UNITED ARAB EMIRATES Law and Practice Contributed by: Francesco Bulleri, Beshoy Mounir, Sultan Bahriddini and Noora Al Doseri, ADG Legal
any statutory protections or procedural requirements. Vacancies arising during a director’s term may be filled by the board on an interim basis, subject to ratification by shareholders at the next general assembly. In LLCs, managers (who perform a function broadly equivalent to directors) are appointed either in the memorandum of association or by a resolution of the shareholders. They may be partners or third par - ties. Removal is typically effected by shareholders’ resolution. In practice, the appointment and removal process in LLCs is often more flexible and heavily influenced by shareholders’ agreements, particularly in joint venture structures. In financial free zones such as the DIFC and ADGM, directors are generally appointed by shareholders (or incorporators, at the formation stage) and may be removed by shareholder resolution in accordance with the company’s articles. Regulated entities are subject to additional requirements, including regula - tory approval for appointments and, in some cases, removals. As to eligibility, UAE law imposes certain restrictions on who may act as a director or manager. These typi - cally include requirements that the individual has full legal capacity and has not been convicted of offences involving dishonesty or breach of trust. Individuals who are disqualified under insolvency or bankruptcy laws, or who are otherwise prohibited by a compe - tent authority, may also be restricted from acting as directors. In regulated sectors – particularly in finan - cial services – directors are subject to “fit and proper” assessments by the relevant regulator, which consider factors such as integrity, competence, experience and financial soundness. In addition to statutory restrictions, constitutional doc - uments and shareholders’ agreements often impose further eligibility criteria (such as professional qualifi - cations or shareholder nomination rights), particularly in regulated or investor-driven environments. 3.5 Independence of Directors Rules relating to director independence and conflicts of interest in the UAE depend on the company’s legal form and whether it is subject to regulatory oversight,
with more prescriptive requirements applying to public and regulated entities. Across all company types, UAE law imposes duties on directors and managers to act in the best interests of the company and to avoid conflicts of interest. Where a director has a personal interest in a transaction or arrangement involving the company, they are gener - ally required to disclose that interest to the board and, in many cases, refrain from participating in delibera - tions or voting on the relevant matter. Certain transac - tions involving conflicts may also require shareholder approval, particularly where they are material or fall outside the ordinary course of business. In public joint stock companies, corporate governance regulations require a defined proportion of the board to comprise independent and non-executive direc - tors. Independence is assessed by reference to the absence of relationships or interests that could impair a director’s judgement, such as material business rela - tionships with the company, significant shareholding, or close ties to management. Independent directors play a key role in board committees – particularly audit and remuneration committees – where independence requirements are typically stricter. In LLCs, there are no formal statutory requirements mandating independent directors. That said, manag - ers remain subject to general duties of loyalty and good faith, and conflict-of-interest principles apply in a similar manner. In practice, independence is less formalised in LLCs – particularly in closely held or joint venture structures – where board represen - tation is often aligned with shareholder interests. In such cases, conflicts are typically managed through contractual mechanisms, including reserved matters, disclosure obligations and approval thresholds. In financial free zones such as the DIFC and ADGM, independence and conflict management frame - works are more closely aligned with common law legal frameworks. Regulated entities are subject to detailed governance rules, including requirements for independent directors, formal conflict-of-interest policies, and ongoing disclosure obligations. Regula - tors in these jurisdictions place particular emphasis
702 CHAMBERS.COM
Powered by FlippingBook