Audit of accounts necessary for all companies

Q: I have a company based in one free zone in Dubai. We have completed around one year of operations for this company. Please explain if there is a requirement for maintaining accounts and submission of audit report to the free zone authority. If yes, what is the time limit for the same. - NG, Dubai
A: Audit of accounts is mandatory for some forms of entities in the free zone like the free zone companies (FZCO) and free zone establishments (FZE), for branch of local and foreign company audit report may not be necessary in most free zones. In order to finalize the audit it is obvious that the accounting records and documents must be available and well maintained. In UAE the general requirement for businesses is to maintain their records for no less than five years. The Commercial Companies Law states that the audit of accounts are necessary for all companies in the mainland. Generally, though the law stipulates the preparation of the audit report, the submission of the same is not enforced by the authorities and hence many organizations do not follow the same. Some free zones, particularly in the northern emirates do not require the submission of audited accounts for certain companies; one needs to bear in mind that this waiver is only for the submission of audit report to the authorities however the preparation of audit report for the entity itself cannot be overlooked. The maintenance of accounting records will become more important for nearly all kind of entities in UAE in light of the forthcoming VATin 2018. Companies have generally a time period between 3 to 6 months after the close of their financial year/period to complete the audit report and submit to the general assembly. Maintenance of accounting records and audit of same also assists the management to understand the performance of the company and areas which need more attention.
Q: We are in the process of finalising a transaction with a company where some of the payments are linked to future milestones and dates. Both parties are ready to put the amount concerned in an account however it is difficult to agree on who will control the account. What will be the possible solution for such a matter? - AV, Sharjah
A: It is not uncommon that some of the terms of the contract between parties may be deferred or dependent of future events. As reliance one of the party would pose a risk for the other party it is many a times decided to involve a third party who shall act as an escrow agent for these parties. The role of such escrow agent is to be independent and comply by the terms agreed between the parties and the escrow agent. Such escrow agent will act as a custodian of the amounts till the time for dispersal arises. Law firms, banks and accountants are generally seen to act as such escrow agent. An escrow agent acceptable to all parities is selected and his/her responsibilities and fees are agreed in advance. In your case too you can appoint a reliable escrow agent to take up this role.
Q: I have interest in couple of businesses in UAE. We have several persons doing the marketing for the company and they are paid incentives on performance. I am not able to dedicate full time to this company in view of my other involvements and hence the supervision required on the marketing team is lacking. I am considering to promote a star marketing person who has demonstrated leadership qualities in the past to become the general manager and thus organize the marketing team. Let me have your thoughts on the same. - ZS, Sharjah
A: I understand from your query that the performance of your marketing team is not upto the expectation because of your under involvement and you expect that the promoted general manager can assume that role. You have provided limited information in your query hence it is difficult to provide an elaborate response. As you will gather that persons can have one or multiple expertise. The promotion of the star marketing performer to be a general manager would have at least one risk, where you will be pulling away your star sales performer and give him another role where by the sales generated by this person may be affected. I would advise that you tread carefully and take your decision based on the capabilities of the proposed person.
The writer is partner at Crowe Horwath, UAE. You can send your business queries to him at atik.munshi@crowehorwath.ae