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General Partnership Company Abu Dhabi

Article (23) of Federal Law No (8) of 1984 concerning commercial companies defined the General Partnership as being a company
formed by two or more partners who are jointly liable to the extent of all their assets for the company liabilities.

It is understood from the above provision that the number of partners should not be less than two, but may be more. This is in addition to a main characteristic which makes all partners jointly liable for the company's debts. This means that the company's liabilities should be borne by all partners to the extent of all their assets. Such liability is, therefore not limited to the cash or kind shares of the partners in the capital. This is, of course unsimilar to the partners liability in a limited liability company or to that of a silent (limited) partner in the simple limited partnership or to that of a shareholder in a joint stock company.

However, it is worth mentioning here that in a general partnership, execution may not be enforced on the assets of a partner unless upon acquiring an execution decree against the company claiming to discharge a debt in case of failure to do so. In this case only, the execution may be enforced on a partner's own assets.

2 Article (25) of the said law also provided that all partners in a general partnership must be holders of the UAE nationality, contrary to the case of all other types of companies in which it is stipulated that any company incorporated in the state should have one or more national partner whose share or shares must not be less than 51% of the capital. But in this single case of a general partnership, the company's ownership is confined to UAE nationals only.

3 In a general partnership, as in any other type of companies, the partner's intention should be concentrated on working together in order to realize profit. They also must accept to bear loss if any. But failure to do so means that the concept of partnership will be prejudiced and the company will be void. However, the basic pillars for the company must be available. These are the asset & capacity of partners in addition to the purpose and the required headquarters.

4 The name of a general partnership should consist of the names of all partners, or it may only be confined to the name of one or more of the partners with an addition indicating the existence of a company.

Such indication may be through adding certain words like (.... & Brothers), (......& Partners or Company) and (.....& Sons).

However, a general partnership may have a special trade name. But, in case the name of an individual non - partner is mentioned in the company name with his knowledge and without objection from his side, then he will be jointly liable for the company liabilities along with other registered partners. It is a practice in the Emirate of Abu Dhabi to get a trade name approval from Abu Dhabi Chamber of Commerce & Industry, and to get the required trade license from Abu Dhabi Municipality Department after having the company memorandum duly registered with the Companies Section at the Ministry of Economy & Commerce.

 It is also understood from the above that it is prohibited to use the name of a non- partner in the company name, If it so happens without the knowledge of such individual, he may present an objection. Because Without such objection, if it is proved that his name was used with his knowledge, and then he will be liable for the company's debts, just like other duly registered partners and jointly with them.

5 It is stipulated by the law that the memorandum of a general partnership should include:

•  The name; surname and title (if any) of each partner, also his nationality and date of birth.

• The company name; purpose of incorporation; headquarters and branches if any; capital and the share undertaken to be presented by each partner whether it is in cash or in kind or merely a right; the estimated value of shares, pertinent terms of presentation and date of maturity; date of incorporation and termination and the terms of management, with a special reference to the names of authorized persons who may sign on behalf of the company and the extent of their powers.

• It should, also include the commencement and end of the company fiscal year and the percentages of profit / loss distribution among partners.

•   In addition to all these major information required by the law, the memorandum of a general partnership should also include other information agreed upon by all partners such as the formation of the board of directors; terms of share assignment; partners liabilities; terms of competition if allowed or not. Decision terms of issuance; reasons of company dissolution; terms of liquidation; dispute-settlement agency and any other statements agreed upon by the partners, provided that they should not be in contravention to the laws.

6 The memorandum of a general partnership should not provide for an agreement on depriving a partner from profit or exempting him from suffering loss, otherwise the memorandum will be considered void.

However, it may be agreed to exempt the partner who contributes nothing but his work from bearing a loss. This is because the capital of a general partnership may be paid in cash; in kind or merely a work, although the registered capital should be only formed from cash and kind shares, and this is the reason why such a partner with a work share only may be exempted from suffering loss, as he, in such a case, may lose his time and effort without getting a regular salary against his work which is viewed as his contribution to the company capital.

7 Partners should agree on the percentage of profit and loss in the company memorandum, but may not agree on distribution of fictitious profits through over - exaggerating the estimate of the company assets.

8 Each partner in a general partnership will be deemed merchant. The bankruptcy of the company will lead to the bankruptcy of all partners. This is accordingly incurring that each partner in the company should be fully capacitated, whereas incapacitated individuals may not be partners in a general partnership.

9 The shares of partners in a general partnership may not be represented by negotiable instruments and may not be assigned to others unless upon approval by all partners. This restriction is reflecting the private feature of the company.

10 The management of a general partnership may be the responsibility of one or more of the partners or a person who is not a partner.

The competence of the manager(s) should be specified in his letter of appointment. In case the manager is a partner and so appointed in the company memorandum, he may not be dismissed except by the unanimous vote of the partners, otherwise dismissal should result in dissolution of the company unless its continuation is so provided in the memorandum. However, a manager may not resign without appropriate justifications, otherwise he will be liable for indemnification.

Appropriate justifications here are meant to be those deemed acceptable by all partners. In case of different opinions, the judge at the court of law is to take a rightful decision. The manager may be held responsible for any damage inflicted on the company or caused to the partners or others in case he acts in contravention to the provisions of the company memorandum.

11 The law also provided that joining the company or withdrawal of partners; avoidance of the memorandum; dissolution or liquidation of the company should all be effected at the Commercial Register / Abu Dhabi Municipality and at the Company Section / Ministry of Economy & Commerce.

12 The law did not fix a certain capital amount for a general partnership.