Appointing And Removing Managers And Directors In UAE Companies: Legal Requirements And Procedures

The process of appointing and removing a manager and/or director in a UAE company has significant implications beyond the internal considerations of the company. Not only does the company have to secure the relevant approval provided by its Constitutional Documents, the required amendments need to be made to the records of its licensing authority. Whilst there are certain principles laid down by Federal Decree-Law No. 32 of 2021 on Commercial Companies, the formalities differ between companies in the main UAE and those in free zones. This article explores the legal basis and the respective published procedures of the Dubai Development Authority and free zone authorities.

 

Legal Basis For The Office of Manager and Director

 

Article 83 of Federal Decree-Law No. 32 of 2021 concerns that a limited liability company is managed by one or more managers, Partners or persons appointed from outside the company, whose terms of appointment and who have been entrusted powers in keeping with the Memorandum of Association, or alternatively separate appointment contract, subject to any restriction in the said documents, and any act within the authority of the manager binds the company.

 

The office of a director is created in a company with a structure providing for the company's board of directors. The composition and functions and powers of the board are determined by applicable legislation and the company's Constitutional Documents. Free zone entities may also be subject to the regulations and procedures of the relevant authority, which may designate separate titles for similar offices. The Jebel Ali Free Zone Authority (JAFZA), for example, offers separate facilities for the appointment and removal of managers and directors of Free Zone Establishment (FZEs) and Free Zone Company (FZCO). Before making the change, the company should clarify the position held by the person including the reference in its Memorandum of Association (MoA) and licence, and the Appointment Contract, if any, since Article 85 confirms that it may be that terms of both documents determine the process of removal of a manager.

 

Removal Of A Manager Under Article 85

 

Article 85 provides that a manager could be removed by a decision of the general assembly, unless the MoA or the appointment contract of the manager provides otherwise. Article 85 goes on to confirm that the said decision of the general assembly would apply regardless of whether the manager was a partner or not, as well as enabling any one or more partners to apply to the Court for the removal of the manager if sufficient grounds exist. The legislation therefore identifies two primary routes of general assembly approval and removal by a court order, which however may be subject to alternative processes contained in the relevant Corporate Documents.

 

As well as satisfying the requirements of the company's Constitution for removing the manager from office, companies registered in a free zone would also need to satisfy the requirements of the relevant authority. A number of requirements are frequently seen in a free zone in relation to resolutions passed regarding removals of managers and directors of FZE and FZCO entities. In particular, a resolution on the company's letterhead, along with the prescribed corporate action form, will often be required for the appointment/removal of a manager/director of an FZE or FZCO. The formalities and requirements for notaries and attestations vary according to the authority and the legal structure of the company and should therefore always be verified prior to signing the resolution, particularly when the documents or authorised signatures involved might span multiple corporate documents.

 

Amending the Licence and Registry Records

 

An internal resolution by itself will not affect the company's commercial licence or its records maintained by its licensing authority. The Dubai Development Authority (DDA) provides a Change of General Manager service under its regulation. The application can be submitted to the Authority by the general manager of the company or an appointed legal representative (the authority states a processing time of seven working days) and, on completion, an amended licence shall be issued. The application may be submitted online or through the Authority's customer service centre. It operates from Monday to Thursday between 7.30 am to 2.30 pm, and on Friday between 7.30 am until 12 noon. An additional charge of AED 10 in Knowledge Fees and AED 10 in Innovation Fees will apply in each case.

 

In JAFZA, through the Dubai Trade portal there is a service available called Registration Amendment whereby a company can use a Change Manager service to appoint a new manager or change an existing one's particular details. The documents listed for completion are a passport copy, visa copy if the visa is sponsored by the free zone, specimen signature, a new authorisation card, resolution and corporate action form. In relation to directors of FZEs and FZCOs, the Change Director service covers appointment of a new director, removal of an existing director and amendments to details of a director. The documents indicated are a passport copy, resolution and corporate action form. The Registrar may call for further documentation where necessary.

 

In the main UAE it is necessary to follow the procedure prescribed by the department of economic development in the relevant Emirate. The precise application requirements, supporting documents and procedures for processing the request should be checked directly with the applicable department rather than assuming uniform procedures across the UAE. For companies subject to the JAFZA authorities, it will again be necessary to confirm the applicable service requirements prior to submitting the application, since documents and procedures applicable to one department may not be applicable to another.

 

Liability Of Managers Under Article 84

 

Article 84 specifies a manager will be liable to the company, to its partners and to third parties for fraudulent acts committed within the scope of their responsibilities and also for abuses of powers, breach of applicable law, breach of the MoA or appointment contract, and gross errors entailing losses or expenses, and any conflicting provision in the MoA or appointment contract is void.

 

The provisions are particularly relevant in the context of manager's responsibilities shifting. As the new appointments take effect, the scope of authority of the new entrant should be measured against the powers and any restrictions contained in the MoA and the appointment contract. The company would also examine the mechanisms used by the departing manager to exercise authority, including bank mandates, powers of attorney and signing permissions. In the extent that those instruments confirm the departing manager's appointment, those instruments should be amended or rescinded as required with a view to the updated management structure. Amending the licence alone may not deal with the range of various mechanisms and authorisations allowing an individual to act on the company's behalf.

 

Conclusion

 

For main UAE limited liability companies, the articles 83 to 85 of the Commercial Companies Law form the key statutory basis in relation to the appointment, removal and liabilities of managers. The relevant Corporate Documents remain central to determining the approval required and the procedure to follow. For companies in free zones, it will be essential to take into account the requirements of the licensing authority, in terms of applicable regulations and administrative procedure. The process of confirming those requirements ahead of signing resolutions and the timely amendment to the licence and accompanying authorisations ensures that the company's formal records properly reflect its management arrangements.