HZLegalUAE’s Federal Decree by Law No. (50) of 2023 Concerning the Regulations of Public Welfare Associations

Introduction

Federal Decree by Law No. (50) of 2023 concerning the Regulations of Public Welfare Associations represents a significant legal framework aimed at regulating public welfare activities in the UAE. This decree underscores the importance of structured governance, transparency, and accountability in the operations of public welfare associations, ensuring that these entities contribute effectively to the social and communal goals of the UAE. This detailed guide explores the key provisions, requirements, and implications of the law.

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Background and Objectives

The UAE government introduced Federal Decree by Law No. (50) of 2023 to enhance the regulation of public welfare associations, which play a crucial role in social development. The objectives of this law include:

1. Promoting Social Welfare:

   • Encouraging the establishment and operation of associations that contribute to social, cultural, educational, and humanitarian goals within the UAE.

2. Enhancing Transparency and Accountability:

   • Establishing stringent guidelines for the operation of public welfare associations, ensuring transparency in their financial dealings and activities.

3. Combating Misuse of Funds:

   • Preventing the misuse of public welfare associations for illegal activities, such as money laundering or the financing of terrorism, through strict compliance requirements.

4. Supporting Public Interest:

   • Ensuring that the activities of these associations align with the public interest, promoting social solidarity and contributing to the nation’s development goals.

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Key Definitions and Concepts

Understanding the terminology used in the law is crucial for comprehending its scope and application. Some of the key definitions include:

1. Public Welfare Associations:

   • These are private legal entities licensed under the law to conduct public welfare activities without the primary aim of generating profit. They operate in fields such as social, cultural, scientific, educational, professional, creative, artistic, and environmental areas.

2. Public Welfare Activities:

   • Activities defined in the law that aim to provide humanitarian services, promote righteousness, and foster solidarity among community members.

3. Ministry of Community Development (Ministry):

   • The governmental body responsible for overseeing the implementation of this decree, including the licensing and regulation of public welfare associations.

4. Competent Authority:

   • The local government authority responsible for licensing, supervising, and controlling public welfare associations within its jurisdiction.

5. Register:

   • A central database maintained by the Ministry, where all public welfare associations are registered, along with details of their activities, membership, and financial transactions.

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Scope of Application

The scope of application of Federal Decree by Law No. (50) of 2023 is extensive, covering all public welfare associations operating within the UAE, including those in free zones. However, certain associations established under local decrees or laws are excluded, with specific provisions still applicable to them.

1. Inclusion:

   • The law applies to all public welfare associations, unions, and social solidarity funds that operate within the UAE, provided they meet the licensing requirements set forth by the Competent Authority.

2. Exclusions:

   • Associations established under local decrees are generally excluded from this law but must still comply with key provisions related to transparency, financial reporting, and anti-money laundering measures.

3. Forms of Associations:

   • The law recognizes various forms of public welfare associations, including associations, national societies, unions, and social solidarity funds. These forms are defined by the nature of their activities and their organizational structure.

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Establishment and Licensing of Public Welfare Associations

Establishing a public welfare association in the UAE under this decree requires compliance with specific criteria and procedures:

1. Founding Members:

   • A minimum of seven founding members is required, with at least 70% being UAE nationals. Non-nationals may participate under strict conditions, including a minimum residency period of three years in the UAE.

2. Legal Personality:

   • An association acquires legal personality upon the issuance of a resolution declaring it by the Ministry, which must be published in the Official Gazette.

3. By-laws:

   • Founding members must establish by-laws for the association, which must include all necessary provisions and data as specified by the Executive Regulations. The by-laws serve as the guiding document for the association’s operations.

4. Licensing Procedure:

   • The application to establish an association is submitted to the Competent Authority, which reviews the application and issues the license after approval from the Ministry. The process includes a thorough review of the association’s objectives, membership, and compliance with the law.

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Management and Governance

Effective management and governance are crucial for the successful operation of public welfare associations under this law:

1. Board of Directors (BOD):

   • Each association must have a BOD consisting of 5 to 11 members, with at least 70% being UAE nationals. The BOD is responsible for managing the association’s affairs and ensuring that it meets its objectives.

2. General Assembly:

   • The General Assembly, consisting of all eligible members, is the highest authority in the association. It holds annual meetings to approve budgets, elect BOD members, and discuss important matters.

3. Director of the Association:

   • The association must appoint a director responsible for the day-to-day operations, reporting directly to the BOD. The director ensures the implementation of the BOD’s resolutions and the association’s compliance with the law.

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Financial Management and Compliance

Financial transparency and compliance are at the heart of the decree’s requirements:

1. Financial Resources:

   • The association’s financial resources include membership fees, revenues from activities, donations, and investments. These resources must be used solely for achieving the association’s objectives.

2. Bank Accounts:

   • Associations are required to have one or more bank accounts in national banks, with all financial transactions conducted through these accounts. The law prohibits cash transactions, ensuring transparency and traceability.

3. Final Accounts and Budget:

   • Associations must prepare annual financial statements and budgets, which are subject to audit by an approved audit office. These documents must be submitted to the Ministry and the Competent Authority for review.

4. Investment of Funds:

   • Excess funds can be invested, but only with the approval of the Competent Authority. Associations are prohibited from engaging in financial speculation or distributing profits to members.

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Prohibitions and Restrictions

The decree sets clear prohibitions to prevent misuse of public welfare associations:

1. Prohibited Activities:

   • Associations are barred from engaging in political activities, financing illegal organizations, or engaging in activities that threaten public order or morality.

2. Compliance with Anti-Money Laundering Regulations:

   • Associations must comply with stringent anti-money laundering regulations, including regular risk assessments, transparency in financial dealings, and cooperation with local and international authorities.

3. Inspections and Audits:

   • The Competent Authority has the right to conduct inspections and audits to ensure compliance with the law. Associations must provide access to all records and documents for these purposes.

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Dissolution and Liquidation

The law provides detailed procedures for the dissolution and liquidation of public welfare associations:

1. Voluntary Dissolution:

   • Associations can be voluntarily dissolved by a resolution of the General Assembly or by a decision from the founders or BOD, with the Ministry and Competent Authority’s approval.

2. Compulsory Dissolution:

   • The Competent Authority may dissolve an association for serious violations of the law, including financial misconduct, failure to achieve its objectives, or involvement in illegal activities.

3. Liquidation of Assets:

   • Upon dissolution, the association’s assets must be liquidated according to the law, with any remaining funds directed as specified in the association’s by-laws or by a decision of the Competent Authority.

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Penalties and Sanctions

To ensure compliance, the decree imposes penalties for violations:

1. Fines and Imprisonment:

   • Individuals or entities that establish or operate unlicensed public welfare associations, or engage in prohibited activities, face significant fines and possible imprisonment.

2. Judicial Enforcement:

   • The Ministry of Justice and local judicial authorities have the power to enforce the law, including the imposition of penalties and the dissolution of non-compliant associations.

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Conclusion

Federal Decree by Law No. (50) of 2023 is a comprehensive legal framework designed to regulate public welfare associations in the UAE. By ensuring strict compliance with transparency, governance, and financial management standards, the decree safeguards the integrity of these associations and their contribution to the public good. For associations operating or intending to operate in the UAE, understanding and adhering to this law is crucial for their continued success and legitimacy.