Questions & Answers
A side agreement as a valid document to protect the shares of a foreign owner of an LLC
Is a side agreement considered a valid enough document to protect my company?
I own a car rental company and, by law, I was told it has to be an LLC, so I brought a partner who is really a nice guy.
I want to protect my business as I am the full owner and all the assets are mine; including the luxury cars, etc.
I only give the sponsor a fee yearly. I’m worried if something ever happened to my sponsor, God forbids, what will happen?
Can any of his family try to take his share even though the 100% company is funded and run by me but his share is 51% on papers only?
Is the side agreement valid?
Is there anything I can do to protect my whole 100%?
Are there any documents I can make or use?
Dear questioner,
Apologies for the delayed response.
As per Article 10 (1) of the Federal Law No. 2 of 2015 on Commercial Companies, a foreigner (non-GGC national) can only hold up to 49% shares of a limited liability company.
An expatriate who wishes to incorporate a Limited Liability Company must have one or more Emirati partners who hold a minimum of 51% shares of such company.
Article 91 grants sponsors "all the rights associated with the description of the partners", and they may have the right to have significant control over the company.
From the above, you can understand the importance and role of UAE national [sponsors] in a mainland LLC. It is true that the courts have validated side agreements in some of its judgments, but the law is very clear on that point.
However, I would suggest corporate sponsorship which is a better remedy to protect your company.
