• Requirements For Payments Out Of Capital

    • 653. Requirements for payment out of capital

      (1) A payment out of capital by a private company for the redemption or purchase of its own shares is not lawful unless the requirements of the following sections are met-
      (a) section 654 (directors’ statement),
      (b) section 656 (approval by special resolution),
      (c) section 659 (public notice of proposed payment), and
      (d) section 660 (directors’ statement to be available for inspection).
      (2) This is subject to section 661 (reduced requirements for payment out of capital for purchase of own shares for the purposes of or pursuant to an employees’ share scheme) and to any order of the Court under section 663 (power of Court to extend period for compliance on application by persons objecting to payment).

    • 654. Directors’ statement

      (1) The company’s directors must make a statement in accordance with this section.
      (2) The statement must specify the amount of the permissible capital payment for the shares in question.
      (3) It must state that, having made full inquiry into the affairs and prospects of the company, the directors have formed the opinion-
      (a) as regards its initial situation immediately following the date on which the payment out of capital is proposed to be made, that there will be no grounds on which the company could then be found unable to pay its debts, and
      (b) as regards its prospects for the year immediately following that date, that having regard to-
      (i) their intentions with respect to the management of the company’s business during that year, and
      (ii) the amount and character of the financial resources that will in their view be available to the company during that year,
      the company will be able to continue to carry on business as a going concern (and will accordingly be able to pay its debts as they fall due) throughout that year.
      (4) In forming their opinion for the purposes of subsection 654(3)(a), the directors must take into account all of the company’s liabilities (including any contingent or prospective liabilities).
      (5) The directors’ statement must be in the prescribed form and must contain such information with respect to the nature of the company’s business as may be prescribed.

    • 655. Directors’ statement: offence if no reasonable grounds for opinion

      (1) If the directors make a statement under section 654 without having reasonable grounds for the opinion expressed in it, a contravention of these Regulations is committed by every director who is in default.
      (2) A person who commits a contravention of this section is liable to a fine of up to level 8.

    • 656. Payment to be approved by special resolution

      (1) The payment out of capital must be approved by a special resolution of the company.
      (2) The resolution must be passed on, or within the week immediately following, the date on which the directors make the statement required by section 654.
      (3) A resolution under this section is subject to-
      (a) section 657 (exercise of voting rights), and
      (b) section 658 (disclosure of directors’ statement).

    • 657. Resolution authorising payment: exercise of voting rights

      (1) This section applies to a resolution under section 656 (authority for payment out of capital for redemption or purchase of own shares).
      (2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.
      (3) Where the resolution is proposed at a meeting of the company, it is not effective if-
      (a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and
      (b) the resolution would not have been passed if he had not done so.
      (4) For this purpose-
      (a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll,
      (b) any member of the company may demand a poll on that question,
      (c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.

    • 658. Resolution authorising payment: disclosure of directors’ statement

      (1) This section applies to a resolution under section 656 (authority for payment out of capital for redemption or purchase of own shares).
      (2) A copy of the directors’ statement under section 654 must be made available to members-
      (a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him,
      (b) in the case of a resolution at a meeting, by being made available for inspection by members of the company at the meeting.
      (3) The resolution is ineffective if this requirement is not complied with.

    • 659. Notice of proposed payment

      (1) Within the week immediately following the date of the resolution under section 656 the company must-
      (a) (in the case of a company other than a restricted scope company) publish in a leading English language newspaper of the United Arab Emirates, or
      (b) (in the case of a restricted scope company) send to each of its members, a notice-
      (i) stating that the company has approved a payment out of capital for the purpose of acquiring its own shares by redemption or purchase or both (as the case may be),
      (ii) specifying-
      the amount of the permissible capital payment for the shares in question, and the date of the resolution,
      (iii) stating where the directors’ statement required by section 654 are available for inspection, and
      (2) Not later than the day on which the company-
      (a) first makes available the notice required by subsection (1), or
      (b) if earlier, first publishes or gives the notice required by subsection (1),
      the company must deliver to the Registrar a copy of the directors’ statement required by section 654.
      This subsection (2) does not apply to restricted scope companies.

    • 660. Directors’ statement to be available for inspection

      (1) The directors’ statement must be kept available for inspection throughout the period-
      (a) beginning with the day on which the company
      (i) first publishes the notice required by section 659(1)(a), or
      (ii) (in the case of a restricted scope company) sends the notice contemplated by 659(1)(b), and
      (b) ending five weeks after the date of the resolution for payment out of capital.
      (2) The statement must be kept available for inspection-
      (a) at the company’s registered office, or
      (b) at a place specified in rules made by the Board under section 996 (rules about where certain company records to be kept available for inspection).
      (3) The company must give notice to the Registrar-
      (a) of the place at which the statement is kept available for inspection, and
      (b) of any change in that place,
      unless it has at all times been kept at the company’s registered office.
      (4) The statement must be open to the inspection of any member or creditor of the company without charge.
      (5) If default is made for 14 days in complying with subsection (3), or an inspection under subsection (4) is refused, a contravention of these Regulations is committed by-
      (a) the company, and
      (b) every officer of the company who is in default.
      (6) A person who commits a contravention of this section is liable to a level 7 fine.
      (7) In the case of a refusal of an inspection required by subsection (4), the Court may by order compel an immediate inspection.

    • 661. Reduced requirements for payment out of capital for purchase of own shares for the purposes of or pursuant to an employees’ share scheme

      (1) Section 653(1) does not apply to the purchase out of capital by a private company of its own shares for the purposes of or pursuant to an employees’ share scheme when approved by special resolution supported by a solvency statement.
      (2) For the purposes of this section a resolution is supported by a solvency statement if-
      (a) the directors of the company make a solvency statement (see section 584) not more than 15 days before the date on which the resolution is passed, and
      (b) the resolution and solvency statement are registered in accordance with section 662.
      (3) Where the resolution is proposed as a written resolution, a copy of the solvency statement must be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to the member.
      (4) Where the resolution is proposed at a general meeting, a copy of the solvency statement must be made available for inspection by members of the company throughout that meeting.
      (5) The validity of a resolution is not affected by a failure to comply with subsection (3) or (4).
      (6) Section 657 (resolution authorising payment: exercise of voting rights) applies to a resolution under this section as it applies to a resolution under section 656.

    • 662. Registration of resolution and supporting documents for purchase of own shares for the purposes of or pursuant to an employees’ share scheme

      (1) Within 14 days after the passing of the resolution for a payment out of capital by a private company for the purchase of its own shares for the purposes of or pursuant to an employees’ share scheme the company must deliver to the Registrar-
      (a) a copy of the solvency statement,
      (b) a copy of the resolution, and
      (c) a statement of capital.
      (2) The statement of capital must state with respect to the company’s share capital as reduced by the resolution-
      (a) the total number of shares of the company,
      (b) the aggregate issue price of those shares,
      (c) for each class of shares-
      (i) prescribed particulars of the rights attached to the shares,
      (ii) the total number of shares of that class, and
      (iii) the aggregate issue price of shares of that class, and
      (d) the amount paid up and the amount (if any) unpaid on each share.
      (3) The Registrar must register the documents delivered to him under subsection (1) on receipt.
      (4) The resolution does not take effect until those documents are registered.
      (5) The company must also deliver to the Registrar, within 14 days after the resolution is passed, a statement by the directors confirming that the solvency statement was-
      (a) made not more than 15 days before the date on which the resolution was passed, and
      (b) provided to members in accordance with section 661(3) or (4).
      (6) The validity of a resolution is not affected by-
      (a) a failure to deliver the documents required to be delivered to the Registrar under subsection (1) within the time specified in that subsection, or
      (b) a failure to comply with subsection (5).
      (7) If the company delivers to the Registrar a solvency statement that was not provided to members in accordance with section 661(3) or (4), a contravention of these Regulations is committed by every officer of the company who is in default.
      (8) If default is made in complying with this section, a contravention of these Regulations is committed by-
      (a) the company, and
      (b) every officer of the company who is in default.
      (9) A person who commits a contravention of subsection (7) or (8) is liable to a fine of up to level 8.
      (10) This section does not apply to a restricted scope company.

    • 663. Application to Court to cancel resolution

      (1) Where a private company passes a special resolution approving a payment out of capital for the redemption or purchase of any of its shares-
      (a) any member of the company (other than one who consented to or voted in favour of the resolution), and
      (b) any creditor of the company,
      may apply to the Court for the cancellation of the resolution.
      (2) The application-
      (a) must be made within five weeks after the passing of the resolution, and
      (b) may be made on behalf of the persons entitled to make it by such one or more of their number as they may appoint in writing for the purpose.
      (3) On an application under this section the Court may if it thinks fit-
      (a) adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Court-
      (i) for the purchase of the interests of dissentient members, or
      (ii) for the protection of dissentient creditors, and
      (b) give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.
      (4) Subject to that, the Court must make an order either cancelling or confirming the resolution, and may do so on such terms and conditions as it thinks fit.
      (5) If the Court confirms the resolution, it may by order alter or extend any date or period of time specified-
      (a) in the resolution, or
      (b) in any provision of this Chapter applying to the redemption or purchase to which the resolution relates.
      (6) The Court’s order may, if the Court thinks fit-
      (a) provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company’s capital, and
      (b) make any alteration in the company’s articles that may be required in consequence of that provision.
      (7) The Court’s order may, if the Court thinks fit, require the company not to make any, or any specified, amendments of its articles without the leave of the Court.

    • 664. Notice to Registrar of Court application or order

      (1) On making an application under section 663 (application to Court to cancel resolution) the applicants, or the person making the application on their behalf, must immediately give notice to the Registrar.
      This is without prejudice to any provision of rules of Court as to service of notice of the application.
      (2) On being served with notice of any such application, the company must immediately give notice to the Registrar.
      (3) Within 15 days of the making of the Court’s order on the application, or such longer period as the Court may at any time direct, the company must deliver to the Registrar a copy of the order.
      (4) If a company fails to comply with subsection (2) or (3) a contravention of these Regulations is committed by-
      (a) the company, and
      (b) every officer of the company who is in default.
      (5) A person who commits a contravention of subsection (2) or (3) is liable to a level 2 fine.
      (6) This section does not apply to a restricted scope company.

    • 665. When payment out of capital to be made

      (1) The payment out of capital, if made in accordance with a resolution under section 656 must be made no more than six weeks after the date of such resolution.
      (2) The payment out of capital, if made in accordance with a resolution under section 661 must be made no more than six weeks after the date of such resolution.