Interests on Loan, Dissolution of Companies

November 24, 2021

Interests taken on Loans:

Article 710 from Civil Transaction Law, defines that the loan will be considered as, the Commercial Loan, if the loan is between two businessmen and the subject will be doing a business or trade. When the deal is between two businesses, it is understood as Commercial Loan. The loan will be considered a personal loan if it is between two persons who are not businessmen or a business entity. These are also known as Individuals. When business or trade is involved, then it becomes individual loans. Let us tell you interests is not allowed as per Sharia Law, therefore this is not recognized in UAE between two individuals. The interest is fully restricted and prohibited in UAE, as to deal with interest factor is not allowed in the United Arab Emirates. But there are a few conditions here. The zero-interest permission or the condition is between two individuals.

The Institutes like Banks and others can offer the loan on an agreed interest basis, which comes under like a business deal to an individual or another company. A loan given by an individual on interest rate/fixed interest to another individual will be considered against of Law. However, it is also acceptable when it is taken place between two companies. While drafting such a loan agreement between the company or among companies, all the kinds of open and hidden charges taken above the loan amount should be mentioned. Article 409 of the United Arab Emirates Penal Code and Cassation No 2021/480 tells that punishment or charges will be inflicted on the person who is giving a loan to another individual on an interest basis, which is considered as prohibited in Law. Where there is no real loan agreement between two companies or a company to an individual which is allowed by the Law, then such agreements, their commissions and amounts can be challenged. No insane loan can be imposed on any debtor. Law does not allow any rules which do not meet the acceptance of human beings.

Partnership Firm Dissolution:

The Article 295 Federal Law No.2 2015 which is about “Commercial Companies” defines that a company will be dissolved if there is a loss or the company is about to be finished, or the investments in the company is not able to generate the profit for a long time. Further rules to dissolve the LLC company or the Free Zone companies can be checked with Emirati Law Firms in Dubai or Emirati Lawyers in Dubai. Article 301 throws the light on this in an elaborative manner that when an LLC company bears loss on a permanent basis then it finds a legal ground to be dissolved. If an LLC has lost more than half of its capital/investment/direct investment or indirect investment then again it gets the right legally to dissolve the company. A partner who owns the 33% of the capital can request dissolution if the losses are one/half of the total capital. But there must be filled a valid resolution, there must be adopted the proper way then the company should be filled for the dissolution. It should be accepted by the majority of partners. It is a mandatory step to amend the MOA. Article 677 Federal Law 5 of 1985 also throws light on this matter. It also clears that majority of the partners can apply for the dissolution of the firm. At the time of expiry of the LLC, the company is considered dissolved if not renewed by the partners. It also states that if the subject of the business is compromised then or it is changed then LLC is also dissolved.

Role of Lawyers:

Loan Agreements, Company Setups, Company Dissolution, The Hiring Process of Employees, setting up the HR department, Setting up Internal Legal Department, Main Land Companies, Free Zone Companies, and there are many other things like WPS Salaries, The System of Increments, The System of Bonus, Leaves, Promotions etc, all these are the agreements or documentation which need to be drafted by the established Lawyers by the established Legal Offices. Therefore, it means that role of lawyers starts from the beginning and reach to end. It is found by the researchers that people who were interested to perform such tasks due to cost issues, privacy issues or they were not willing to spend money on lawyers, had to pay a huge fee for the losses. The losses which were incalculable and more than the capacity, a company can afford.

Last but not least we do recommend that Lawyers must be made part of every step, decision and legal action. It will reduce the efforts, reduce the time and reduce the cost issues. Initially not spending on such legal requirements will lead to a big loss. Serious businessmen and wise people would not prefer to take such decisions. If a company thinks that permanent legal support is required then a Retainer ship is also a good option. It is also called the Contractual Agreement or the relation between two parties. A Law Office is engaged on an agreed price for an agreed time where the Law Office has to manage all the requirements of the Client. The Client’s Requirements can be anyone as stated above or other than these. This is our recommendation we give all the time that better to hire the Emirati Lawyers and Legal Consultants. It generates a high level of trust and a devoted work environment. These Local Advocates are the support and success for every business and the individual in UAE who has to hire legal support. When it becomes inevitable to hire or mandatory to hire legal support then these Local Lawyers are the most reliable legal support. The Articles and the Law we mentioned above, can be better explained to clients by these lawyers. These Lawyers can explain the Articles, Law terms and terminologies better than other Lawyers. As far as services are concerned like Loan Agreements, challenging the interests or setting up a company, Emirati Lawyers will be the best option anyone can have in Dubai and UAE.