Questions & Answers
The legality and reliability of a joint venture company agreement
Dear All,
Warm greetings!
We are in the process to create a joint venture company in Dubai, between a company from Europe (Named EU) and an existing company in the UAE (name UAE). The name of the new company is EU, UAE LLC.
The new trade license mentions:
- New company name is: UAE-EU LLC company
- Shares are 51% to UAE partner and 41% to EU partner
However, the foreign partner from Europe is asking me and another person to be part of the new JV Company as managing partners of the new company (COO and CTO).
The shares would be: 20% for UAE partner + 40% for the EU partner and 20% for COO + 20% for CTO, but we will not have any salary; only 20% commission as COO and 20% as CTO, because we are not employees.
Our names as managing partners are not mentioned in the new trade license.
Can you please advise if this is enough to protect ourselves as COO/CTO? and also is the side contract taken into consideration by the UAE law in case of payment issues?
Kind regards,
Dear questioner,
As per your requirements since it is an LLC, so 49% is for the expats and 51% is for the local. In the 49%, you have provided the shareholding structure.
Your name should be mentioned in the license and in the MOA (contract) as the investor or partner. Also, in the MOA, the shares should be shown properly and the [point / note should be written that the COO and CTO should have the percentage commission as stated.]
Also, will the profit be shared as per the mentioned arrangement? Or only the UAE expat will be COO with commission only?
If there is no profit sharing as per the investments, then a side agreement can be drafted. However, it depends upon the court to accept it, the side agreement is not legally valid for the court but it may consider on case to case basis.
Please contact us for further clarification.
Dear Client,
Good day!
It is possible that we can provide a JV draft, if you want to have a Joint Venture agreement, we will definitely do it.
A Joint Venture Agreement is between two companies, however, if you are planning to do an acquisition, it is different. In an acquisition, you can mention the new trade license and you can mention in the MOU or Articles of Association clearly explaining the partnership responsibility and the shareholdings of each partner.
For further assistance, please feel free to contact us via phone or email.
Thank you!
