Rights of the Limited Partner in a Simple Limited Partnership Company

Dr. Ghassan Arnous
Legal Advisor at Zayed Al Shamsi Advocates and Legal Consultants.

The Simple Limited Partnership Company is one of the partnerships recognized under the UAE Companies Law. The legislator defines it as:

“… a company formed by one or more general partners who are jointly and personally liable for the company’s obligations and acquire the status of merchants, and one or more limited partners who are liable for the company’s obligations only to the extent of their share in the capital and do not acquire the status of merchants.”

From this definition, it is clear that limited partners in such companies are not personally liable beyond the value of their capital contribution, do not acquire the status of merchants, and do not participate in management, as management is the exclusive responsibility of the general partner(s), given their full liability for the company’s obligations.

However, this does not mean that the legislator has overlooked the rights of limited partners. On the contrary, Article (68) of the UAE Companies Law of 2021 explicitly outlines the rights of limited partners, stating the following:

1. A limited partner enjoys the same rights as a general partner in the following respects:
   • (a) Lending money to the company and entering into transactions with it, provided that all general partners consent.
   • (b) Reviewing and obtaining copies or extracts of the company’s books and records at any time during official business hours.
   • (c) Receiving full and accurate information about the company’s business and obtaining an official statement thereof.
   • (d) Carrying out any of the actions listed under Clause (1/a) either personally or through another partner or third party, as long as this does not harm the company.
2. When applying the provisions of this article, a limited partner is not considered to be participating in the management of the company by merely performing any of the company’s internal organizational tasks, nor shall they be held jointly liable for the company’s debts towards third parties acting in good faith.

Furthermore, the law clearly stipulates that limited partners must not interfere in the company’s management in dealings with third parties. However, they may request a copy of the company’s profit and loss statement and balance sheet, and verify the accuracy of the contents by reviewing the company’s books and documents themselves or through an agent (either another partner or a third party), provided that doing so does not harm the company.

It is important to note that the Simple Limited Partnership, as a form of partnership recognized by the UAE Companies Law, serves as a legal solution that allows individuals who either cannot legally acquire merchant status or who do not wish to bear liability beyond their capital contribution, to invest their funds as limited partners. These individuals are granted clearly defined rights under the law, enabling them to participate in the business environment without the burdens of full legal and financial liability.

This legal structure strikes a balance between encouraging investment and protecting partners, ensuring that both general and limited partners have roles and responsibilities that are fair and transparent.