How to Draft a Memorandum of Association in the UAE

The UAE government enacts laws and guidelines to guarantee the protection of the rights of all persons engaged in commercial transactions. Businesses operating in the United Arab Emirates have embraced best practices, one of which is using Memorandums of Association (MoAs). Here, we review the functions of a MoA Memorandum of Association and explain its components.

What is a Memorandum of Association in the UAE?

A Memorandum of Association (MoA) is a corporate document bearing the signatures of the founding members or partners who authorise the formation of a company. According to UAE legislation, establishing a corporation requires every shareholder’s approval.

Although MoAs can be translated into other languages, they are written in Arabic. After the draft is finished, it must be registered with the free zone authority where the business will operate or the commercial register of the specific emirate’s economic department. For example, one must communicate with the Department of Economic Development to start a firm in Dubai.

Depending on the type of business, you should also register with specific regulatory organisations and have the MoA notarised.

The following is contained in the UAE Memorandum of Association:

• The company’s parameters are described in a memorandum of agreement.
• Mention the company’s address.
• The member’s rights and the connection between the entity and its members are outlined in the MoA.
• It lists the possible activities a corporation can engage in and guarantees that each activity is consistent with the intended business operations.
• The MoA also describes the company’s share capital and the worth of each shareholder’s share. A corporation’s memorandum of agreement establishes its ownership and obligations.

Do You Need a Memorandum of Association?

Before beginning the procedure, it is essential to understand the idea and importance of a Memorandum of Association (MOA). This section will explain the MOA’s purpose in forming UAE companies. We will examine how it establishes the rights and obligations of the company’s shareholders and the business’s goals, operations, and organisational structure.

What is the Importance of a Memorandum of Association (MOA)? 

There are various reasons why the Memorandum of Association (MOA) is required:

• Legal Prerequisite

In most jurisdictions, including the UAE, a corporation’s formation is legally required to include a Memorandum of Agreement (MOA). When incorporating a business, it is one of the foundational documents that needs to be turned in to the appropriate government authorities. The lack of a properly designed MOA may have legal ramifications and hinder the company’s registration and establishment.

• Outline the Goals and Actions of the Company

The MOA delineates the main goals and actions that the corporation plans to take. It makes the nature of the company and its range of activities more clear. Prospective owners, investors, and stakeholders must comprehend the organisation’s objectives and priorities.

• Know the Obligations and Rights of Shareholders

The rights, obligations, and powers of the shareholders are outlined in the MOA. It outlines the duties, methods of profit sharing, voting rights, and responsibilities of the shareholders concerning the firm. This promotes responsibility and openness among the company’s stakeholders.

• Oversees Governance and Structure of the Company 

The company’s internal organisation and governance procedures are described in the MOA. It outlines the duties and obligations of the shareholders, management, and board of directors. It also offers standards for meetings, resolutions, and decision-making procedures. This makes creating a structured and functional foundation for running the business easier.

• Safeguards Interests of Investors

The MOA protects shareholders’ interests and creates a just and equitable environment for them by establishing guidelines for share transfers, limitations on share transfers, and procedures for settling shareholder disputes.

• Foundation of the Company’s Constitution

The MOA, Articles of Association (AOA), and other parts of the company’s constitution are based on the MOA. The MOA concentrates on the business’s goals and overarching structure, whereas the AOA offers more specific guidelines for internal controls, managerial practices, and shareholder rights. The MOA and AOA establish the legal foundation for the business’s activities.

Preparing the Memorandum of Association

You can prepare a MOA Memorandum of Association in the United Arab Emirates by following the instructions in this section. We will review the procedures, records, and data required to establish a Memorandum of Agreement that complies with UAE laws and regulations. Important factors to think about are as follows:

• Name of the Company and Activities

Select a distinctive and fitting company name that fits the operations detailed in the MOA.

• Capitalization and Distribution of Shares

Figuring out how many shares are authorised, how much money they contain, and how they are distributed among shareholders.

• Rights and Liabilities of Shareholders

describing the duties, responsibilities, and rights of the shareholders and their participation in profit-sharing, dividend distribution, and decision-making processes.

• Governance and Management

specifying the functions and duties of the executive management, general assembly, and board of directors, if relevant.

• Legal Address and Registered Office

Name the legal address and registered office for the company’s operations.

• Legalisation and Notarization

For a Memorandum of Association to be legitimate and enforceable in the United Arab Emirates, it must be notarized and made lawful.

• Obtain Consent and Endorsements

In the UAE, the MOA can require notarization by a notary public. Depending on your business’s location, you might need approvals and signatures from pertinent government agencies, including the Department of Economic Development (DED) or the Free Zone Authority.

• Updates and Modifications

If your business’s operations or organisational structure change, its MOA Memorandum of Articles could need to be updated or modified over time. This section will describe the amendment procedure and the required paperwork and approvals. We will also discuss how these modifications may affect the company’s compliance and legal standing.

• Getting Expert Help

The UAE’s legal and regulatory environment can be difficult to navigate. Consulting with legal professionals or business advisors specialising in UAE company establishment is highly recommended. They can facilitate the acquisition of your Memorandum of Association, guarantee compliance, and lead you through the procedure.

Content of Memorandum of Agreement in the UAE

In the United Arab Emirates, memoranda of agreement have a certain format. The following are included in a company’s memorandum of agreement:

• Name Clause: The suitably suffixed name of the company.
• Object Clause: This section lists the goods the business offers for sale. This area can be updated as needed.
• Situation Clause: This section describes the business’s operations in the United Arab Emirates and stipulates the nation’s geographic bounds.
• Capital Clause: Specifies the number of registered shares, the stock of the corporation, and the current and future share splits. It also states the additional amount each shareholder must provide to launch a business.
• Liability Clause: This clause indicates whether the business is government-owned, limited, or unconstrained. It also provides a solution to owners’ or shareholders’ obligations.

Guidelines Regarding Company Name in Company’s Memorandum of Association

An important consideration for any business is its name. As part of the Companies Memorandum of Articles, specific guidelines must be followed when naming entities.

• The title cannot be the same as, or similar to, the name of an established business or brand. It must be unique and unreplicated by any other business in the government database.
• There should be no derogatory or negative title.
• excludes all references to any kind of relationship or direct or indirect sponsorship of the government. 

Conclusion

To sum up, the Memorandum of Association (MoA) is an essential document for any company’s foundation and legal registration in the United Arab Emirates. It outlines the core principles that the business works under, including its goals, ownership structure, and governance systems. Understanding the complexities of the Memorandum of Agreement (MoA) can offer a strong foundation for your corporate journey, ensuring your organization complies with the legal and commercial landscape of the United Arab Emirates. 

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