The UAE legislator has defined social responsibility as the voluntary contribution to community development through cash or in-kind contributions (or both) to implement developmental projects and programmes within the State. The essence of this definition rests on two inseparable elements: it is voluntary in principle, and developmental in its purpose.

In other words, social responsibility is not a tax or a fee imposed on the company. Rather, it is a tool for achieving what is known as “institutional giving,” through which the company engages in the development of the community in which it operates — enhancing its reputation and standing while contributing at the same time to addressing economic, social, and environmental challenges.

Three legislative instruments work together to form the legal system of social responsibility in the State, each serving a distinct function:

It is worth noting that the Decree-Law made the promotion of corporate social responsibility one of its declared objectives in developing the business environment, then expressly delegated the Cabinet to issue the controls necessary to incentivise companies to undertake their social responsibilities and the stages of their implementation — a delegation later embodied in the implementing resolution.

The CSR controls apply to the “company” as defined in the resolution, which covers two main categories:

The implementing resolution set out a number of controls to be followed in respect of community contributions, whether cash or in-kind, which may be summarised as follows:

• It must be voluntary and purposefulThe contribution aims to achieve institutional giving and to contribute to community development, and to no other purpose.
• It must be made through approved channelsContributions are directed through the programmes and projects approved by the National Fund or other entities licensed in the State, or through any other forms of CSR contributions.
• At least one financial year must have elapsedAt least one financial year must have passed from the date of the company’s incorporation before contributing.
• A special resolution specifying the percentage must be issuedThe company must issue a special resolution regarding the contribution, clearly specifying the contribution percentage.
• It must come from realised profitsThe contribution is deducted from the profits realised at the end of the financial year, and may be drawn from undistributed profits of previous years.
• Disclosure is permitted after the financial year endsThe company may disclose its community contribution after the end of the financial year.
• Inclusion in the financial reportsThe auditor’s report and the annual financial statements must include a statement of the entity or entities benefiting from the community contribution.

The legislator tied the community contribution exclusively to profits — a logical linkage that protects the company’s capital and the rights of its creditors. Within this framework, the company has two options:

The implementing resolution is thereby consistent with the text of the Decree-Law, which permitted the allocation of a percentage of annual profits or accumulated profits alike.

The community contribution does not arise through a passing administrative decision; rather, it requires a special resolution. The special resolution — as defined in the implementing resolution — is the resolution issued by the shareholders or holders of shares at the annual general assembly meeting, or by the owner, or in accordance with the various forms of the company, as set out in the Decree-Law.

The implementing resolution gave the company a broad spectrum of areas to which its community contributions may be directed — whether through the Fund’s approved programmes, licensed entities, or other forms — including:

The National Fund for Corporate Social Responsibility occupies a central position in this system. Established by the Cabinet Resolution issued in 2018, it is the approved channel for directing companies’ contributions through its approved programmes and projects. Nonetheless, the implementing resolution did not confine contributions to the Fund alone, but also permitted directing them through other entities licensed in the State, or through other forms of CSR contributions — granting companies flexibility to choose the channel most suited to their objectives.

The implementing resolution took into account the position of branches of foreign companies operating in the State, subjecting them to the same controls in principle, but addressing the point of issuing the special resolution in a manner suited to their nature:

The legislator was keen to incentivise companies rather than compel them, entrusting federal and local government entities — including the authority competent for company affairs in each emirate — with the power to exercise their competences in granting incentives to companies that contribute to social responsibility. This incentivising role is the very philosophy of the resolution: encouraging institutional giving through reward and recognition rather than imposing it by coercion.

The implementing resolution confirmed that the company continues to carry out its obligations in accordance with the Cabinet resolutions concerning its community contribution, including the 2018 Cabinet Resolution on corporate social responsibility. In other words, the new resolution did not repeal what preceded it; rather, it built upon and integrated with it, ensuring the continuity of the system and the stability of existing companies’ obligations.

• Federal Decree-Law No. (32) of 2021 on Commercial Companies.Federal Decree-Law
• Cabinet Resolution No. (79) of 2022 on the Controls for Incentivising Commercial Companies to Undertake their Social Responsibility.Cabinet Resolution
• Cabinet Resolution No. (2) of 2018 on the Social Responsibility of Companies and Establishments.Cabinet Resolution