As soon as subscribers sign a memorandum of association for a joint liability company in UAE, they are legally bound in performing obligations that are under the legal corporate document. But, there are factors that can cause the annulment of a memorandum of association for a joint liability company in UAE after it has come into effect. The annulment means the document is not enforceable and the subscribers won’t be able to exercise rights and duties or perform obligations as per the documentation.
Factors Causing Annulment of Memorandum of Association (Joint Liability Company)
The factors that cause the annulment of a joint liability company’s memorandum of association usually reflect that the legal document is against a public policy and there’s been some miscommunication with the contract by a subscriber.
- Uncertainty – When a memorandum of association utilizes language which creates uncertainty with regards to the contractual obligations, then it may be annulled. For instance, the agreement in agreeing within a memorandum of association can create uncertainty because there’s no clear indication as to what’s going to be agreed to.
- Incomplete MOA – A memorandum of association or MOA is incomplete when it’s missing some essential terms and conditions. Essential terms and conditions are the ones that make contracts unenforceable when they are absent or not included. Some examples of the essential terms for MOAs for joint liability companies in the UAE include agreed capital investment and/or starting date of company incorporation.
- Common mistake – It is when the subscribers of an MOA are mistaken with regards to a particular subject matter in the legal document. For instance, when a subscriber has agreed in putting in a certain amount for a company, but the subscriber has already filed for bankruptcy, then it’s going to be considered as a common mistake that can cause the annulment of a memorandum of association in the UAE.
- Lack of capacity – The parties or subscribers to a joint liability company’s memorandum of association are presumed to fully have the mental capacity in understanding the effect and nature of the important corporate document. If they demonstrate before a public notary in Dubai during the notarization process that they lack the capacity, then the MOA will be annulled. Lack of capacity may be due to being underaged or having a mental disorder.
- Illegality – A memorandum of association may be annulled when it’s dealing with illegal activity. It can be an MOA with clauses that are directly in prohibition to the laws of the land like unfair contract terms covered by UAE Commercial Companies Law.
- Public policy – A contract such as a memorandum of association in UAE may also be annulled when the performance or subject matter is against any public policy. A great example of this is the involvement of slavery in a company’s economic activities.
- Vague terms or terms which are impossible to fulfill – Let us say that you have signed the memorandum of association that you won’t be able to execute due to incapacitation following the signing of the document. In such a case, a memorandum of association may be applied with the local authorities for an annulment as your obligation will be impossible for you to fulfill.
- The lack of consideration – A memorandum of association for a joint liability company in UAE has to be clear objectives wherein the subscribers are involved with some sort of example. For instance, you may not agree contractually to do something that you have already done or something that you are already required in doing legally.
- Fraud – Memorandum of association may be invalidated when one subscriber got another subscriber to sign through lies or concealing crucial facts. In such a case, it can be ruled to have a memorandum of association annulled as it’s null and void because of fraud.
- Sloppy alterations after MOA was printed – Crossing out mistakes, using correction fluid, and writing initials over may fly for formal documents; however, they are not acceptable for legal corporate documents such as a joint liability company’s memorandum of association. Even when they are honest mistakes with information conveyed accurately, there is a cause for suspicion. When an MOA looks like it has been tampered with, then it is less likely for it to be enforceable and it won’t be approved for notarization in UAE. Enforcing MOAs with alterations can result in fraud allegations. What is recommended is to start fresh and for subscribers to pay close attention to detail.
Take note: a memorandum of association has to be notarized by a public notary in UAE, including its annulment. It is also important to ensure proper notarization has been provided by a notary public in UAE, so the document can be executed flawlessly. If you want to know more, contact us here in Notary Public Dubai today!
Hassan Humaid Al Suwaidi is a UAE Citizen and the founder of the firm HHS Lawyers. He has a vast experience of 20 years of dealing with high-value and complex notary requirements. Hassan has been involved in some of the largest legal settlements in the UAE and is commended for his ability to attain the most favourable outcomes for his clients.