Company Partnership

A questioner from Dubai: Two months ago, I established a company with one person, along with a local partner who was stipulated to pay 51 per cent of the capital as per the law, and the remaining capital to be paid equally by me and the other partner. We ratified the Memorandum of Association for the company, but after it was completed, the partner told me that due to financial problem, the bank rejected his application for loan and therefore, he could not pay his percentage. I need him to run the company due to his experience and he said in future he will pay his percentage and requested me to pay his share along with my share for the company capital. My questions are; If I make a side agreement where I mention the actual percentage for each partner, would this mean such agreement is legal, since it is against an officially ratified agreement? In case of dispute, will the side agreement be considered in court? Can I protect my right with such an agreement? Is it possible to ratify the side agreement? Please advise.

Answer: I would like to advise the questioner to amend the ratified Memorandum of Association of the company by removing the partner from the company since he did not pay his share value in the capital. If, however, he pays in future, the questioner can then amend the Memorandum of Association and his name can be mentioned in the memorandum at that time. As for the side agreement, the competent court may accept the same, but it cannot be ratified before the notary public. Therefore, in case the questioner does not want to amend the Memorandum of Association, in that case I would advise him to prepare such agreement through the legal offices and have it signed by witnesses as well, in order to be legally drafted and protected.

Notice Period

A questioner from Dubai: I worked in a company for more than two years under a contract for unlimited period; I submitted my resignation to transfer to a new company with better salary and benefits. But the problem is the notice period mentioned in my labour contract is for 3 months. I asked the employer to exempt me from working within such period provided I waive my 3-month salary plus my three months’ bonus. I used to get my bonus every three months to be deducted from my end-of-service gratuity. My employer rejected the suggestion. If I work within this period, I might lose the opportunity to join the new company. My questions here are; Is the employee as per UAE labour law legally obliged to work within the notice period? If the employee does not work what is the penalty? Can the notice period be increased for more than 30 days according to the Labour Law? I was forced to sign the contract with this clause because at that time they told me it was the company policy and I would not be taken on board if I did not agree to this clause. Please advise.

Answer: I would like to clarify to the questioner that article no. 118 of the UAE Federal Labour Law No. 8 of 1980 states the following: “A contract shall subsist throughout the notice period referred to in the preceding Article and shall terminate only on expiry of that period. The worker shall be entitled in respect of the notice period to full pay, calculated on the basis of his last wage, and shall continue to perform his duties during that period if the employer so requests. The Parties may not agree to waive the notice requirement or to reduce the notice period; however, they may agree to extend the period”.

As for the question on the possibility of rejecting the work within the notice period, I would tell the questioner that as per the above article, working within such period is mandatory unless the employer waives the requirement and allows the employee to leave work within the said period. Therefore, if the employee failed to work within the said period, he might lose his labour rights and the employer may apply to the Ministry of Labour to impose a one-year ban on the employee due to such violation.