Dubai Company Formation -Company Formation United Arab Emirates (UAE): Abu Dhabi

Federal Law No. (8) of 1984 LLC:

ARTICLE 218

A company with limited liability is the company where the number of partners may not exceed fifty and should not be less than two.

Each partner shall only be liable to the extent of his share in the capital, whereas negotiable instruments may not represent their shares.

ARTICLE 219

A limited liability company shall have a name derived from its purposes or from the name of one or more of the partners.

ARTICLE 220

Except the businesses of insurance, banking and investment of funds for the account of third parties, a limited liability company may practice any other lawful activity.

ARTICLE 221

The company may not resort to public subscription for the formation or increase of its capital, nor for obtaining required loans. The company may not issue negotiable stocks or securities.

ARTICLE 222

All cash and kind shares must be distributed in the company memorandum amongst the partners, and the value of each share should be fully paid up at the time of incorporation.

Cash shares should be deposited in one of the banks operating in the State. The bank may not release the cash shares except to the company managers upon presentation or proof of the registration of the company in the Commercial Register.

ARTICLE 223

If a partner presents a share in kind, it must be valued in the company memorandum, specifying Its kind, the name of its contributor and the amount it represents in the capital. The contributor of the share in kind shall be liable towards third parties for the accuracy of the estimate of its value in the memorandum. If it is established that the share was valued at more than its real value, the contributor of the share must pay the difference in cash to the company and the founder members shall be jointly liable with their private assets for the payment of this difference.

ARTICLE 224

The founder members shall prepare a memorandum of association mentioning the following particulars:
Name and objects of the company and its main office.

Names of the partners, their nationalities, places of residence and addresses.
The capital amount, the share of each partner and a statement showing the shares in kind (if any), their values names of contributors.

Names and nationalities of the company managers and members of the board of supervisors in the cases where it is a statutory requirement to establish such a board.

• The company dates of commencement and expire.
• Profit/loss terms of distribution.
• The form to be observed in the company notices addressed to the partners.

However, the Ministry may prepare a draft memorandum of association form including the said, and other particulars it deems appropriate.

ARTICLE 225

The company manager shall have to apply for company registration in the Commercial Register. The application should be attached to the company memorandum and other documents indicating that the shares have been distributed amongst partners and their values have been fully paid up and deposited in a bank operating in the State.

The company may not practice any of its activities except after its registration in the Commercial Register.

ARTICLE 226

If, at any time after incorporation, the number of partners exceeds the statutory limit, the competent authority shall notify the company to rectify its situation. If the company does not implement rectification within the six months subsequent to the date of notice, the company shall be deemed dissolved and the partners shall be personally and jointly liable for the debts and liabilities incurred by the company as from the date of exceeding the statutory limit of the number of partners. However, the partners ignorant of such excess shall be excepted from this provision.

On Shares and Capital

ARTICLE 227

The capital of a limited liability company must not be less than one hundred and fifty thousand Dirhams and should be comprised of equal shares of a minimum value of one thousand Dirhams each.

A share shall not be divisible. In the event of more than one person owning the share, they must nominate one of them to be considered the sole owner of the share towards the company. The company may specify a time for the owners to make the nomination, provided that at the expire of this date the company shall have the right to sell the share for the account of its owners. In this case, the partners shall have the priority to purchase it.
Profits and losses shall be equally divided amongst the shares, unless it is otherwise stipulated in the memorandum.

ARTICLE 228

The company shall have to keep at its main office a special register for partners. The register should include the following information:

• Partners’ names and surnames, domiciles, nationalities and professions.
• The number and value of shares owned by each partner.
• Transactions carried out with regard to the shares indicating the date thereof.
• The company managers shall be jointly liable for maintaining this register and for the accuracy of its contents. The partners and any concerned party shall have the right to review the register.

ARTICLE 229

Every January, the company shall provide both the Ministry and the competent authority with the particulars recorded in the register referred to in the preceding article and any developments that had occurred thereto.

ARTICLE 230

A partner may assign his share to another partner or to a third party in pursuance of a formal document prepared in accordance with the provisions of the company memorandum. This assignment shall only be valid towards the company or third parties as from the date of recording it in the company register and the Commercial Register.

The company should not refrain from recording the assignment in the register, unless it is In violation of the stipulations of the company memorandum. In all cases, the assignment must not result in the reduction of the shares of the national partners in the company capital to less than 51% of the total shares, nor to increase the number of partners to be In excess of the number stipulated in article (218).

ARTICLE 231

If a partner intends to assign his share to a non-partner person, whether against or without indemnification, he shall have to notify all other partners via the company manager of the terms of such an assignment. Upon receipt of the notice, the manager shall immediately notify the partners. Each partner may apply to acquire the share at the price to be agreed upon. In case of disagreement on the price, the company’s auditor should evaluate the price as at the time of acquisition. If at the expire of thirty days from the date of notice none of the partners had exercised his right to acquire the share, the partner shall be free to dispose of his share.

ARTICLE 232

With consideration to the provisions of Article (227), if more than one partner exercised his right to acquire the share, the involved share or shares, which are to be sold, shall be proportionately distributed amongst them as per the share of each of them in the capital.

ARTICLE 233

The share of each partner shall devolve to his heirs. A legatee shall be considered as an heir.

ARTICLE 234

If a creditor of a partner commences executive proceedings against an indebted share, he may agree with the debtor and the company on the method and terms of sale. Otherwise, the share should be offered for sale in a public auction.

The company may, within fifteen days from the date of adjudication, acquire the sold share for the benefit of one or more partners with the same conditions that the auction had reached.
These provisions shall, also apply in case of a bankrupt partner.

On Company Management

ARTICLE 235

The limited liability company shall be managed by one or more managers to be selected from amongst the partners or others, provided that their number should not exceed five.

The managers shall be appointed in the memorandum or by a separate contract for a limited or an unlimited period.

If the managers are not appointed in the manner stipulated in the preceding paragraph, they shall be appointed by the partners’ general assembly.

ARTICLE 236

if the company manager is appointed in the company memorandum without a limited term in office, he shell remain as manager for the duration of the company unless the memorandum provides that he may be dismissed, in this case, dismissal of the manager shall be by the same majority required for the amendment of the company memorandum, unless a different majority is stipulated in the memorandum.

If the company memorandum does not provide that the manager may be dismissed, he may be dismissed by a unanimous vote of the partners or by a judicial decree where serious causes justify it.

ARTICLE 237

Unless his powers are specified in the company memorandum, the manager shall have full capacity to manage the company. His actions shall be binding on the company when being corroborated by stating the capacity for his actions.

The manager’s responsibility shall be the same as that of the members of the board of directors In a joint stock company. Any provision in the company memorandum to the contrary shall be void.

ARTICLE 238

The company managers shall prepare the company balance sheet and profit and loss account. They shall also prepare an annual report of the company’s activities, its financial position and their proposal concerning the distribution of profits. All the above should be done within three months before the end of the financial year.
The managers shall, within ten days following the ratification of the balance sheet and profit and loss account, lodge them with both the Ministry and the competent authority.

ARTICLE 239

If there is more than one manager, the company memorandum may provide for the formation of a board of managers, specify the method of operation of this board and the required majority for adopting its resolutions

ARTICLE 240

If the number of partners exceeds seven, supervision must be entrusted to a board formed of at least three partners. The company memorandum shall appoint this board for a specific period. The general assembly may re-appoint the members after the expire of this period, appoint others from amongst the partners, or may dismiss the members at any time for an acceptable reason.

The managers shall not have the right to vote for the election or dismissal of the members of the board of supervisors.

ARTICLE 241

The board of supervisors may inspect the company books and documents, then carry out stocktaking of available funds, goods, financial papers and other documents substantiating the company rights. The board may also request the managers at any time to submit a report on their management. The board will supervise the budget, the annual report, the distribution of profits and submit its report in this regard to the general assembly of partners at least fifteen days before convening it.

ARTICLE 242

The members of the board of supervisors shall not be liable for the actions of the managers unless they become aware of the faults committed and fail to mention these faults in their report presented to the general assembly of partners.

ARTICLE 243

The partners who are not managers in companies having no board of supervisors shall have the same rights of supervision as those accorded to general partners in a general partnership in accordance with the provisions of article (36).

ARTICLE 244

A limited liability company shall have a general assembly composed of all partners. The general assembly shall convene upon a call by the managers at least once every year during the four months subsequent to the end of the financial year at the date and place specified in the company memorandum.

The managers must call the general assembly to convene if so requested by the board of supervisors or by a number of partners holding not less than a quarter of the capital.

Invitations to attend the general assembly shall have to be sent by registered mail, along with an acknowledgment of receipt addressed to each partner at least twenty-one days before the date of convening the assembly. The Invitation letters must Include the particulars of the agenda and the place and time of the meeting.

ARTICLE 245

Every partner is entitled to attend the general assembly irrespective of the number of shares he owns. He may delegate another partner who is not a manager to represent him by proxy at the assembly. Each partner shall have a number of votes equal to the number of shares he owns or represents

ARTICLE 246

The agenda of the general assembly at its annual meeting must include the following matters:
Review the managers’ report on the company activities and its financial position during the year. Also, review the reports of both the board of supervisors and the auditor.

• Discuss and ratify the balance sheet and the profit and loss account.
• Determine the share of profits to be distributed amongst the partners.
• Appoint the managers or the members of the board of supervisors and determine their remuneration.
• Other matters that are within its competence in accordance with the provisions of this law or the memorandum

ARTICLE 247

The general assembly may not deliberate on other matters not included in its agenda unless serious facts were disclosed during the meeting, which requires discussion thereof.

If one of the partners requests a specific matter to be included in the agenda, the managers must grant the request, otherwise the partner shall have the right to appeal to the general assembly

ARTICLE 248

Every partner shall have the right to discuss the items included in the agenda. The managers are obliged to reply to the partners’ questions up to the extent that may not jeopardize the company’s interests. If one of the partners considers the reply to his question insufficient, he may appeal to the general assembly whose resolution in this regard must be enforceable.

ARTICLE 249

Resolutions of the general assembly shall not be valid unless adopted with the approval of a number of partners representing at least one half of the capital, unless the company memorandum provides for a larger majority.
If this quorum Is not achieved at the first meeting, the partners must be called to a second meeting to be convened within twenty-one days of the first meeting. Resolutions at this meeting are adopted with a majority of votes represented at the meeting unless otherwise stipulated In the company memorandum.

ARTICLE 250

The managers may not participate in voting for resolutions relating to absolving them from the responsibilities of management.

ARTICLE 251

Minutes adequately summarizing the discussion of the general assembly should be prepared. These minutes and the resolutions of the general assembly should be recorded in a special book kept at the company headquarters. Any of the partners may review the book personally or through an attorney. They may also review the company balance sheet, profit and loss account and the annual report.

ARTICLE 252

The company memorandum may not be amended or its capital increased or reduced unless approved by a number of partners representing three quarters of the capital, unless the company memorandum provides for a numerical majority of the partners in addition to this quorum. However, the liabilities of the partners may not be increased without their unanimous approval. The resolution to reduce the company capital shall not be valid unless approved by the competent authority.

ARTICLE 253

The company shall have one or more auditors selected each year by the general assembly of partners. The provisions concerning the auditors of public joint stock companies shall apply.

ARTICLE 254

Without prejudice to the rights of boa fide third parties, a resolution adopted by the general assembly of partners in violation of the provisions of this Law or the company memorandum, adopted for the benefit of certain partners or to cause damage to other partners without due consideration to the interests of the company shall be void. In this event only the partners who had objected to the adoption of the resolution or those who were unable for acceptable reasons to object thereto, may request the nullification of the resolution.

The judgment nullifying the resolution will lead to the resolution being considered as nonexistent for all the partners.

A case of nullification is time barred on the expire of one year from the date of adopting the resolution. Initiating the case will not suspend the implementation of the resolutions unless otherwise ordered by the Court.

ARTICLE 255

The company shall allocate 10% of Its net profits each year to create a statutory reserve. The partners may suspend the allocation if the reserve reaches half the capital.