UNITED ARAB EMIRATES Law and Practice Contributed by: Francesco Bulleri, Beshoy Mounir, Sultan Bahriddini and Noora Al Doseri, ADG Legal
on transparency, board effectiveness and the proper management of conflicts. Overall, while the concept of director independence is well established in the UAE, its practical application varies significantly depending on the type of entity. 3.6 Legal Duties of Directors/Officers The principal legal duties of directors and officers in the UAE are derived from statute and widely rec - ognised fiduciary and governance principles, which broadly align with international standards. At a fundamental level, directors and managers are required to act in the best interests of the company and in furtherance of its objects. This includes a duty to exercise their powers in good faith and within the scope of the authority granted to them under law and the company’s constitutional documents. They are also subject to a duty of care, skill and dili - gence, requiring them to act with the level of care that a reasonably prudent person would exercise in com - parable circumstances. This encompasses informed decision-making, appropriate management oversight, and ensuring that the company complies with appli - cable laws and regulations. One of the key obligations is the duty of loyalty, which includes avoiding conflicts of interest and not exploit - ing corporate opportunities for personal benefit. Directors must disclose any personal interest in trans - actions involving the company and, where applicable, refrain from participating in related decisions. They are also prohibited from competing with the company or engaging in activities that could prejudice its interests, unless authorised. Directors and officers are further subject to duties relating to confidentiality and use of information, and must not misuse company assets, information or their position for personal gain or to the detriment of the company. In addition, UAE law imposes specific statutory responsibilities, including maintaining proper account - ing records, preparing and presenting financial state - ments, safeguarding the company’s assets, and
ensuring compliance with corporate, tax and regula - tory requirements. In certain circumstances such as insolvency or serious misconduct, directors may incur personal liability, including civil and, in some cases, criminal consequences. 3.7 Responsibility/Accountability of Directors Under UAE law, directors and officers owe their duties primarily to the company itself, as a separate legal entity. Their obligations are not owed directly to indi - vidual shareholders, but rather to the company as a whole, including (indirectly) its body of shareholders collectively. In discharging their duties, directors are required to act in the best interests of the company, which is gen - erally understood to mean promoting the company’s success and safeguarding its long-term viability. This includes acting in good faith, exercising powers for proper purposes, and avoiding conflicts of interest. Directors are generally expected to act in the best interests of the company and, where relevant, to have regard to the interests of a broader range of stake - holders. For example, in situations of financial distress or potential insolvency, directors are expected to con - sider the interests of creditors and avoid actions that could prejudice their position. 3.8 Breach of Directors’ Duties A breach of directors’ duties in the UAE may be enforced through a combination of shareholder action, company action and, in certain cases, regulatory inter - vention, depending on the nature of the breach and the type of company. As a general principle, the company itself is the prima - ry party entitled to bring a claim against its directors or officers for breach of duty, typically acting through a resolution of the shareholders. In practice, this may involve the company pursuing compensation for loss - es suffered as a result of mismanagement, breach of duty or misuse of powers. Shareholders may also have standing to take action in certain circumstances. This includes bringing claims against directors where a shareholder has suffered personal loss. Shareholders may also resolve to pur -
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