SHAREHOLDER DOCUMENTATION IN THE UAE: STRUCTURING CONSIDERATIONS IN A DISPUTE CONTEXT
The nature of the legal framework in the United Arab Emirates means that almost all overseas parties wishing to do business ‘onshore’ (outside of the designated business zones known as ‘free zones’) must partner with a UAE national or an entity wholly owned by UAE nationals (although it should be noted that this is currently under review in certain sectors). Two of the principal options available to foreign businesses setting up in the UAE are to either register an overseas branch and enter into a contractual sponsorship agreement with the local party, or to establish a limited liability company (LLC) in which a majority of the issued shares (though not necessarily the economic rights) are held by the participating local.
The benefits of a limited liability structure mean that the second option is commonly chosen, in which case documentation governing the relationship between the shareholders must be put in place. Inevitably, disputes between the parties can arise during the life of the business and there are a number of jurisdiction-specific considerations which overseas parties should be aware of when structuring the shareholder arrangements at the outset.
Jul-Sep 2015 issue
DLA Piper Middle East LLP