UAE’s new co-op law comes into effect in December

The government hopes the reforms will boost the sector's contribution to GDP and grow its membership

The UAE Ministry of Economy says its new law for co-operatives will come into effect next month.

Designed to boost the sector’s contribution to national GDP from 1% to 5%, the law introduces a series of provisions to help co-ops grow. These include allowing co-operatives operating in one emirate to expand activity to other emirates with the approval of the local authorities, and giving non-Emiratis the right to obtain membership in some co-operatives.

Abdullah Bin Ahmed Al Saleh, undersecretary of the Ministry of Economy, said the government has two key goals for the co-op sector after the law is enacted. “The first is to increase the contribution of co-operatives to the non-oil GDP by 5% by the year 2031, as compared to the sector’s current contribution of less than 1%.

“The second goal is to increase the number of members contributing to co-operative unions to nearly 500,000 from the current 100,435.”

He added: “The law creates new prospects for all members of society to participate in the co-operative sector’s operations, in addition to building a new generation of leaders in the co-operatives sector. It generates more employment opportunities in this vital sector, encouraging and spreading the innovative co-operative culture in society. This will be achieved by allowing non-citizens to obtain memberships in the country’s co-operatives, except for consumer co-operative associations with memberships that are exclusive to UAE nationals.”

The law also supports building Emirati co-operatives in new sectors, such as healthcare, education, tourism, financial services, and online platforms.

In another first, the law allows for listing and trading shares in co-operatives on the country’s financial markets. The trading will follow the rules of the financial markets but it will happen only among members of cooperatives.

Related: UAE changes law to allow co-ops to be listed on financial markets

Under the law, co-ops have the right to establish subsidiaries, as per the requirements and procedures specified by the relevant authorities, and can acquire shares in other companies and co-operatives.

The law also separates non-core co-operatives – where each contributing member has one vote regardless of the number of shares he owns – from core co-operatives – which may grant additional privileges to the contributing members, including multiple voting rights, increased volume of investments, and other preferential rights according to conditions and controls to be stipulated in the law and its executive regulations.

As per the current law provisions, both types can be primary co-ops.

Fines ranging from AED 100,000 to AED 1 million will be given to anyone who “unlawfully uses a name or logo that disguises it as a co-operative”, including those who use a co-operative logo illegally.

The new clarifies that the distribution of net profits will take place after deducting the legal reserve to 10% of the net profits annually, until the amount reaches 50% of the capital.

Samah AlHajeri, director of Cooperatives & Strategic Reserve, Ministry of Economy, said: “The UAE is moving forward with the development of the co-operative sector in accordance with international best practices, thus cementing the national economy’s strength and promoting its resilience and sustainability, and ability to compete regionally and globally.”

The ministry is in the process of developing its executive regulation that will accompany the law.

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