When Investors Require Side agreement

 In the UAE it is common knowledge that many limited liability companies (LLCs) are in fact owned and managed by foreign shareholders, though the legal ownership may reflect differently. It is common for the shareholders to execute ‘side agreements’, as they are commonly known, between them to mirror their real understanding of the ownership and management of the company and its operations.

   These side agreements can take various forms and generally they contain provisions contrary to the UAE Companies Law and the company’s memorandum of association (MOA). For example, a foreign shareholder may give a loan to a UAE shareholder for the latter to purchase shares in the company. Because the shares were purchased with money loaned from the foreign shareholder, the foreign shareholder obtains a pledge over the UAE shareholder’s shares.

   The UAE shareholder may also execute certain other deeds or arrangements in favor of the foreign shareholder, enabling the latter to control and manage the company until the loan is repaid.

Protection and Promotion of Investments

   To improve its development goals, the UAE signed 101 agreements to protect and encourage investments. With a network of the UAE’s key trade partners, these agreements aim to protect investments from all non-commercial risks like nationalization, expropriation, sequestration and freezing. They also aim to allow the establishment of investments and licensing such investments and confirm the free transfer of profits and other returns in a freely transferable currency, as well as granting national treatment in accordance with the laws enforced in the UAE, and other objectives that ensure the protection and encouragement of investments in the UAE.

   The only way to start a business in UAE is to find a local Emirati sponsor. The local sponsor acts as an inactive partner in your business in exchange for an annual fee. While setting up a limited liability company in Dubai or elsewhere in the UAE a local national has to become the sponsor.

   Business setup Dubai can manage the entire drafting of contracts for you. We are your one-stop-shop service for all your business setup needs. We are always with you for any kind of investors side agreement services. for more details contact us.