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Silent Shareholder Agreement

Silent Shareholder Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Silent Shareholder Agreement

"I need a Silent Shareholder Agreement for my Dubai-based technology startup, where the silent partner will invest AED 2 million for a 25% profit share, with quarterly financial reporting requirements and tag-along rights."

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Document background
The Silent Shareholder Agreement is a crucial document used in the UAE business environment when an investor wishes to provide capital without taking an active role in business operations. This type of agreement is particularly relevant under UAE Commercial Companies Law (Federal Law No. 2 of 2015) and must be carefully structured to comply with local regulations while protecting both active and silent partners' interests. The document typically includes detailed provisions for capital contribution, profit sharing, confidentiality obligations, and financial reporting requirements. It's commonly used in situations where investors want to maintain anonymity while participating in business ventures, or when businesses seek capital without surrendering operational control. The agreement must address specific UAE requirements regarding foreign ownership, commercial licensing, and corporate governance while maintaining the distinctive characteristics of a silent partnership arrangement.
Suggested Sections

1. Parties: Identification of the active partner(s) and the silent partner, including full legal names and addresses

2. Background: Context of the agreement and brief description of the business venture

3. Definitions: Key terms used throughout the agreement, including 'Silent Partner', 'Business', 'Capital Contribution', and 'Profit Share'

4. Capital Contribution: Details of the silent partner's investment amount, payment terms, and any additional funding obligations

5. Profit and Loss Sharing: Formula and mechanisms for calculating and distributing profits and losses

6. Role and Limitations: Clear definition of the silent partner's non-management role and restrictions on involvement in business operations

7. Confidentiality: Obligations regarding the confidential nature of the silent partnership and business information

8. Financial Reports and Audit Rights: Silent partner's rights to financial information and audit provisions

9. Term and Termination: Duration of the agreement and circumstances under which it can be terminated

10. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for dispute resolution

Optional Sections

1. Tag-Along Rights: Include when the silent partner wants the right to join in any sale of the business by the active partner

2. Drag-Along Rights: Include when the active partner wants the right to force the silent partner to join in a sale

3. Right of First Refusal: Include when parties want pre-emptive rights on transfer of interests

4. Additional Investment Rights: Include when the silent partner may have future opportunities to increase investment

5. Business Expansion Provisions: Include when there's potential for expanding into new business lines or territories

6. Conversion Rights: Include when there's possibility of converting silent partnership to active partnership

7. Anti-dilution Protection: Include when protecting against dilution from future capital raises

8. Islamic Finance Compliance: Include when parties require Sharia compliance provisions

Suggested Schedules

1. Schedule 1 - Capital Contribution Details: Detailed breakdown of initial and any planned future capital contributions

2. Schedule 2 - Profit Calculation Methodology: Detailed formula and examples of profit calculation and distribution

3. Schedule 3 - Business Plan: Overview of business objectives and financial projections

4. Schedule 4 - Reporting Templates: Format and templates for regular financial reports to silent partner

5. Schedule 5 - Compliance Requirements: List of UAE regulatory requirements and compliance procedures

6. Appendix A - Due Diligence Documents: List of documents reviewed by silent partner before entering agreement

7. Appendix B - Communication Protocols: Procedures for communications between parties and confidentiality maintenance

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Active Partner
Silent Partner
Business
Business Day
Business Plan
Capital Account
Capital Contribution
Commencement Date
Confidential Information
Control
Distributable Profits
Effective Date
Encumbrance
Event of Default
Financial Year
Force Majeure Event
Governmental Authority
Initial Capital Contribution
Intellectual Property Rights
Investment
Loss
Management
Material Adverse Effect
Net Profit
Parties
Partnership
Partnership Interest
Profit Share
Quarter
Related Party
Relevant Authority
Reserved Matters
Share
Shareholder
Territory
Transfer
UAE
UAE Commercial Companies Law
Valuation
Clauses
Definitions and Interpretation
Capital Contribution
Profit and Loss Sharing
Management Restrictions
Non-Participation
Confidentiality
Financial Reporting
Information Rights
Non-Competition
Non-Disclosure
Transfer Restrictions
Tag-Along Rights
Drag-Along Rights
Right of First Refusal
Exit Rights
Term and Termination
Events of Default
Force Majeure
Representations and Warranties
Indemnification
Dispute Resolution
Governing Law
Amendment
Notices
Assignment
Severability
Entire Agreement
Third Party Rights
Compliance with Laws
Anti-Money Laundering
Relevant Industries

Technology and Startups

Real Estate and Construction

Trading and Import/Export

Manufacturing

Professional Services

Retail and E-commerce

Healthcare

Hospitality and Tourism

Financial Services

Family Businesses

Relevant Teams

Legal

Finance

Compliance

Corporate Governance

Risk Management

Investment

Business Development

Company Secretariat

Executive Leadership

Corporate Affairs

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Legal Counsel

Corporate Lawyer

Investment Manager

Business Development Director

Company Secretary

Compliance Officer

Managing Partner

Finance Director

Private Equity Manager

Venture Capital Manager

Corporate Governance Officer

Risk Management Officer

Industries
UAE Commercial Companies Law (Federal Law No. 2 of 2015): Primary legislation governing company formations, shareholder rights, and corporate structures in the UAE. Particularly relevant for defining shareholder roles, rights, and obligations.
UAE Civil Code (Federal Law No. 5 of 1985): Governs general contractual principles and obligations that apply to all agreements in the UAE, including formation, validity, and enforcement of contracts.
UAE Commercial Transactions Law (Federal Law No. 18 of 1993): Regulates commercial transactions and business relationships, including provisions relevant to silent partnership arrangements and profit sharing.
Foreign Direct Investment Law (Federal Law No. 19 of 2018): Relevant for determining foreign ownership restrictions and requirements if any party to the agreement is a foreign national.
UAE Federal Law No. 4 of 2012 on Competition Regulation: May be relevant if the silent partnership affects market competition or involves substantial market share.
UAE Anti-Money Laundering Law (Federal Decree Law No. 20 of 2018): Relevant for compliance requirements regarding capital contributions and financial transactions within the partnership.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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