United Arab Emirates: Shareholders Agreements And Joint Venture Agreements In The United Arab Emirates: A Checklist

Last Updated: 17 August 2017
Article by Douglas G. Smith

The following summary is designed to set out some of the chief considerations and potential pitfalls in preparing, negotiating and settling shareholders and joint ventures in the United Arab Emirates (UAE). It is focused upon such arrangements for UAE limited liability companies formed under the Commercial Companies Law (Federal Law No. 2 of 2015) (the Companies Law).

Note that currently, all locally formed limited liability companies must, by law, be locally owned with at least 51% of the company's issued shares owned by a UAE national or a company entirely owned by one or more UAE nationals. Foreigners are accordingly restricted to owning only minority stakes in UAE limited liability companies.


The Agreement will contain certain definitions and legal "boilerplate" including regarding such matters as:

a. the applicable currency of the Agreement, typically UAE Dirhams (dollars in many of the free zones);

b. the governing law of the contract, which will typically, but may not necessarily be, UAE law;

c. provisions regarding waiver and amendment; and

d. in the case of a company which is going to be present and operating through subsidiaries, particulars regarding the organization and management of those subsidiaries.

Business and Affairs of the Company

  • Particulars concerning the management of the day-to-day business and affairs of the company should be set out in some detail and may include such matters as:

a. detailed descriptions of the business obligations of the parties including concerning capital contributions and ongoing duties to the company;

b. the constitution and identity of the manager or managers of the company (the company must have one or more managers who act as a board of managers in a manner similar to boards of directors);

c. a requirement for periodic meetings of the managers;

d. a requirement for periodic meetings of the shareholders/members of the company;

e. stipulated quorums for meetings of directors and shareholders;

f. particulars as to what the types of majorities which can carry pass general resolutions before the board (other than with respect to substantial matters), subject to the requirements of the Companies Law;

 g. an indication as to who will act as the bank of the company, the types of accounts to be maintained and particulars as to what persons are authorized to draw cheques on any of the company's bank accounts;

h. a statement as to who will serve as the auditors of the company;

i. the fiscal year end of the company;

j. specific details concerning, and perhaps limitations upon, the ambit of the company's business;

k. matters requiring special majorities of the directors or shareholders such as:

i. amendments to the Memorandum of Association of the company;

ii. the issuance or granting of options to purchase shares of the company (note that under the current Companies Law, only one class of shares is permitted);

iii. the redemption, purchase for cancellation or other payment by the company for any of the company's shares;

iv. the declaration or payment of any dividends or making any distribution, whether in cash, in stock or in specie;

v. the creation, assumption or liability for any borrowing or mortgage, pledge, charge, grant of security interest or other encumbrance upon any of the company's assets;

vi. the giving of security for or guarantee of or giving of any support in respect of, any debt, liability or obligation of any person;

vii. the making of any capital (or any) expenditure in excess of a stipulated agreed amount (e.g. AED500,000);

viii. entering into any contract, agreement or commitment out of the ordinary course of business or acquiring or establishing any additional business or making any material change in, or termination or suspension of, any material part of the company's existing business;

ix. the taking, holding, subscribing for or entering into any agreement to purchase or acquire shares of any company or the taking or having of any interest in a joint venture or partnership or similar undertaking;

x. entering into any contract, agreement or commitment with any shareholder or any associate or affiliate of any shareholder or any person controlled by an individual shareholder or with any person who does not deal at "arm's length" with any shareholder;

xi. repayment of any principal outstanding on any loan made to the company by any shareholder or any associate or affiliate of any shareholder or any person controlled by an individual shareholder or any person who does not deal at arm's length with any shareholder or payment of interest upon any such loans;

xii. making any payments or advances of any kind to any individual shareholder or the spouse or any other relative of any individual shareholder, except for salary and commission payable in the ordinary course of business in accordance with employment arrangements which have been approved by all the shareholders;

xiii. selling or otherwise disposing of, by conveyance, transfer, lease or otherwise, assets of the company as an entirety or substantially as an entirety or amalgamating or merging with or into any other corporation or applying to be continued as a corporation under the laws of any jurisdiction;

xiv. approval of the company's annual business plan (the Annual Business Plan);

xv. entering into any transaction not contemplated by the Annual Business Plan;

xvi. replacement of the manager or managers of the company;

xvii. taking or instituting any proceedings for the winding-up, reorganization or dissolution of the company; or

xviii. permitting any subsidiary of the company to do any of the matters contemplated by Clauses (i) to (xvii) above.

  • The Agreement should set out particulars regarding ongoing financing requirements for the company, whether by approved annual business plan or otherwise, as well as set out the limits for the providing of funding by the shareholders.

General Matters Relating to the Holding of Shares

  • The Agreement should contain basic representations and warranties by the parties, including regarding the beneficial ownership of their shares in the capital of the company.
  • There should be a general prohibition on share transfer without the consent of the other parties, subject to the terms of the Agreement.
  • There may be a provision to the effect that an individual shareholder can transfer all or any shares in the capital of the company to an entity controlled by him/her subject to terms, such as prohibitions on future transfers.
  • There should be a general prohibition against pledges or mortgages of shares.
  • The Agreement should provide that no registration of any transfer of shares will be made unless it is made in accordance with the terms of the Agreement.
  • Each of the shareholders should give a general covenant to the effect that all necessary consents and approvals and all attendances (before a Notary or applicable governmental department) to a transfer of shares permitted under the Agreement are or shall be given or made as soon as practicable in compliance with the relevant provisions of the Agreement relating to such a transfer.

Matters Relating to the Disposition and Acquisition of Shares

  • The Agreement should specify designated representatives of the shareholders entitled to make offers and receive notices with respect to share transfers and to execute documentation in connection therewith.
  • The Agreement may contain a "shot-gun" buy-sell provision and set out its terms.
  • The Agreement may contain rights of first refusal and set out their terms. The Commercial Companies Law does provide for preemptive rights on the sale of shares to third parties but the shareholders can augment and clarify those rights.
  • The Agreement may contain "piggy-back", "tag-along" or "drag-along" rights in the event of a third-party share sale.
  • The Agreement may provide that on the occurrence of certain events, a shareholder may be required to sell or to offer to sell its shares. These circumstances might consist of such things as:

a. the breach or continuing to breach by a shareholder of its obligations under the Agreement;

b. any representation or warranty of a shareholder being untrue or becoming untrue or incorrect;

c. the death of an individual shareholder;

d. the bankruptcy or insolvency of a shareholder; or

e. any change in voting control of a corporate shareholder.

Valuation and Completion Procedures

Where the Agreement provides that a shareholder is required to sell its shares on the occurrence of a particular event (such as breach, death, insolvency, change of control, etc.), clear valuation methodology should be set out for the determination of a purchase price for such shares. Completion procedures such as notice periods, time limits and other closing procedures should be set out in detail so as to avoid misunderstandings at a later date.

Restrictive Covenants

  • The Agreement should provide for a requirement for shareholders to refrain from directly or indirectly competing with the business of the company.
  • There should be general confidentiality covenants regarding confidential information received by the parties in their capacity as shareholders.
  • It is also typical for such agreements to provide for so called non-solicitation clauses, prohibiting shareholders from soliciting for their own purposes or enticing away employees or clients of the company.

Dispute Resolution

  • There are a variety of dispute resolution mechanisms including litigation or arbitration. A reasonable choice for companies with operations in Dubai, depending upon the circumstances, would be to stipulate for arbitration in the Dubai International Arbitration Centre (DIAC) or in the DIFC-LCIA (London Court of International Arbitration) Arbitration Centre in Dubai under the DIFC-LCIA Rules.
  • There are circumstances under which the parties may wish to forego the arbitration process altogether and have immediate recourse to the courts of the UAE or of another jurisdiction. In such a case, the parties should specifically contractually submit to the exclusive or non-exclusive jurisdiction of the courts, again dependent upon the circumstances.
  • The Agreement may also wish to address what occurs if there is a deadlock among the parties. Deadlocks can sometimes be resolved by arbitration or, in some cases, by adjudication by an expert. Some agreements stipulate that where there is a deadlock which cannot be amicably resolved, the shareholders shall have right to put their shares to the other parties or otherwise provide for forced sale arrangements.

Reconciliation With Constating Documents

  • Unlike the many jurisdictions, entering into a unanimous shareholders' agreement in the UAE does not bind the parties to the exclusion of the company's constating documents, its Articles of Association or Memorandum of Association, depending on the type of corporate entity involved. Under the Companies Law, where there is a discrepancy between these constating documents and the terms of a unanimous shareholders' agreement, with few exceptions, the constating documents will prevail.
  • Accordingly, the Memorandum of Association of the company should be carefully reviewed to ensure that the Agreement does not contradict them in any respect. Also, the parties may consider a clause to the effect that the parties will, at the time of signing the Agreement, take all steps as are necessary to amend the company's constating documents such that they conform to the terms of the Agreement.

General Provisions

The Agreement will contain a number of general provisions, including relating to the binding effect of the Agreement upon the parties, an indemnity by the company of its directors and shareholders for certain acts; the term of the Agreement; provisions regarding notices and delivery of the same; and similar general contractual terms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions