Scroll Top
201/202, Al Hawai Tower,Financial Centre Metro Exit 2,Duabi,UAE

How can disputes between joint shareholders in the UAE be resolved?

dispute between share holders in uae law-3a legal consultants-uae

To resolve disputes between joint shareholders in UAE, the following precautions can be taken 

  • In the United Arab Emirates, having a legally binding agreement with a local partner for on-the-ground operations is essential. Typically, this entails including at least one UAE national among the company’s shareholders. This collaboration is far deeper than just words on paper. Share certificates and other corporate papers must be registered in the local partner’s name with the government agency in charge of issuing business licenses. Shareholder registration is also obligatory in free zones.
  • The corporate structure and procedures for making decisions are laid forth in official documents like the Memorandum of Association (MOA) and Articles of Incorporation. It might be difficult to settle disagreements between shareholders who each own an equal portion of the company. In reality, though, the majority shareholder will have greater say thanks to the ownership structure of varied percentages. However, this is not always the case in actual use.
  •  The procedure for settling shareholder disputes is often laid out in the governing corporate papers in various jurisdictions, including the United States. For instance, the majority shareholder may have the option to purchase the minority shareholder’s shares if the dispute cannot be settled through meetings and negotiations. However, things aren’t quite so simple in the UAE.
  • Shares cannot be transferred in the United Arab Emirates (UAE) solely on the basis of the governing documents, as this would violate local law. In the event of a disagreement, the majority shareholder cannot seize control of the company without the consent of the minority shareholders. The law enforcement officials need the cooperation of both parties. Therefore, going to court is the sole option if the matter cannot be settled through dialogue.
  • In most circumstances, UAE courts will order the company’s liquidation rather than the transfer of shares. The implications for the company’s functioning are not good. Shareholders need to be aware of the constraints and difficulties they may encounter when trying to settle disputes over this complicated and sensitive subject.
  • There is a growing trend among licensing authorities, particularly in specific free zones, to create legislation providing interim relief to shareholders in the event of a disagreement. While the disagreement is underway, these measures try to halt certain actions or prevent the abuse of authority by one party. The scope and depth of these choices, however, remain limited.
  • For instance, new rules in the Dubai Multi Commodity Center (DMCC) permit disqualification of officers instead of shareholders. That implies an application can be filed to the DMCC registrar to have a shareholder who is also an officer of the company removed from both positions.

Above mentioned steps are essential to practice to resolve disputes between joint shareholders in future may occur.

To visit ministry of justice website click here

To know about our business law services click here

Request a Free Consultation

Consult right now with our experienced team for complete solutions to your legal requirements.
3A Legal consultants -uae - best law firm in -uae