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How to Secure a LLC Partnership in UAE


United Arab Emirates is widely known as a regional hub of foreign direct investment (FDI). Entrepreneurs from around the world come here to grab the opportunities the market represents because of its consumer base of over 2 billion people. There are various ways by which a foreign investor can setup a business in UAE. One of the most popular ways of legal setup is the formation of Limited Liability Company (LLC).

While there are numerous benefits of LLC formation in UAE such as limitation of an investor towards company’s liability, permission to trade in all emirates of UAE, exemption of personal and corporate tax, no restriction on capital and profit repatriation, allowed to hold unlimited offices or properties in UAE, availability of residence visa for investor and many other lucrative features; there is one particular area of concern as a partner in LLC is the extent of flexibility of all partners as well as the laws governing LLC in UAE.

LLC Company Formation Sponsorship

UAE Commercial Code specifies that foreign entrepreneurs intending to establish an LLC in UAE are required to have UAE national partner as a sponsor. Broadly speaking, a sponsor can be any UAE national or UAE company who takes on the responsibility of bringing you in UAE whether as an investor, employee or even tourist.

Furthermore, the local sponsor will own at least 51% of capital in the company and 49% of remaining ownership will be of foreign investor. Currently, there is no ownership restriction on branch office setup as well as representative offices however their involvement in commercial activities is limited.

UAE Laws Regulating LLC Partnership

It is not easy to describe all laws governing LLC partnership in Dubai due to their complexity and extensiveness. We will discuss the major points here. Article 218 of UAE Commercial Companies Law characterizes Limited liability Company as in company in which liability of a partner is limited to the extent of his share in the capital.

This condition is not for all companies under LLC partnership. There are various forms of LLC legal structure for instance general partnership, joint partnership, public joint stock company etc. The laws governing partnership agreement under each form of LLC are different.

Minimum Capital Requirement in LLC Formation

The general rule of law requires UAE companies to have 51% shares in an LLC partnership. Most popular forms used by foreign investors for establishment of legal entities are Limited Liability Company and Joint Stock Company (public and private). Previously for these two forms, there was huge minimum capital requirement but now government has eliminated this law.

It is however expected from these companies that they are formed with enough capital in order to carry out their business operations. There is, on some forms of LLC partnership; requirement of minimum capital.

Security of a Foreign Investor

It is the most common concern for foreign entities regarding the extent to which partners in UAE Company may be subjected and whether UAE government protects the rights of partners in an LLC partnership.

Article 246 of UAE Civil Code requires from partners to perform their duties according to contents of agreement fulfilling the manner of good faith. Article also specifies that “the agreement will not be limited to an obligation from contracting partner to perform which is mentioned in it, it should also embrace what is appurtenant to it by virtue of UAE law and nature of transaction.” UAE law secures partners in an LLC contract so that they perform their obligations in good faith.

Protection of Rights under LLC Partnership in UAE

Entering into a contract that safeguards your rights as a foreign investor, preparing a security contract that will shelter your investments and savings, appointing a partner who is inactive in the business operations in return for an annual compensation? You must be wondering whether it is possible or not? The answer is yes. With KWSME business setup, you can have complete ownership of your business operations.

KWSME provides strong investor rights and protection contracts that two witnesses from both parties sign and certify. We are the most reliable business partners in UAE. The key documents that specify your positions as partner, company formation contract, power of attorney etc. are carefully prepared and examined by KWSME experienced professional consultants who will provide you complete security that you desire in an LLC partnership.

If you want to know more about protection rights of a partner and UAE laws regarding LLC company formation in Dubai or in search of perfect local partner who will safeguard your business operations ownership, contact KWSME business setup agents.

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