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ME-ALLIANCE LEGAL UPDATE
The Fictitious Nature of One of the Partners Does Not Mean The Invalidity of the Company
The General Authority of the Court of Cassation in the Emirate of Dubai recently approved a new legal principle to determine whether the fictitious nature of a partner in a limited liability company leads to the invalidity of the company’s articles of association. We will explain this below:
✅The Legal Rule Approved By The General Authority:
A limited liability company’s articles of association may not be declared invalid due to the fictitious nature of one of the partners or the lack of a 51% participation rate for UAE nationals, even if the contract was concluded before the issuance of Federal Decree-Law No. (32) of 2021, as long as no judicial ruling of invalidity was issued before the Decree-Law came into effect.
✅Impact Of The Ruling:
This decision establishes an important judicial principle in the United Arab Emirates, namely:
– Protecting the stability of the legal status of companies.
– Preventing the misuse of nullity claims for personal or competitive purposes.
– Supporting the business and investment environment.
✅The Most Important Conclusions Of The General Assembly Of The Court Of Cassation:
• A company contract is not automatically invalidated due to the fictitious nature of one of the partners:
– The fictitious nature of a partner does not automatically mean the invalidity of the company’s articles of association.
– Invalidity cannot be automatically established without a legal claim, and the fictitious nature must be proven by a court ruling.
• UAE legislation has evolved in this regard:
– Federal Decree-Law No. (32) of 2021 regarding commercial companies allows the establishment of a limited liability company by a single person.
– Thus, the fictitious nature of partners or their small number is no longer sufficient grounds for nullification following the issuance of this law.
To view the full ruling, please click on the link below:
Resolution No. 8 of 2025 – General Authority Decisions – Cassation
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