Dividends of Limited Liability Companies in the U.A.E. Mainland

Like in many other jurisdictions, mainland limited liability companies in the U.A.E. can pay dividends to their shareholders. It is very important to follow procedures and comply with requirements when paying dividends according to the Federal Decree Law No. (32) of 2021 “On Commercial Companies” (the “Commercial Companies Law”), because:

• company directors have fiduciary duties to act in the best interests of the company and to comply with the law. Paying dividends unlawfully can be a breach of duty, potentially exposing directors to personal liability;
• U.A.E. law requires companies to pass an annual audit where an auditor will require records relating to declaring and paying dividends;
• various stakeholders of the company, e.g. investors, minority shareholders, creditors, and lenders may inquire on correctness of dividend payments to shareholders;
• improper dividend payments may create tax complications (e.g., recharacterisation as unlawful distributions or loans) and may attract penalties or regulatory scrutiny.

Manager to provide recommendations on dividends. The first stage, according to Article 87 of the Commercial Companies Law, is for the company’s manager to provide her / his recommendations on the distribution of profits to the General Assembly, within three months of the end of the fiscal year. In practice, such recommendations are included in the annual manager’s report or in a manager’s resolution. Shareholders will rely on such recommendations during the Annual General Assembly.

Annual General Assembly to decide on dividends. According to Article 94 of the Commercial Companies Law the General Assembly considers and decides on the dividends to be distributed to the partners. This is a mandatory part of the agenda of any Annual General Assembly. Shareholders’ decision on dividends can be included in the minutes of the Annual General Assembly or issued in the form of an Annual General Assembly resolution, depending on the company’s internal corporate governance practices.

Statutory reserve. Mainland companies cannot distribute 100 % of their net profit to shareholders by default. Article 103 of the Commercial Companies Law states that an LLC shall set aside every year 5 % of its net profits to form a statutory reserve. Shareholders may resolve to stop such allocation if the reserve reaches 50% of the capital amount.

In addition, the Commercial Companies Law provides the following important rules regarding dividends :

• Article 29(1) confirms that if the Memorandum of Association (“MOA”) of an LLC does not define a partner’s share in the profits or losses, the latter’s share shall be proportional to his or her capital contribution. Nevertheless, if the MOA doesn’t include it, the partners may amend the MOA to agree upon an alternative arrangement for the distribution of dividends — the new MOA shall be approved by a number of partners holding at least three quarters of the shares represented at the meeting of the General Assembly;
• Article 29(3) prohibits provisions in the MOA that deny the right of any shareholder to receive her /his part of distributed profits;
• Article 30(2) states that if the LLC distributes any profits in violation of the provisions of the Commercial Companies Law and secondary law issued in implementation hereof, the shareholder concerned shall pay back the profits received by her / him in violation of such provisions.

Finally, the U.A.E. law generally recognises Shareholders’ Agreements. It is standard practice to include detailed rules on how decisions on dividends are made in Shareholders’ Agreements or the MOA. Should you have any questions, please feel free to contact CHENINS via www.chenins.ae. Check out our articles on Share classes in the U.A.E. and Calling shareholders’ meetings of Limited Liability Companies in the U.A.E. mainland.

This article is based on laws and regulations existing on 19 January 2026. It is intended for general informational purposes only and does not constitute legal advice or create client relationships.