to the creditors for at least 45 days from the date of the notice to present their claims.
If the assets of the company are not sufficient to repay all the debts, the liquidator shall pay part of such debts, without prejudice to the rights of preferred creditors. Every debt arising from the liquidation procedures shall be settled from the funds of the company before any other debts. If some creditors fail to provide their claims, their debts shall be deposited in the treasury of the Competent Court. Sufficient amounts to pay the share of the disputed debts shall also be deposited, unless the holders of such debts obtain adequate securities or it is resolved to adjourn the division of the assets of the company until the conclusion of the dispute in the said debts.
The liquidator shall not commence new works other than as required to complete previous works. If the liquidator performs any new works not required for liquidation, the liquidator shall be liable from all his funds for such works. If there is more than one liquidator, they shall be jointly liable. The liquidator shall complete his task within the period as determined in the document appointing him. If no such period is determined, any partner may refer the issue to the Competent Court to determine the term of liquidation.
Such period may not be extended other than under a Decision by the partners or under a special Decision by the General Assembly, as the case may be, upon inspection of the liquidator's report stating the reasons for not completing the liquidation in due time.
If the term of liquidation is determined by the Competent Court, it may not be extended without the consent of the Court. The liquidator shall provide to all the partners or the General Assembly every three months an interim account of the liquidation procedures.
The liquidator shall state any information and statements as required by the partners on the status of liquidation. Within one week from the date of the approval by the General Assembly, the liquidator shall notify the partners to receive their dues within no later than 21 days under an announcement to be published in two daily local newspapers, one of them issued in Arabic. Such process shall be complete upon approval of the final account.
The completion of liquidation shall not be effective against third parties other than from the date of such entry. The registration of the company shall be stricken off from the Commercial Register kept with the competent authority. The liquidator shall not be liable, whatsoever, due to taking such procedures.
The liquidator shall be liable if he mismanages the affairs of the company during the period of liquidation. The liquidator shall also be liable for the damage incurred by third parties due to his professional faults in the liquidation process.
Each partner, upon division, shall obtain an amount equal to his share in the capital, and the rest shall be divided among the partners at the pro rate of their shares in the profits. If a partner fails to appear to collect his share, the liquidator shall deposit such share in the treasury of the Competent Court. Register in the former event, and from the date of the act creating liability in the latter event. A rticle Foreign Companies governed by the Provisions of this Law.
Subject to the special agreements made between the Federal Government or the local Government or any entity of either of them and foreign companies, the provisions of this Law, excluding the provisions concerning incorporation, shall apply to the foreign companies that conduct their activities in the State or their place of management is based in the State. The licence issued shall determine the activity that the company is licensed to conduct.
The agent of a foreign company shall be a UAE national. The obligations of the agent to the company and third parties shall be limited to providing such services to the company, without any responsibility or financial obligations in connection with the business or activity of the branch or office of the foreign company inside the State or abroad. The office or branch of a foreign company shall be deemed as its domicile in respect of its activity in the State.
The activity to be conducted shall be governed by the provisions of the applicable Laws in the State. Such Decisions may determine such events and conditions that should be observed for the management and closure of the branch or office of the foreign company. Other than representative offices, foreign companies or their branches shall have an independent balance sheet and an independent profits and losses account and shall have an auditor registered in the roll of auditors operating in the State.
Such foreign companies or branches shall be provide to the competent authority and the Ministry annually a copy of the balance sheet and the final accounts, together with a report by the auditor and a copy of the final accounts to its holding company, if any.
It may, together with the Inspection Committee, seek the assistance of one or more experts with the required technical and financial experience in the subject matter of inspection, to verify that the company is compliant with the provisions of this Law and the decisions issued in execution hereof and with the Articles of Association of the company.
The inspectors may demand, at their own discretion, any information or statements from the Board of Directors, the Executive Officer, the Managers or the Auditors of the company. The Competent Court shall decide on such request as a matter of urgency. The Minister shall issue the regulation for inspection of the private joint stock companies.
The regulation shall determine the inspection procedures and the powers and duties of the inspectors. Subject to the provisions of Article of this Law, the Chairman, Executive Officer, General Manager, personnel and Auditors of the company shall provide to those assigned for inspection all the books, minutes of meeting Board of Directors, committees and General Assemblies , records, documents and papers of the company as they deem necessary and provide the required statements and information.
In such event, the meeting shall be chaired by the representative of the Ministry or the Authority, as the case may be, of a degree of an executive officer or any similar officer, to consider the following:.
In the event of the Board member that represents a legal person, the share of such legal person shall be excluded. If the Ministry or, as applicable, the Authority finds that the breaches attributed by the applicants for inspection to the Board members or the auditors are not true, the Ministry or the Authority may order to publish the result of inspection in a daily local newspaper issued in Arabic and require the applicants for inspection to pay its costs, without prejudice to civil and penal liability as applicable.
Conciliation is possible before referral of the criminal lawsuit to the competent Court against payment of an amount not less than two times the minimum fine limit, if any, and equivalent to the daily fine.
When a US company issues equity-based compensation to its employees, it must recognize that compensation in its financial statements by recording a book expense in relation to issued equity-based compensation. Generally, these options are not taxed to the employee nor deducted by the employer.
The spread between the market price and the strike price is deductible to the employer when the employee includes the proceeds from the exercise in income. For tax purposes, stock options are expensed at the time they are exercised.
International equity award grants. Thus, the cost of the equity issued is initially with the US parent. That is, when the granted stock options have vested and are exercised, the US parent would have to incur the cost associated with exercise.
But the cost of equity compensation awards granted to non-US employees is not deductible in the US under the US tax laws and thus, offers no tax benefit to the US parent.
In certain circumstances, it may be tax advantageous to push down the cost to a foreign subsidiary where a deduction can be claimed. Figure 1 illustrates the sequence of payments. Payment sequence under a recharge agreement.
Tax impact of recharging. If the US parent and subsidiary corporations comply with requirements set forth by regulations issued under Section of the Internal Revenue Code, the recharge payment will be treated for US tax purposes as payment to the parent corporation in consideration for its stock.
This means the recharge payment will not be taxable to the parent corporation as a dividend or otherwise, and serves as a mechanism to repatriate cash to the US. From the US perspective, the US parent can use either the grant-date method or the spread-at-exercise method to determine the value of the stock options costs for purposes of recharging.
Under the spread-at-exercise method, the value is determined on the date of the exercise and is based on the difference between the market value of the stock price and the exercise price. The grant-date method could also be used, which as noted above, follows the fair market value principles and is calculated on the date of the grant.
However, it bears noting that Section regulations follow the spread-at-exercise method, and to that extent using the grant-date method may result in some tax implications.
Foreign subsidiaries may be able to claim a deduction for the payment for equity-based compensation under a recharge agreement. However, local tax and accounting requirements differ in what forms of compensation are eligible, the value of the compensation that can be deducted, and accounting requirements. Some countries, such as the UK, provide statutory deductions irrespective of any cost in the local entity i.
Many countries allow a corporate deduction if the local entity recognizes an appropriate expense i. Further, in certain countries the deduction may only be available for shares purchased in the open market and not for newly issued shares. Other countries, such as the Netherlands, generally do not allow a deduction even where there is a local entity expense.
Furthermore, in certain jurisdictions, such as China, recharge may not be possible for foreign exchange control reasons. The Appendix below summarizes local tax and accounting requirements applicable to the deductibility of recharged costs in Australia, Brazil, Canada, China, Germany, Hong Kong and the United Kingdom.
In the experience of the authors, companies equally use the grant-date method and the spread-at-exercise method to determine the cost of stock options in recharging equity-based compensation.
Due care should be taken in choosing the method for recharging costs because it also impacts transfer pricing relationships as discussed below. Transfer pricing implications of recharging. Although the grant of equity-based incentive compensation to employees of overseas subsidiaries has limited direct tax implications from the US standpoint, it can have a bearing on intercompany pricing, which could result in additional cost burden on the foreign subsidiaries and also indirectly affect the tax liability of the US parent.
Depending on the transfer pricing relationship, foreign subsidiaries can be broadly categorized into two groups: Recharging to an LRE. First consider the case of an LRE that is provided a guaranteed level of profit though a cost-plus payment by the US parent, illustrated in Figure 2. This implies that the recharged cost is essentially passed back to the US parent though the payment that the US parent provides to the local subsidiary.
Alternatively, if the LRE is compensated by a foreign principal, the foreign principal may absorb the cost of the recharge through the payment provided to the LRE.
Impact of recharge on intercompany pricing of LREs. However, if the payment made by the US parent to the foreign subsidiary is deductible in the US, this higher tax burden may be offset by lower taxes for the US parent.
In effect, the cost of equity-based compensation that is pushed down to the foreign subsidiary is round-tripped back to the US parent via the payment to its foreign subsidiary. This effectively allows the US parent to get the same benefit from the deduction that it would have lost had it not recharged the equity grants. The cost of equity-based compensation included in the cost base becomes important in this scenario because the compensation to the LRE is based on the cost base of the LRE.
Companies can use either the grant-date method or the spread-at-exercise method in this regard. That is, unrelated parties negotiate prices ex-ante on the basis of expected costs likely to be incurred.
Thus, pricing takes into account the grant-date value of any equity-based compensation that the company expects to offer to its employees. Indeed, unrelated parties typically do not adjust prices on the basis of actual stock price performance. This is also reflected in the financial statements released by the companies that disclose the grant-date value of equity-based compensation given to its employees. In other words, the financial performance disclosed to investors, which forms the basis for their investment decisions, includes the grant-date value of equity-based compensation.
However, issues can arise in using the grant-date method because the local tax deduction, if allowed, typically follows the spread-at-exercise method, which can produce a materially different value from the grant-date method.
This can result in lower than desired level of profitability if the value under the spread-at-exercise method is higher than the value under the grant-date method. On the other hand, if the spread-at-exercise method value is lower than grant-date method value, it may result in higher-than desired level of profits in the LRE. This suggests that the LRE should only claim a local tax deduction equal to the grant-date value so that consistency between costs and revenue is achieved.
However, this may not be possible in all countries. The advantage of using the spread-at-exercise method in pricing intercompany fee is that it ensures consistency between the deduction available and the payments that that the LRE will receive and therefore the LRE is more likely to achieve the target level of profitability. Another advantage of the spread-at-exercise method is that the cost plus fee paid by the US parent or the foreign principal to the LRE may be deductible to the US parent or the foreign principal.
Thus, equity compensation award costs, which were not deductible by the US parent or the foreign principal effectively may become deductible through the service fee paid by the US parent or the foreign principal.
Further, over an extended period of time, the values under the two methods are likely to converge, and the corresponding tax liability is likely to be similar under both methods. Another peculiarity associated with the spread-at-exercise method is that in certain situations the spread can be substantial due to a run up in the stock price this happens most often in the case of a startup company going public.
Correspondingly, the cost base and the plus can be also be substantial resulting in an increase the tax burden of a cost plus LRE. In such situations, it may be more optimal to recharge the equity-based compensation to a foreign principal.
In conclusion, neither method is perfect. Taxpayers should evaluate and choose a method taking into consideration the anticipated results. More importantly, taxpayers should stick with the chosen method to ensure consistency. Recharging from an RBE. When the local subsidiary is an RBE whose profits are determined by the performance of the business, and the costs from the recharged equity grants are deductible, the tax burden is reduced because the profits are lower due to the recharged costs.
This is shown in the figure below.