Profit Sharing Agreement for United Arab Emirates

Profit Sharing Agreement Template for United Arab Emirates

A comprehensive legal agreement governed by UAE law that establishes the terms and conditions for sharing profits between two or more parties in a business venture. This document outlines the methodology for calculating profits, distribution mechanisms, payment terms, and parties' rights and obligations, while ensuring compliance with UAE Federal Laws, including the Commercial Companies Law and relevant Sharia principles where applicable. It includes provisions for financial reporting, audit rights, dispute resolution, and termination conditions, specifically tailored to the UAE business environment.

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What is a Profit Sharing Agreement?

The Profit Sharing Agreement is a crucial document used in the United Arab Emirates to formalize arrangements between parties who wish to share profits from a business venture or project. It is particularly relevant in the UAE's dynamic business environment, where joint ventures, partnerships, and collaborative business models are common. This document needs to comply with UAE Federal Law No. 32 of 2021 (Companies Law) and other relevant regulations, while potentially incorporating Sharia-compliant principles when required. The agreement typically includes detailed profit calculation methodologies, distribution mechanisms, financial reporting requirements, and governance structures. It's commonly used in various scenarios including joint ventures, family businesses, employee incentive schemes, and investment partnerships, providing a clear framework for financial collaboration while protecting all parties' interests under UAE law.

What sections should be included in a Profit Sharing Agreement?

1. Parties: Identification and details of all parties entering into the profit sharing agreement

2. Background: Context of the agreement, business relationship, and purpose of the profit sharing arrangement

3. Definitions: Detailed definitions of key terms used throughout the agreement

4. Scope of Agreement: Details of the business activities covered under the profit sharing arrangement

5. Term and Commencement: Duration of the agreement and effective date

6. Profit Calculation Method: Detailed methodology for calculating distributable profits

7. Profit Distribution: Terms and percentages of profit sharing between parties

8. Payment Terms: Timing, method, and currency of profit distributions

9. Books and Records: Requirements for maintaining financial records and accounting standards

10. Audit Rights: Procedures for auditing and verifying profit calculations

11. Confidentiality: Protection of confidential information and trade secrets

12. Termination: Circumstances and procedures for terminating the agreement

13. Governing Law: Specification of UAE law as governing law and relevant jurisdictional matters

14. Dispute Resolution: Procedures for resolving disputes, including jurisdiction and arbitration provisions

What sections are optional to include in a Profit Sharing Agreement?

1. Sharia Compliance: Section specifying Sharia compliance requirements, necessary when parties require Islamic finance principles to be followed

2. Management Rights: Section defining management responsibilities and decision-making powers, needed when parties share management responsibilities

3. Non-Competition: Restrictions on competitive activities, relevant when parties have other business interests

4. Intellectual Property Rights: IP ownership and usage rights, needed when the profit-sharing involves IP-dependent activities

5. Employee Profit Sharing: Specific terms for employee profit sharing schemes, required when employees are included in the arrangement

6. Loss Sharing: Terms for sharing losses, important in full partnership arrangements

7. Insurance Requirements: Insurance obligations of parties, relevant for high-risk business activities

8. Force Majeure: Provisions for unforeseen circumstances affecting profit generation

What schedules should be included in a Profit Sharing Agreement?

1. Schedule 1 - Profit Calculation Formula: Detailed mathematical formula and examples for profit calculation

2. Schedule 2 - Distribution Timeline: Annual/monthly schedule of profit distribution dates and deadlines

3. Schedule 3 - Accounting Principles: Specific accounting standards and principles to be followed

4. Schedule 4 - Business Plan: Projected profits and business operations plan

5. Schedule 5 - Initial Capital Contributions: Details of any initial investments or contributions by parties

6. Appendix A - Reporting Templates: Standard templates for financial reporting and profit calculations

7. Appendix B - Authorized Signatories: List of authorized representatives for financial decisions and distributions

8. Appendix C - Bank Account Details: Designated bank accounts for profit distributions

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

Publisher

Genie AI

Document Type

Agreement Contract

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Real Estate & Construction

Technology & Software

Financial Services

Retail & Consumer Goods

Manufacturing

Healthcare

Professional Services

Hospitality & Tourism

Energy & Resources

Media & Entertainment

Trading & Distribution

Education

Industrial & Engineering

Maritime & Logistics

Relevant Teams

Legal

Finance

Corporate Development

Compliance

Treasury

Risk Management

Business Development

Corporate Secretary Office

Investment

Operations

Partnerships

Strategic Planning

Venture Capital

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Legal Counsel

Finance Director

Business Development Manager

Investment Manager

Partnership Manager

Compliance Officer

Corporate Secretary

Financial Controller

Managing Partner

Operations Director

Project Manager

Risk Manager

Treasury Manager

Venture Capital Manager

Industries
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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