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Joint Participation Abu Dhabi

Article (56) of Federal Law No. (8) of 1984 concerning commercial companies defined a joint participation as being a company concluded between two partners or more on sharing the profits or losses incurred by a single or multiple business operations performed by one of the partners in his personal name.

The law also provided that such a company should be confined to the relationship between partners and may not be effective vis-à-vis any third party. However, the company existence may be proved by all familiar means of evidence, whereas its pertinent contract should regulate the rights and obligations of each partner; the terms of profit / loss distribution and the capital amount. It is worth mentioning here that the contract of a joint participation is neither subject to registration in the commercial register nor to the necessity of being publicized. Yet no municipality license may be issued for such participation whose contract may, otherwise be authenticated before the Notary Public.

According to the law provision, a partner in a joint participation may not be viewed as merchant unless he runs business operations by himself. However, each partner in such a company should remain owner of his share, unless it is otherwise agreed upon.

The law, on another hand, prohibited a joint participation from issuing stocks or negotiable bonds. The most important characteristics of this company is that a third party may not have the right of recourse except toward the partner whom he dealt with. If an action performed by the partners conducts to let a third party be informed of the company existence, it may; then be considered a real company in which the partners will be jointly liable towards third parties.

On another side, the law provided that any partner in a joint participation should have the right to review the company books and documents either by himself or through his attorney who may be another partner or a third party, providing that such review should not cause the company any damage or loss, and any agreement to the contrary should be considered null and void according to the said law.