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Investing in the UAE - Legal Mistakes

Investment in Start-up Companies

Doing Business in the UAE

The UAE is a popular entry point for international businesses looking to expand into the Middle East. This is due to the country’s familiarity, the widespread use of English, excellent transport and logistics, favorable regulations, and access to talent and finance. However, businesses face challenges and need to stay updated on recent changes in the local business environment.

We at LawBridge Law Firm assist investors and businesses in the UAE with investment issues in start-up companies. Here are two common options for investing in start-up companies in the UAE:

  1. Non-Shareholder Investment: An investor provides funds to a company without becoming a shareholder. This model suits existing companies with a proven track record of profitability and market sustainability. For example, a company might need extra funds to start a new project without wanting to add a new shareholder. The investor benefits from interest on the company’s income and has more security due to the company’s stable market position. However, in the case of start-ups, there is a higher risk of bankruptcy.

  2. Shareholder Investment: The investor becomes a shareholder and supports the company’s business model. In this scenario, a shareholder agreement is necessary between the partners. The shareholder assumes responsibility for any future obligations that may arise.

Investing in LLC companies in the UAE can present challenges if proper legal due diligence is not conducted. Our law firm specializes in thoroughly checking companies and preparing comprehensive reports on their conditions.

Recent Case:
Our client invested 3,500,000 AED in an LLC company in Mainland Dubai. The company’s representative provided a favorable three-year financial report. However, after the investment, hidden legal liabilities were discovered, leading to litigation in the Dubai Courts. The case is currently ongoing.

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