Q: I would like to know if a Dynamic Equity Split is possible here in the UAE, how I would… A: For a dynamic equity split model you need to take certain steps…

For a dynamic equity split model you need to take certain steps viz.: Have a trustworthy leader, Assign a relative value to the various inputs provided by each participant, Calculate shares by dividing an individual’s contribution to the company by the total contribution (individual value ÷ total = shares %). In the UAE the shareholders' rights and obligations stem from the Memorandum and Articles of Association and trade license. You can manage or customize the management clause of the Memorandum but the rights and obligations are purely based on the main documents ie the Memorandum of Association of the company.

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Dynamic equity split

I am looking to get my tech startup incorporated and I recently read a book called "The Founder's Dilemma" that talked about the importance of a Dynamic Equity Split.

I would like to know if it's possible here in the UAE, how I would do it and where, and if the lawyer answering this question would personally recommend it.

Nikhat Sardar Khan

Kochhar & Co Inc. Legal Consultants (Dubai Branch)

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30 Oct 2017, 09:04

For a dynamic equity split model you need to take certain steps viz.:

Have a trustworthy leader,
Assign a relative value to the various inputs provided by each participant,
Calculate shares by dividing an individual’s contribution to the company by the total contribution (individual value ÷ total = shares %).

In the UAE the shareholders' rights and obligations stem from the Memorandum and Articles of Association and trade license. You can manage or customize the management clause of the Memorandum but the rights and obligations are purely based on the main documents ie the Memorandum of Association of the company.

31 Oct 2017, 07:22

Are there any recommended methods or industry standards of calculating the individual value provided by a person?

31 Oct 2017, 07:28

We do have some credit rating agencies like Dubai Chamber of Commerce (http://www.dubaichamber.com/what-we-do/others/credit-rating) and Etihad (http://aecb.gov.ae/credit-report). Also, auditors do ascertain the net worth of an individual or company shares.

Lawyers are for legal due diligence and auditors are for the financial.

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