The Emirati legislator was proactive by all standards with the amendments he made to the Commercial Companies Law, due to the great importance of this sector in the economic arm of the state.
Perhaps the most prominent amendments in this regard are those dealing with the responsibility of the board of directors and the executive management towards the company, shareholders, and others, for all acts of fraud and abuse of power, and every violation of the law or the company’s system, and the nullification of every condition stipulating otherwise, in accordance with the first paragraph of Article 162 of Federal Decree-Law No. 32 of 2021 regarding commercial companies.
The legislator established a mechanism for accountability – in the second paragraph of the aforementioned article – which states that if the error arises from a decision issued by consensus, the responsibility falls on all members of the board of directors, and the opponents are not responsible for that, when they prove their objection in the minutes of the meeting if it is issued by the majority, and it is not exempted A member of the Board of Directors who is absent from the session in which the decision was issued, unless it is proven that he was not aware of the decision, or that he was aware of it and was unable to object to it.
If a final judicial ruling is issued regarding the Chairman of the Board of Directors or any of the members of the Board or any of its executive management, after proving that any of them committed fraud, abuse of power, or concluding deals or transactions that involve a conflict of interest, the convict shall be considered isolated by the force of law, and not accept Candidacy for membership in the board of directors of any joint stock company in the state, or to perform tasks in the executive management of the company except after the lapse of at least three years from the date of dismissal.
The legislator reinforced this position by emphasizing in Bankruptcy Law No. 9 of 2016 in Article 144 amended by Federal Decree-Law No. 35 of 2021 that the court, which rules on declaring the company’s bankruptcy, may oblige the members of the board of directors or the managers or any of them to pay the remainder from The company’s debts or part of it, each within the limits of his responsibility for those debts, if there is a legal presumption that the company’s funds are not sufficient to pay at least (20%) of its debts, when it is proven to the court that any of them,
Use commercial methods that are not considered risks, such as disposing of goods at prices lower than their market value, in order to obtain funds with the intention of avoiding bankruptcy procedures or delaying their start.
or entered into transactions with a third party to dispose of the funds without consideration or in return for an insufficient consideration, and without a certain benefit or proportionate to the debtor’s funds.
or fulfills the debts of any of the creditors with the intent of causing harm to other creditors.
With these court articles, the UAE legislator counts his tangible effort in preserving the companies and the interests of its shareholders and others, by holding the board of directors accountable for its mistakes, and compensating the aggrieved, in order to establish justice and strengthen the economy.
Arbitrator and legal advisor
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