Side Agreements in UAE LLCs: A Comprehensive 2024 Guide
If you're planning to establish a Limited Liability Company (LLC) in the UAE, understanding the role and legal standing of side agreements is essential. These agreements offer greater clarity, protect partners’ rights, and define internal relationships beyond what's included in the company’s official documents. In this guide, we explore what side agreements are, their legal validity, and why they are crucial for a successful LLC setup in the UAE.
📘 What is a Limited Liability Company (LLC) in the UAE?
A Limited Liability Company (LLC) is one of the most widely used business structures in the UAE. Governed by Federal Law No. 2 of 2015 on Commercial Companies, an LLC offers:
-
- Limited Liability: Each partner's liability is limited to their capital contribution, protecting personal assets from business liabilities.
Keywords: limited liability UAE, LLC liability protection -
- Flexible Ownership: An LLC can have 2 to 50 partners, providing structural flexibility.
Keywords: LLC partners UAE, minimum partners LLC, maximum partners LLC UAE -
- Capital Requirements: The required share capital may vary based on the activity and the emirate (e.g., Dubai, Abu Dhabi).
Keywords: LLC capital requirements UAE, minimum capital LLC Dubai
📄 What are Side Agreements in UAE LLCs?
Also known as shareholders’ agreements or side letters, side agreements are private contracts entered into by the partners of an LLC. They supplement the company’s Memorandum of Association (MOA) and offer more detailed provisions on internal governance, financial rights, and partner obligations.
✅ Common Clauses in LLC Side Agreements
-
- Profit and Loss Distribution
Agreements may redefine profit-sharing ratios beyond ownership percentages.
Keywords: profit sharing LLC UAE, loss allocation UAE -
- Management & Control
Define each partner’s role, voting rights, and decision-making powers.
Keywords: LLC management UAE, board of directors UAE -
- Share Transfer Restrictions
Include provisions like right of first refusal, tag-along, or drag-along rights.
Keywords: share transfer UAE, right of first refusal UAE -
- Dispute Resolution Mechanisms
Outline how internal disputes are resolved—via mediation or arbitration.
Keywords: dispute resolution LLC UAE, arbitration UAE -
- Exit Strategy
Set clear procedures for partners exiting the business, including buy-sell clauses.
Keywords: LLC exit strategy UAE, buy-sell agreement UAE -
- Confidentiality and Non-Compete Clauses
Protect sensitive company information and restrict partners from competing post-exit.
Keywords: confidentiality agreement UAE, non compete UAE
⚖️ Are Side Agreements Legally Valid in the UAE?
Yes. Side agreements are generally legal and enforceable under UAE law, provided they do not contradict the Commercial Companies Law or public policy. Article 71 of Federal Law No. 2 of 2015 supports partner agreements that govern internal company matters. However, poorly drafted or ambiguous agreements may not stand in court—legal precision is key.
🌟 Key Benefits of Using Side Agreements
-
- Customization & Flexibility
Partners can define terms based on the unique needs of the business. -
- Protection for Minority Shareholders
Ensures fair treatment and inclusion in major decisions. -
- Reduced Disputes
A well-drafted agreement reduces conflict by clearly stating roles and expectations. -
- Confidentiality
Unlike the MOA, a side agreement remains private and is not filed with authorities.
👨⚖️ Why You Need Legal Counsel
Incorporating side agreements into your LLC structure is a smart move—but only if done correctly. A corporate lawyer in the UAE can:
-
- Draft enforceable side agreements tailored to your business
-
- Ensure alignment with UAE Commercial Companies Law
-
- Safeguard your rights as a shareholder or managing partner
Whether you're launching a new LLC or restructuring an existing one, legal advice is essential for drafting a binding and effective agreement.
🏁 Conclusion
Side agreements in UAE LLCs are powerful tools for enhancing governance, protecting partner rights, and preventing future disputes. While not part of the public company records, these private agreements carry substantial legal weight when properly drafted. To ensure your interests are protected, always engage a qualified corporate lawyer in the UAE when preparing or reviewing these documents.
Importance of Legal Counsel:
It is highly recommended to consult with a corporate lawyer in the UAE when drafting or reviewing side agreements. A qualified lawyer can ensure that the agreement is legally sound, enforceable, and protects your interests.
- LLC UAE
- Limited Liability Company UAE
- Side agreement LLC UAE
- Shareholders agreement UAE
- LLC formation UAE
- Company setup UAE
- Commercial Companies Law UAE
- LLC agreement UAE
- LLC partners UAE
- Business setup Dubai/Abu Dhabi
- Corporate lawyer UAE
- Business lawyer UAE
Disclaimer: This blog post is intended for informational purposes only and should not be considered legal advice. For personalized legal guidance tailored to your specific situation, please consult a qualified lawyer in the UAE.
Tags: abu dhabi legal firms, advocate firm, affordable legal firms in uae, asset finance law firms, attorneys that sue banks near me, bank fraud lawyer, bank lawyer, banking and finance law, banking and finance law firms, banking and financial services law, banking law attorney, banking law lawyers, banking litigation law firms, banking litigation lawyer, banks law firm, best banking law firms, best corporate law firms, best corporate lawyers, best law firms in dubai, best lawyer for banking issues, best lawyers in dubai, best legal firms, best legal firms in dubai, biggest corporate law firms, biggest law firms, commercial banking attorney, commercial banking lawyer, commercial law firms, commercial law firms in dubai, Commercial Lawyer, commercial lawyer dubai, commercial lawyer in dubai, commercial lawyers in uae, corporate and banking law, corporate and commercial law firm, corporate banking law, corporate business lawyers, corporate commercial law, corporate law attorney, corporate law firm in uae, corporate law firms, corporate law firms in dubai, corporate law services, Corporate Lawyer, corporate lawyers in dubai, corporate litigation law firm, financial lawyers, financial regulation lawyer, financial services law, financial services law firm, international law firms in dubai, largest law firms, law firm attorney, law firm services, law firms in abu dhabi, law firms in difc, law firms in doha, law firms in dubai, law firms in uae, law firms near me, law offices in dubai, lawyer for bank issues, lawyer services dubai, lawyers in uae, lawyers who handle bank issues, leading law firms, legal adviser, legal firm, legal firms in abu dhabi, legal firms in dubai, legal firms in uae, legal firms near me, legal law firm, legal services firm, local law firms in dubai, top banking law firms, top corporate law firms, top law firms, top law firms in dubai, top legal firms, top legal firms in dubai
