Ask the law: What is the legal remedy to dissolve a company if all partners do not agree
One partner is out of country and does not agree to close the company despite losses
Question: I am a partner in a limited liability company with two partners. The company is currently experiencing significant losses. The second partner and I agreed to terminate the company, but the third partner did not agree. He is outside the UAE and does not want to return to solve the problem. My question is what is the legal remedy to this situation? Do we have the right to terminate the company without the consent of the third partner? Please advise.
Answer: As per Article 302 of the Federal Decree Law no. 32 of 2021, some of the general reasons for the companies’ expiry are: Agreement of the partners and a court order. The mentioned Article states that without prejudice to the provisions governing the expiry of each company, a company shall be dissolved upon occurrence of the following: Unanimous agreement of the partners to terminate the company unless a certain majority is provided for in the company’s memorandum of association and Court order for dissolving the company.
You have to refer to the articles of association and the quorum needed to dissolve the company. In most cases, the quorum equals to the partners who own 75% or more of the shares, provided that the general assembly shall issue a decision to dissolve and liquidate the company, appoint a liquidator, pay the debt and obligations, and distribute the remaining profits in the proportions known to each partner according to his share in the company. During the liquidation period, the company retains the legal personality necessary for the liquidation work.
If the quorum is not present and the majority of the company’s shareholders did not vote and agree to dissolve or liquidate, then partners can file a case in court, as per Article 308 of the same law,: (1)- If a limited liability company sustains loss amounting to one half of the capital, the directors shall refer dissolution of the company to the general meeting. It is a requirement that a valid resolution for dissolution be adopted by the same majority required for the amendment of the company Memorandum of Association. And (2) if the loss amounts to three quarters of the capital, partners holding one quarter of the capital may request its dissolution.