Dubai: If you are about to set up a business in the UAE, one of the most important documents you will need in the process is a Memorandum of Association (MoA). If you are looking at how you can start your own business in the UAE, you may already have come across this term. But what does it mean, why do you need it and how can you get one?
Here is all you need to know.
What is a Memorandum of Association (MoA)?
It is a document that lists out the complete scope of a business’s operations, according to Eshaan Bora, Junior Associate at Fotis International Law Firm.
“A MoA is prepared during the formation and registration process of the company to determine the relationship with the stakeholders, and it establishes the objectives for which the company has been formed,” Bora said.
“This document outlines the basic rights and powers of the company, which is helpful to shareholders, creditors, and anyone else dealing with the company. Additionally, the information in the MoA aids potential shareholders in making the best choice when considering an investment in the business,” he added.
It is important to note that a company is permitted to only engage in the activities listed within the MoA. So, as a document, it lays down a broad boundary for the company’s actions, which also subsequently protected the shareholders’ money and ensure that they are not exposed to risk in other unrelated activities.
Apart from the business activities and shareholder agreements, the MoA also lists the office address, names of the shareholders, firm’s name, and share distributions within the company.
A MoA is prepared during the formation and registration process of the company to determine the relationship with the stakeholders, and it establishes the objectives for which the company has been formed.
The MoA should be in Arabic
According to Bora, one aspect to always consider when planning your business formation is the fact that the MoA is a document that needs to be written and in Arabic, and it also must be notarised, for it to be valid.
“If the MoA is published in a language other than Arabic, the Arabic version will have precedence in the UAE,” Bora said.
• nothing that violates the nation's legal system;
• nothing that goes against the will of the people;
• everything not listed among the incidental and primary objects;
• incidental goals required to accomplish the organization's primary goal;
• The primary goals of the LLC that it will pursue once incorporation is approved.
How is an MOA registered?
According to Bora, for a MoA to be effective, it must be recorded in the commercial register of the economic department in the Emirate or the free zone authority within which the company has been registered.
“Failure to register the MoA renders it ineffective in the eyes of third parties. However, if only a portion of the MoA is not registered, only that portion will be ineffective in the eyes of third parties,” he said.
This means that in case an earlier MoA was amended by a company, because it went through an expansion or change, and if the subsequent MoA is not registered with the economic department or free zone, the amendment cannot be enforced or be effective.
Failure to register the MoA renders it ineffective in the eyes of third parties. However, if only a portion of the MoA is not registered, only that portion will be ineffective in the eyes of third parties.
According to Mohamed Montasser, Director of Operations at Global-Link Corporate Service Provider a company is legally bound to operate within the boundaries outlined in the MoA.
“Under no circumstance is a company able to depart from the MOA’s specified provisions. When or if it does, it will be considered as a breach of agreement,” Montasser said.
What if I want to amend the MoA?
According to the experts who spoke with Gulf News, in case your business ends up expanding or changing business activities, all you need to do is ensure that you amend the MoA to reflect the changes, in accordance with the legal requirements mentioned above. The amendment also needs to be attested for it to be effective.
Where can I get a Memorandum of Association?
If you are setting up your business through a company formation specialist, they will be able to assist you with the MoA’s drafting and attestation. Alternatively, you can also apply for it through a UAE-based law firm or a registered public relations service provider or typing centre.
Why is it important to attest the MoA?
According to Montasser, it is legally mandated to attest this document, as per the UAE’s federal laws.
“The business license application will be rejected if a MoA is unattested, as it will be considered invalid,” he said.
While typically the MoA needs to be attested by a notary in the UAE, in case you need to present the MoA for business purposes outside the UAE, you will need additional attestation from the Ministry of Foreign Affairs and International Cooperation (MOFAIC) as well as the UAE Embassy in the respective country. To know more about how you can get documents attested in the UAE, read our guide here.