Limited Liability Company
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Limited Liability Company (LLC)
A Limited Liability Company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the Company’s capital. The time required to form a company will be approximately 1-2 weeks from the date of receipt of all the documents. and procedures and the breakdown of the cost can be given upon request.
The Majority of Companies with expatriate partners have opted for this Limited Liability Company, due to the fact that this is the only option which will give maximum legal ownership i.e. 49% to the expatriates for a trading license.
Fifty-one per cent participation by UAE nationals is the general requirement for the Limited Liability Companies.
Normal shareholding for an LLC will be:
Local sponsor (Partner) – 51%
Foreign Shareholder (s) – 49%
Several steps are required to establish a Limited Liability Company in Dubai, and these will include the following:
- Selecting a commercial name for the Company and having it approved by the Licensing Department of the Economic Department.
- Drawing up the Company’s Memorandum of Association and having it notarized by a Notary Public in the Dubai Courts.
- Seeking approval from the Economic Department and applying for entry in the Commercial Registe
- Once the approval is granted, the Company will then be entered into the Commercial Register and have its Memorandum of Association published in the Ministry of economy and Commerce’s Bulletin. The license will then follow, which will be issued by the Economic Department.
- The Company should then be registered with the Dubai Chamber of Commerce and Industry.
Sponsorship agreement or /Side Agreement
As mentioned above, any foreign partner can only hold up to 49% of the company’s shares. The remaining 51% must be held by a UAE national, or a company wholly owned by nationals of the UAE.
However, the foreign partner is often interested – despite the provisions of the law – to obtain the majority of shares and sole power to take decisions on behalf of the company. Therefore, many joint venture partners enter into side agreements to the memorandum and articles of association.
A common set up is that the foreign partner pays the capital of the company in full and the local partner acts as trustee for the shares of the foreign partner, who in fact is the sole shareholder of the company. The foreign joint venture partner indemnifies the local partner from all financial responsibilities of the company and is liable towards third parties for any liabilities of the company. The local partner is usually paid a specific amount for his services only and is excluded from any profit and loss distribution.
These agreements are known as so called sponsorship agreements or side agreements. Any side agreements between the partners of a LLC providing that the foreign joint venture partner only shall be considered as the real owner of the entire share capital and excluding the local joint venture partner from any profit and loss distribution are a circumvention of the law. Any such side agreements between the partners do not have any legal effect as against others.