Articles:Partner And Manager Responsibilities In Limited Liability Companies

Golden rules for an investor to follow prior to establishing a company in the UAE

From a Legal perspective, if an investor wants to start a business in the UAE, he/she should follow the golden rules listed below:

1. For most investors, who wish to set up a business in the UAE, their main concern is about the income and expenses. They do not try to familiarize themselves with the culture of the country such as the local customs, traditions as well as the applicable laws and regulations of the UAE. Therefore, as a first rule, it is mandatory for the investor to know the culture of the region in which he wishes to invest and start a business.

2. Based on the activity of the business, the investor can decide whether he wants to start a limited liability company or individual company, mainland or offshore company. In the UAE, there are different categories of companies that the investor can select based on the type, activity, and location of the firm. The second rule is that the investor must be fully aware of the advantages and disadvantages of each type of company and what the consequences of the same are.

3. The investor should be fully aware of the Legal Structure, applicable Laws and Regulations of the city when establishing the company. Of course, I mean that the investor should be familiar with the relevant Labor Laws, Company laws, Rental laws and the nature of court procedures, arbitration center, and all the appropriate authorities. Generally, most of the foreigner investors, are signing Commercial Agreements, and the Dispute Resolution method is Arbitration, and the applicable Law is a Foreign Law. As such, if any dispute arises between the parties, it shall be resolved through the Arbitration Center. Many investors presume that it is not vital to be familiar with the UAE Law since the applicable Law for resolving any dispute is a foreign Law, and by virtue of my legal experience this is one of the biggest mistakes the investors do. Therefore, the third rule is, that the investor must consult an experienced Local lawyer who is fully aware of the applicable Laws and Regulations as well as the court procedures for comprehensive Legal advice so as to avoid any dispute which may occur in future.

For the time being, it is pretty straightforward to get the necessary information’s to learn on how can you to set up your business in the UAE and most investors see that a consulting law firm is a luxury and not important.

However, there is an essential relationship that exists between the investor and the lawyer, and this relationship should start from the beginning not after the dispute arises.

I am fully aware that, all the investors are keen to manage their expenses, but they must put a budget from the business capital to protect themselves and their assets, by referring to the legal advice from a experienced and well-known Law firm in UAE.

– Abdelaziz Alhanaee

Managing Partner

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Abdelaziz Alhanaee Advocates & Legal Consultantancy Articles

LLCs are one of the most popular vehicles for carrying out business in the UAE outside of the Free Zones where the business activity does not involve banking, insurance or investment (where another corporate vehicle is required). LLCs are governed by the UAE Commercial Companies Law and require a minimum of two members with a starting capital of AED300,000. Foreign investors can hold up to 49% equity in an LLC and 51% must be held by one or more UAE nationals. Managers of the company (up to 5 people) can be UAE Nationals or expatriates.

Partner’s liability

Limited liability companies allocate the liability of partners according to their share in the capital of the company. This means that partners are only liable to the extent of their shareholding. The finances of the company are of course separate from the finances of its partners, and because of this company creditors can only make claims against the company as an entity and not its partners individually or as partners of the company in their own merits.

Under article 218 of the UAE Commercial Companies Law, partners in limited liability companies cannot be held personally accountable for the company’s debts above the extent of their share in its capital. This is also upheld in the courts. As an exception to this rule, where the partner is found to have acted fraudulently or negligently to the detriment of the company or its creditors the liability is not divided as per the above rule. Rather, the partner can be held liable in their personal capacity, meaning that creditors can pursue the individual partner for the company’s debts and their liability is not limited to their share in the company. Creditors in this instance can attempt to secure the partner’s personal finances, separate from the company.

– Abdelaziz Alhanaee

Managing Partner

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Manager’s liability

Similar provisions also apply to the general manager of the LLC. Article 219 of the UAE Commercial Companies Law provides that “It shall be mentioned that the company is an LLC, along with the company’s capital. If this is ignored, the manager shall be personally liable in his own funds for the company’s liabilities in addition to damages”. This article refers only to the civil liability of the manager. Criminal liability is stipulated in article 322 of the Commercial Companies Law that “without prejudice to any stronger punishment in any other law, a punishment of no less than three months and no more than two years in jail and a fine of no less than ten thousand and no more than one hundred thousand Dirhams or any of these two punishments, to the manager or board member who intentionally falsifies the budget or the profit and loss account, or intentionally omits substantial facts in such documents with an intention to hide the real financial position of the company”. This means that the manager is also liable to the company, partners and any third parties for a breach of the law or the company’s regulations or fraudulent management activities.

Prior to filing a case against an LLC, Legal Consultant research into the company’s activities, its partners, its transactions needs to be carried out in order to plan how to approach the case. . The burden of proof rests with the creditors to evidence the acts of the partners or manager the manager for any fraud or misconduct.

– Abdelaziz Alhanaee

Managing Partner

Extradition of Criminals

International judicial cooperation is one of the most important aspects of cooperation between countries for crime fighting. There is exigent need to fighting the crime and protecting the society structure, in addition to punishment and chasing the criminal wherever he travels, in order not to avoid the punishment. A criminal usually escapes after committing the crime, as it becomes easy for him, nowadays, to travel freely between countries.

The international judicial cooperation is a phenomenon indicates the moral and cultural level of such countries for the purpose of law protection and crime fighting. Extradition of criminals is one of the international cooperation aspects, as many countries are governed by bilateral or collective treaties for extradition of criminal and judicial cooperation.

In view of the above, the expression (Extradition of Criminals) originated and it means that a country shall extradite a person available within its borders to another country in which he is suspected or convicted, at the request of the latter.

UAE is one among many other countries that persists in and complies with such treaties, in accordance with the Law No 39 of 2006, concerning the international judicial cooperation on the criminal matters.

The matter of criminal extradition is critical and complicated, as there are different practices and legal systems between the countries. Some countries apply the common law. Some other countries apply the civil law. There are many differences in the substantive and procedural aspects between the practices of the common law and civil law. UAE is one of the countries that apply the civil law practices. Therefore, extradition of criminal cases requires a lawyer not only familiar with the UAE law, but also practicing before the public prosecution and the court and specialized in its proceedings.

In the UAE, there are always 3 important elements with regard to the matter of criminal extradition, as follows:

The Requesting Country: The foreign country requesting the judicial cooperation from the country authorities.

The Requested Country: The country requested to execute the judicial cooperation.

The requested persons: A person requested to be arrested and extradited.

The extradition application shall be submitted to the country, in writing, through the diplomatic means. It shall be submitted to the public prosecutor who shall order arrest of the requested person if there is fear that he may escape outside the country. The public prosecutor may also order release of the requested person for personal or financial guarantee.

Therefore, the public prosecution shall explain the reason of arresting the requested person and informing the latter of the extradition application content and the related evidences and proofs. It shall also interrogate him and record his statements and the claims of his lawyer. The public prosecution shall, within fifteen days, refer the extradition application to the competent court.

It is worth mentioning that that the UAE judicial system divides the litigation degrees into the court first instance, court of appeal and Supreme Court (cassation court). However, regarding the matter of criminals extradition, the public prosecution shall refer the extradition application directly to the court of appeal, as this matter is being heard directly before the court of appeal and the supreme court (court of cassation) only. In accordance with the applicable law, the extradition application shall be heard before the court of appeal in a closed session, in the presence of the public prosecution, requested person and his attorney.

The public prosecutor or the requested person may challenge the decision issued from the court of appeal before the Supreme Court (cassation court), within thirty days from the date thereof.

Article (7) of the Law No 39 of 2006, stipulates four conditions for criminals extradition. However, it is worth mentioning that the international bilateral or collective treaties are insufficient. There are other elements and source complementary to the international treaties as follows:

– Extradition laws: the internal laws.

– International practices.

– Reciprocity of treatment: unfortunately, many stakeholders are paying attention only to the internal laws and omitting or unaware of the extent of this principle importance, as it may absolutely prevent the criminals extraditions.

With regard to the possibility of rejecting the extradition applications, Article (9) of the Law No 39 of 2006 stipulates 10 conditions for rejection of the extradition application. It is worth mentioning that even if a decision for rejection of an extradition application is issued by the competent court, this shall not preclude from issuance of another decision of possibility of extradition upon a subsequent application from the requesting country in case of appearance of new grounds which were not previously brought up before the competent court.

Finally, criminal extradition between countries may give preliminary impression that it is easy matter, as it is related to treaties. However, it is, as indicated hereinabove, a critical and complicated process, because there is many treaties, concerning the criminal extradition. Such treaties should be carefully considered and examined, in addition to careful examination of the formal and substantive conditions of an extradition application. Moreover, the requesting country laws and procedures should be considered and comprehended. Furthermore, the valid arguments and evidences should be prepared, in addition to coordination with authorities of the requesting country and careful examination of their applications and documents.

– Abdelaziz Alhanaee

Managing Partner