Silent Partner Contract for United Arab Emirates

Silent Partner Contract Template for United Arab Emirates

A Silent Partner Contract under UAE law is a specialized agreement that establishes a partnership where one party (the silent partner) provides capital investment but does not participate in the daily management or operation of the business. This document, governed by UAE Federal Law No. 32 of 2021 and related commercial legislation, outlines the terms of capital contribution, profit-sharing arrangements, limitations on management participation, and protection mechanisms for the silent partner. It includes specific provisions for financial reporting, confidentiality, and exit strategies while ensuring compliance with UAE commercial regulations and local emirate requirements.

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What is a Silent Partner Contract?

The Silent Partner Contract is a crucial document used in the United Arab Emirates when establishing a business relationship where an investor wishes to participate financially in a business venture without involvement in day-to-day operations or public association with the business. This type of agreement is particularly common in the UAE business environment, where silent partnerships (also known as sleeping partnerships) are frequently used to facilitate business growth while maintaining clear operational control. The contract must comply with UAE Federal Law No. 32 of 2021 and other relevant commercial legislation, making it essential to include specific provisions about capital contribution, profit sharing, management restrictions, and investor protections. Silent Partner Contracts are particularly valuable in situations where experienced business operators seek capital investment while maintaining operational control, or where investors wish to maintain privacy while participating in business opportunities.

What sections should be included in a Silent Partner Contract?

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

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

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

4. Partnership Structure: Details of partnership formation, business purpose, and declaration of silent partner status

5. Capital Contribution: Specific amount and form of capital contribution by the silent partner

6. Profit and Loss Distribution: Formula and timing for profit sharing and treatment of losses

7. Management and Control: Explicit statement of active partner's management rights and silent partner's non-participation

8. Financial Records and Reporting: Requirements for maintaining accounts and providing reports to silent partner

9. Rights and Obligations: Specific rights of silent partner and obligations of active partner

10. Term and Termination: Duration of partnership and circumstances for termination

11. Confidentiality: Obligations regarding business information confidentiality

12. Governing Law and Jurisdiction: Application of UAE law and jurisdiction for disputes

What sections are optional to include in a Silent Partner Contract?

1. Non-Competition: Restrictions on partners engaging in competing businesses, if applicable

2. Insurance: Requirements for business insurance and coverage details

3. Intellectual Property: Treatment of IP rights if relevant to the business

4. Assignment Rights: Conditions under which partnership interests may be transferred

5. Force Majeure: Provisions for unforeseen circumstances affecting the partnership

6. Islamic Finance Compliance: Specific provisions ensuring compliance with Sharia law if required

7. Additional Capital Contributions: Procedures for making additional capital investments if needed

What schedules should be included in a Silent Partner Contract?

1. Schedule 1: Capital Contribution Details: Detailed breakdown of initial capital contribution, including timing and form

2. Schedule 2: Profit Distribution Formula: Detailed calculation method for profit sharing

3. Schedule 3: Business Plan: Overview of business operations and projections

4. Schedule 4: Financial Reporting Requirements: Specific format and timing of financial reports

5. Schedule 5: Bank Account Details: Designated account information for partnership operations

6. Appendix A: KYC Documents: Copies of required identification and verification documents

7. Appendix B: Powers of Attorney: If required, documents delegating specific authorities

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

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Real Estate

Trading

Manufacturing

Technology

Retail

Hospitality

Construction

Professional Services

Healthcare

Education

Financial Services

Import/Export

Logistics

Food and Beverage

Consulting

Relevant Teams

Legal

Finance

Corporate Governance

Investment

Compliance

Executive Leadership

Business Development

Corporate Affairs

Risk Management

Treasury

Relevant Roles

Chief Executive Officer

Managing Director

Business Owner

Investment Manager

Legal Counsel

Chief Financial Officer

Corporate Lawyer

Business Development Manager

Finance Director

Company Secretary

Investment Advisor

Compliance Officer

Private Equity Manager

Venture Capitalist

Business Angel

Partnership 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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