- September 7, 2020
- Posted by: DBS Editorial Team
- Category: Business Setup Services in Dubai
Things you need to know before signing a partnership agreement in Dubai
As per the UAE Commercial Law, signing a partnership agreement in Dubai is an important requisite. The UAE Commercial Law is crucial and distinguishes the legalities involved for a partnership in Dubai. Foreign investors get into business partnership agreements with UAE nationals to engage in any sort of commercial activity. To setup a company, the foreign national and the UAE local sign a partnership agreement in Dubai that is drafted with legal guidance.
For a mainland company setup also referred as LLC company setup – the UAE national owns 51 percent of the capital in the company. This rule is only applied to trading companies and business that require commercial license in the region. Whereas, professional businesses enjoy 100% ownership of the company. Moreover, branch and representative offices also are solely owned by foreigners. But they must only engage in those activities that are carried out by the parent company.
Still, LLC partnership agreements is among the most common forms of business partnership agreement. So, what makes limited partnership agreement in Dubai such a viable option? And why entrepreneurs prefer having a general partnership agreement?
Lets’ analyse why signing a partnership agreement in Dubai is a preferred option?
- The liability of the investors is limited to their shares in the company’s capital.
- An LLC has the freedom of conducting any type of commercial activity except for insurance, banking or investment.
- An LLC can legally trade anywhere inside as well as outside the country, including free zones and offshore jurisdictions.
- There are no restrictions on the number of visas that can be obtained and the visa procedures are simpler.
- Office can be setup for LLC companies anywhere across the Emirate and there are no restrictions on the location to rent or even buy an office premises.
- There is not requirement of paid-up capital to start an LLC company in Dubai.
So, what are the things you need to be aware of while signing a partnership agreement in Dubai?
100% Operational Ownership
The UAE commercial law mandates you to partner with a UAE national, but ensure that you have 100% operational ownership of the business. If you want to solely run your business without the interference of anyone else, then ensure to get 100% operational ownership. In this, the UAE national transfers all the rights and ownership back to you through a side-agreement. The UAE national you have partnered for business may also provide you the power of attorney. He or she may only charge an annual fee to be your partner. So, before signing a business partnership agreement check for 100% operational ownership.
Consider Your Potential UAE National Partners
If you are wondering how to find a suitable UAE national to be your partner, then there are several businessmen services providers that are owned by UAE nationals. These business setup service providers do not just offer licensing, registration, documentations and PRO services but also partner with you for LLC partnership business in UAE. The partnership agreement in UAE is done only to abide with the UAE commercial law, however a side agreement is made to provide 100% operational ownership. In such partnership agreements the UAE national does not take participate in any commercial activities. The UAE national partner will also have no share in the profits and loss of the company.
Know the Laws Governing LLC Partnership
It is difficult to understand the whole gamut of laws governing partnership in Dubai. However, knowing the most basic laws governing your LLC partnership can be helpful. The limited partnership agreement in UAE is defined by the Article 218 of the UAE Commercial Companies Law. The law clearly states that a Limited Liability Company, is where the liability of the partner is restricted only to the extent of their shares within the capital. While this it’s not an equivalent for all the legal entities under an LLC partnership.
The UAE Federal Commercial Companies Law No.8 of 1984 “CCL” positions various sorts of indebtedness companies’ legal structures like general partnership; simple limited partnership; joint partnership; public joint stock company; private joint stock company; indebtedness company and a corporation limited by shares. The laws governing each LLC agreement under each legal entity is different. Consult an expert for FREE to understand it better.
51% Shareholding Under LLC Partnership In UAE
The general rule states that companies within the UAE must have a minimum of a national shareholding of 51 percent. LLC and JSC (public and private) are among the foremost common sorts of legal commercial structures that are frequently adopted by international investors establishing venture operations. Under the said categories, there was an enormous capital requirement, however, the authorities have removed the clause of minimum capital. Nevertheless, know that authorities do expect that the LLC company should be formed with a sufficient level of capital to conduct the proposed business activities. Likewise, certain commercial sectors are imposed additional levels of capital requirements depending on their requirements.
Ensure You Are Secure Being A Foreign Investor
Foreign investors are often concerned about the extent to which partnerships with UAE nationals could be subjugated sometimes. Business partners in Dubai and around UAE are keen to know whether UAE law recognizes the safety of partnership in Dubai and other parts of UAE. The UAE Civil Code – Article 246 seeks a requirement of excellent 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 during a manner according to the wants of excellent faith. (2) The contract shall not be restricted to an obligation upon the contracting party to try to that which is (expressly), contained in it, but shall also embrace that which is appurtenant thereto by virtue of the law, custom, and therefore the nature of the transaction.
” Moreover, UAE laws offer protection to the international investors considering that the parties will adhere to their obligations and duties under relevant contracts. The agenda is to ensure obedience and represent UAE as a safe place to start business.
Still not sure about signing a partnership agreement in Dubai?
Speak to an expert from DBS Business Setup to know more about signing a partnership agreement in Dubai. Our qualified and experienced business setup service providers offer you partnership agreements in Dubai that ensure complete control of your business. Be it the power of attorney, incorporation agreement, purchase agreements or any other important document – we are here to help!
Book a free consultation today! Call us on +97145667485 or WhatsApp us on +971555813673. You may also follow this link https://www.dubaibusinessservices.com/contact-us/ to connect with a business setup consultant right away!