United Arab Emirates is a major hub of foreign direct investment around the world. While UAE offers a range of opportunities for international investors, there are also few concerns on flexibility as a partner in a Limited Liability Company. A common area of concern for international investors is when it comes to entering a partnership agreement while starting a business in UAE and the laws governing such partnership business in UAE.
According to the UAE Commercial Code, a foreign investor is required to have a UAE national partner to establish a Limited Liability Company in UAE. Further, the condition under a limited partnership agreement denotes that the UAE national needs to own at least 51 percent of the capital in the company. While there is no restriction on a branch and representative offices, yet, the engagement towards commercial business for such entities is limited.
Laws governing LLC partnership
It is difficult to discuss the entire gamut of laws governing partnership in Dubai or any part of UAE, also there are provisions that differ from one emirate to another. The limited partnership agreement in UAE is defined by the Article 218 of the UAE Commercial Companies Law which clearly states that a Limited Liability Company, is where the liability of the partner is limited only to the extent of their shares in the capital.
While this it is not the same for all the legal entities under an LLC partnership. The UAE Federal Commercial Companies Law No.2 of 2015 “CCL” positions various types of limited liability companies’ legal structures such as general partnership; simple limited partnership; joint partnership; public joint stock company; private joint stock company; limited liability company and a company limited by shares. The laws governing each LLC agreement under each legal entity is different.
Capitalization under LLC partnership in UAE
The general rule states that companies in the UAE must have at least a national shareholding of 51 percent. Limited liability company (LLC) and joint stock company (public and private) are among the most common forms of legal commercial structures that are frequently adopted by international investors establishing joint venture operations. Under the said categories, there was a huge capital requirement, however, the authorities have removed the clause of minimum capital.
Nevertheless, authorities do expect that the LLC company should be formed with at least a sufficient level of capital to conduct the proposed business activities, likewise, certain industrial sectors are imposed additional levels of capital requirements.
Are you secure as a foreign investor?
Foreign investors and international entities are often concerned about the extent to which partners in UAE companies may be exposed or subjugated at times. Business partners in Dubai and around UAE are keen to understand whether UAE law recognizes the security of partnership in Dubai and other parts of UAE.
The UAE Civil Code – Article 246 seeks a duty of good faith among the parties in any contract governed by UAE law. It states that (1) The agreement must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith. (2) The contract shall not be restricted to an obligation upon the contracting party to do that which is (expressly), contained in it, but shall also embrace that which is appurtenant to it by virtue of the law, custom, and the nature of the transaction.”
UAE laws affirm to this and several other such doctrines, they provide protection to the international investors considering that the parties will adhere to their obligations and duties under relevant contracts so that they ensure obedience to this wider duty of good faith.
How can you protect your rights under a partnership in UAE?
Create an agreement the safeguards your rights as an investor, create a protection contract that keeps your savings and investments protected, appoint an inactive partner for your business in exchange for an annual fee. Is it possible? Yes, with Shuraa Business Setup you can have a100% operational ownership of the company.
At Shuraa, we offer strong investor rights and protection contracts, that is signed and certified by two witnesses from each side. Shuraa provides you with the most reliable business partners in Dubai. The power of attorney, agreement of incorporation, purchase agreement and several other such important documents that describe your position as a partner are carefully drafted and checked by Shuraa’s proficient business consultants. Shuraa gives utmost importance to your security and position in the partnership.
If you want to know more about the laws governing partnership business in UAE or are trying to find the perfect local partner for your business – making sure you are the 100% operational owner in the business, contact Shuraa Business Setup now!