Corporate Governance in the UAE: Directors’ Duties and Shareholder Rights

Corporate governance in the UAE is not merely a set of administrative procedures or requirements applicable to publicly listed companies. It is a legal framework governing management powers, shareholder rights, decision-making, financial oversight, and disclosure obligations. Effective corporate governance helps protect businesses against disputes, misconduct, and regulatory violations.

Corporate governance is particularly important for limited liability companies (LLCs). Without clearly documented controls, a manager may make decisions without appropriate oversight, a shareholder may be denied access to company accounts, profits may be distributed unlawfully, or disputes may arise over the validity of general assembly resolutions.

Federal Decree-Law No. (32) of 2021 on Commercial Companies, as amended, establishes important rules governing company management, directors’ and managers’ liability, and shareholder rights. Additional requirements may apply depending on the company’s legal form, business activity, and regulatory authority.

In this guide, Legal Consultant Mohammed Jasem explains the main corporate governance requirements in the UAE, the duties of company managers, shareholder rights, access to financial records, director removal, and potential legal liability for breaches of the law or the company’s constitutional documents.

What Is Corporate Governance in the UAE?

Corporate governance refers to the rules, procedures, and controls that regulate how a company is managed, define the responsibilities of its directors or managers and shareholders, and establish how decisions are made and monitored.

In practical terms, corporate governance addresses four essential questions:

• Who has authority to make decisions within the company?
• Which transactions require shareholder approval?
• How can shareholders monitor the company’s accounts and financial performance?
• What legal remedies are available if a manager breaches the law or the company’s constitutional documents?

Effective corporate governance typically includes clear constitutional documents, a defined delegation of authority, properly documented meetings, reliable financial records, conflict-of-interest disclosure procedures, and mechanisms for resolving shareholder disputes.

Is Corporate Governance Mandatory in the UAE?

The UAE Commercial Companies Law establishes a corporate governance framework and places responsibility for implementing applicable governance rules and standards on the company’s board of directors or managers, as appropriate.

The specific requirements depend on the company’s legal form and regulatory status.

Limited liability companies: These companies are subject to the Commercial Companies Law provisions governing management powers, liability, general assemblies, accounts, and shareholder rights.

Public joint-stock companies: These companies are also subject to applicable governance regulations and decisions issued by the Securities and Commodities Authority.

Regulated businesses: Companies operating in regulated sectors, including certain financial activities, may be subject to additional requirements imposed by their relevant supervisory authorities.

The Commercial Companies Law also provides for penalties for breaches of applicable governance rules. The relevant statutory framework allows certain governance-related fines to reach AED 10 million. However, this does not mean that every administrative breach automatically attracts the maximum penalty. The applicable regulation and the nature of the violation determine the potential sanction.

What Are the Duties of an LLC Manager in the UAE?

An LLC manager is responsible for managing and representing the company within the limits of the law, the memorandum of association, and the manager’s appointment agreement.

The manager’s responsibilities extend beyond day-to-day operations. They may include protecting the company’s interests, maintaining proper accounts, complying with valid shareholder resolutions, and avoiding conduct that exposes the company or its shareholders to unlawful harm.

1. Acting Within the Scope of Authority

The manager’s powers should be clearly defined in the memorandum of association, appointment agreement, or other applicable company documents.

These powers may include:

• Signing commercial contracts.
• Managing bank accounts.
• Dealing with suppliers.
• Recruiting employees.
• Obtaining financing.
• Buying or selling company assets.

Under the Commercial Companies Law, a manager may have broad management powers where the relevant documents do not restrict those powers, subject to the applicable legal requirements.

Companies should therefore consider specifying which transactions require prior shareholder approval, such as substantial borrowing, the sale of significant assets, or transactions involving related parties.

2. Exercising Appropriate Care in Management

A manager must manage the company in accordance with the law, the memorandum of association, and the appointment agreement, while acting within the manager’s lawful authority.

Potential liability may arise where a manager commits fraud, abuses their powers, violates the law or the company’s constitutional documents, or commits a serious error that causes legally compensable damage.

This does not mean that a manager guarantees the success of every commercial decision. Liability depends on the facts, the nature of the conduct, the applicable legal duties, and the evidence.

3. Avoiding Conflicts of Interest and Unauthorised Competition

Managers must consider the company’s interests and comply with applicable requirements concerning conflicts of interest, related-party transactions, and competition.

Depending on the transaction and the applicable company documents, disclosure or general assembly approval may be required.

Examples of potential governance problems include:

• Entering into a contract with a company owned by the manager without proper disclosure.
• Diverting a business opportunity belonging to the company to another business controlled by the manager.
• Using company assets for personal purposes.
• Entering into transactions that create an undisclosed conflict of interest.

A clear conflict-of-interest policy can help identify these risks and establish the appropriate approval procedures.

4. Preparing Annual Accounts and Reports

The manager is responsible for preparing the company’s financial statements and the annual report on its activities and financial position, and submitting the required documents to the general assembly in accordance with the applicable law and deadlines.

These reports help shareholders assess the company’s performance, review its financial position, and make informed decisions about profits, financing, and expansion.

The company should also retain supporting financial documents and avoid concealing material information or providing misleading financial statements.

5. Convening the General Assembly on Time

The manager or other person responsible for managing the company must convene the general assembly in accordance with the law and the company’s constitutional documents.

For an LLC, the Commercial Companies Law generally requires the annual general assembly to be held at least once during the four months following the end of the financial year. The law also regulates requests by shareholders holding the legally required percentage of capital to convene a meeting.

The annual meeting should not be treated as a formality. It provides a framework for presenting financial statements and reports, discussing profits, and making decisions within the general assembly’s authority.

6. Updating Company Information and Records

Companies must complete the required filings and notifications with the competent authority or relevant registrar when changes occur, in accordance with the procedures and deadlines applicable to each change.

Depending on the circumstances, this may include changes to:

• The memorandum of association.
• The company’s manager.
• The shareholders.
• Registered company details.
• Other information required by the competent authority.

Meeting minutes, resolutions, financial records, and corporate documents should be maintained in an organised manner so they can be retrieved when necessary.

What Are the Rights of Shareholders in a UAE LLC?

A shareholder does not lose their oversight rights simply because they do not participate in the company’s day-to-day management.

The Commercial Companies Law grants shareholders specific rights, subject to the law, the memorandum of association, and the nature of the matter concerned.

These rights may include:

• Attending general assembly meetings and voting in accordance with the applicable rules.
• Discussing financial statements, management reports, and proposed resolutions.
• Accessing documents and records that the law permits them to inspect.
• Obtaining information and reports required by law.
• Participating in decisions concerning profits, the appointment of managers, and the appointment of auditors, where these matters fall within the general assembly’s authority.
• Taking appropriate legal action where there is a lawful basis to challenge conduct or seek a manager’s removal or accountability.

However, shareholders should not assume that they have unrestricted access to every employee record, trade secret, or bank account. Statutory inspection rights must be distinguished from information that is subject to legitimate legal or confidentiality restrictions.

My Business Partner Is Preventing Me From Accessing Company Accounts. What Can I Do?

Preventing a shareholder from obtaining information to which they are legally entitled is a common source of corporate disputes in the UAE.

The first step is to identify the specific records requested, the legal basis for accessing them, and the appropriate procedure for obtaining them.

Step 1: Submit a Written Request

A shareholder should consider sending a written request to the company or its manager identifying the required documents and allowing a reasonable period for a response.

Keep a copy of the request and evidence showing that it was delivered.

The rules governing LLCs provide shareholders with rights to obtain certain accounts and audited reports and inspect specified records and minutes, subject to the applicable statutory conditions and procedures.

Step 2: Document the Refusal

If the manager refuses the request or fails to respond, retain the original request, proof of delivery, and any response from the company.

These records may help demonstrate that the shareholder attempted to obtain the information through the available procedures before pursuing further action.

Step 3: Assess the Appropriate Legal Remedy

Depending on the documents requested, the nature of the refusal, and the shareholder’s percentage of capital, possible options may include seeking a general assembly meeting, applying to the competent court for appropriate relief, or taking another action permitted by law.

Legal action should not be unnecessarily delayed where there is a risk that important records may be destroyed or that harmful conduct may continue.

How Is an LLC General Assembly Organised in the UAE?

The general assembly is the principal forum through which shareholders exercise their collective powers on matters assigned to it by law and the company’s constitutional documents.

Depending on the circumstances, matters presented to the general assembly may include:

• Management reports.
• Annual financial statements.
• Profit distribution.
• Appointment or removal of managers.
• Appointment of an auditor.
• Other matters within the general assembly’s authority.

Notice of the Meeting

The meeting notice should contain the relevant meeting details and agenda and must be delivered in accordance with the prescribed method and notice period.

For an LLC, the statutory notice period is generally 21 days before the meeting, subject to applicable exceptions and procedural requirements.

Quorum

The quorum required for a valid meeting is determined by the Commercial Companies Law and the company’s constitutional documents.

Companies should verify the applicable rules before calculating attendance requirements or adopting resolutions. They should not rely on outdated templates or rules that apply to a different legal form.

Voting on Resolutions

The required voting majority depends on the type of resolution. Different requirements may apply to ordinary management matters, amendments to the memorandum of association, increases or reductions in capital, and other matters regulated by law.

Attendance, proxies, resolutions, and objections should be properly recorded in the meeting minutes, together with the relevant supporting documents.

What Are the Financial and Accounting Obligations of UAE Companies?

Financial governance is an essential element of corporate compliance. Reliable records allow shareholders to understand the company’s financial position and help managers demonstrate that decisions were taken on an appropriate basis.

Preparing Accounts in Accordance With Applicable Accounting Standards

Financial statements should be prepared in accordance with the accounting rules and standards applicable to the company.

The company should retain supporting documents for its transactions, income, expenses, assets, and liabilities.

Appointing an Auditor Where Required

Companies should determine whether an auditor must be appointed under the law applicable to their legal form and circumstances.

Where an audit is legally required, the appointment and related procedures must be completed correctly.

Maintaining Books and Records

Record-retention periods vary according to the type of document and the legislation governing it. Obligations may arise under the Commercial Companies Law, commercial transaction legislation, and tax legislation.

A company should therefore maintain a record-retention schedule that reflects its actual legal, accounting, and tax obligations rather than applying a single retention period to every document.

Distributing Profits Lawfully

Profit distributions must be based on distributable profits determined in accordance with the accounts, applicable law, and the company’s constitutional documents.

Companies should not distribute fictitious profits or amounts that cannot lawfully be distributed.

A manager may face legal consequences for unlawful profit distributions, false financial information, or concealment of material facts, depending on the applicable statutory provisions and the established circumstances.

What Is the Ultimate Beneficial Owner Register, and Why Does It Matter?

Companies subject to the relevant UAE legislation must maintain and update ultimate beneficial owner information, together with shareholder or partner records, in accordance with the applicable requirements.

An ultimate beneficial owner is the natural person who ultimately owns or exercises control over a legal entity under the applicable legal criteria.

Determining the ultimate beneficial owner may require considering direct and indirect ownership, control arrangements, and other statutory criteria. Ownership percentage alone may not be sufficient in every case.

Cabinet Decision No. (109) of 2023 on the Regulation of the Procedures of the Real Beneficiary establishes requirements concerning the identification and maintenance of ultimate beneficial owner information. The applicable framework includes requirements to update information within 15 days of becoming aware of a relevant change, subject to the governing provisions.

These requirements promote transparency, identify the individuals who ultimately own or control a company, and support regulatory compliance.

What Is the Legal Liability of a Company Manager in the UAE?

The limited liability status of a company does not automatically protect its manager from personal liability for their own unlawful conduct.

Under the Commercial Companies Law, an LLC manager may be liable to the company, its shareholders, or third parties for fraudulent acts and for losses or expenses resulting from abuse of authority, violations of the law or the company’s constitutional documents, or serious errors, where the applicable legal conditions are met.

Examples that may require a legal assessment include:

• Transactions exceeding the manager’s authority.
• Providing false financial information or concealing material facts.
• Misusing company funds or assets.
• Breaching legal obligations concerning management or accounting.
• Engaging in undisclosed conflicts of interest or failing to obtain required approval.

Liability depends on the nature of the conduct, the damage suffered, the causal connection, and the available evidence. A disagreement between a manager and a shareholder does not, by itself, establish legal liability.

Can an LLC Manager Be Removed in the UAE?

Yes. A manager may be removed in accordance with the law, the memorandum of association, and the manager’s appointment agreement.

Where the relevant documents do not provide otherwise, the Commercial Companies Law permits a manager to be removed by a general assembly resolution, whether the manager is a shareholder or an external appointee.

A court may also remove a manager following an application by one or more shareholders where a legitimate ground for removal is established.

What Grounds May Justify a Request to Remove a Manager?

The relevant grounds depend on the circumstances and may include:

• Abuse of management powers.
• Serious failure to perform management duties.
• Conduct that harms the company’s interests.
• Violations that make the manager’s continued appointment legally objectionable.

A commercial disagreement or difference of opinion does not automatically justify removal. The facts and supporting documents must be assessed to determine whether the proposed action is legally justified.

What Documents Are Important in a Manager Removal Case?

Relevant documents may include:

• The memorandum of association.
• The manager’s appointment agreement.
• General assembly minutes.
• Correspondence between the parties.
• Financial statements.
• Contracts that are being challenged.
• Other documents supporting the grounds for removal.

A preliminary legal review can help identify the appropriate claims and avoid overlooking important evidence.

How Can You Protect Your Company From Shareholder Disputes?

Preventing shareholder disputes begins with clearly documenting the parties’ rights and responsibilities before a disagreement arises.

Practical measures include:

1. Drafting a clear memorandum of association: Define management powers, decision-making procedures, and shareholder rights.
2. Establishing financial authority limits: Specify approval requirements for signing, borrowing, purchasing, selling, and disposing of assets.
3. Preparing a shareholders’ agreement where appropriate: Address matters requiring more detailed arrangements, provided the agreement is consistent with applicable law and the company’s constitutional documents.
4. Documenting meetings: Retain notices, agendas, minutes, and resolutions.
5. Regulating access to information: Establish clear procedures for requesting accounts, reports, and records.
6. Managing conflicts of interest: Define disclosure requirements and approval procedures for related-party transactions.
7. Establishing dispute-resolution mechanisms: Consider negotiation, mediation, arbitration, or court proceedings, depending on the nature of the dispute and the applicable legal framework.
8. Reviewing compliance regularly: Verify that company information, records, and regulatory and tax obligations remain up to date.

Internal policies do not replace compliance with the law. Shareholder agreements and governance procedures should be reviewed to ensure that they are enforceable and do not conflict with mandatory legal requirements.

What Is the Role of a Lawyer in Corporate Governance in the UAE?

A lawyer can help translate legal obligations into clear documents, practical procedures, and controls suited to the company’s business activity and shareholder structure.

Depending on the scope of the engagement, legal services may include:

Reviewing the memorandum of association: Identifying weaknesses in management powers, decision-making procedures, and shareholder rights.

Drafting corporate governance policies: Establishing management authority limits, approval requirements, and conflict-of-interest disclosure procedures.

Preparing shareholders’ agreements: Regulating shareholder relationships, dispute resolution, withdrawal, and share transfers within the limits permitted by law.

Organising general assembly meetings: Reviewing notices, agendas, minutes, and resolutions.

Reviewing financial and regulatory obligations: Identifying the records and procedures required under applicable legislation.

Handling corporate disputes: Assessing claims concerning access to accounts, manager removal, liability, and compensation, and evaluating appropriate court or alternative dispute-resolution options.

Legal Consultant Mohammed Jasem provides legal assistance in corporate governance matters and shareholder disputes based on the relevant documents, facts, and applicable legal rules.

Frequently Asked Questions About Corporate Governance in the UAE

What Does Corporate Governance Mean in the UAE?

Corporate governance refers to the rules and procedures governing company management, management powers and responsibilities, shareholder rights, decision-making, and financial oversight under applicable legislation and regulatory requirements.

Is Corporate Governance Mandatory for an LLC in the UAE?

LLCs are subject to the Commercial Companies Law provisions concerning management, liability, accounts, general assemblies, and shareholder rights, together with any additional regulatory requirements applicable to their business activities.

What Are the Main Duties of an LLC Manager?

A manager’s duties include complying with the law and the company’s constitutional documents, acting within the scope of their authority, exercising appropriate care, preparing required accounts and reports, convening general assembly meetings, maintaining records, and complying with applicable regulatory obligations.

Does a Shareholder Have the Right to Inspect Company Accounts?

Yes. The law grants shareholders rights to obtain certain documents and reports and inspect specified records, subject to the applicable conditions and procedures. If access is unjustifiably refused, the appropriate legal remedy can be assessed.

Can a Company Manager Be Removed Without Their Consent?

A manager may be removed in accordance with the law and the company’s constitutional documents or appointment agreement. Depending on the circumstances, removal may be effected through a general assembly resolution or a court order where the relevant legal conditions are met.

Is a Company Manager Personally Liable for Company Debts?

The company generally has a legal personality and financial liability separate from those of its shareholders. However, a manager may incur personal liability for their own fraudulent acts, abuse of authority, serious errors, or other legally actionable violations where the statutory requirements are satisfied.

Why Is the Ultimate Beneficial Owner Register Important?

The register helps identify the natural persons who ultimately own or control a company and supports transparency and regulatory compliance. Relevant information must be updated in accordance with the applicable legislation.

Does a Small Company Need an Internal Governance Policy?

A small company may benefit from an internal governance policy suited to its size and business activity, particularly where it has multiple shareholders, broad management powers, or substantial transactions. The policy must remain consistent with the law and the company’s constitutional documents.

Conclusion: Corporate Governance Protects Managers and Shareholders

Corporate governance in the UAE helps organise management, protect shareholder rights, improve financial transparency, and reduce the risk of disputes and legal liability.

Effective governance requires clearly defined authority, properly documented meetings, reliable financial records, respect for shareholder inspection rights, and clear procedures for regulatory compliance.

Companies should not wait until a dispute arises before reviewing their management structure. Regular reviews of the memorandum of association, internal policies, and corporate records can identify weaknesses before they develop into financial losses or litigation.

If you need a review of your company’s governance arrangements or assistance with a shareholder dispute, Legal Consultant Mohammed Jasem can review the relevant documents and assess the available legal options based on the company’s circumstances and applicable legislation.

Legal References

• Federal Decree-Law No. (32) of 2021 on Commercial Companies, as amended, including amendments issued in 2025.
• Cabinet Decision No. (109) of 2023 on the Regulation of the Procedures of the Real Beneficiary.
• Applicable corporate governance regulations and decisions governing different company types and regulated activities.
• Relevant accounting, commercial, and tax legislation governing books, records, and supporting documents.

Legal Disclaimer

This article is provided for general legal information and educational purposes only and does not constitute legal advice for a specific case.

The applicable requirements may vary according to the company’s legal form, regulatory authority, constitutional documents, and the nature of the dispute. Current legislation and relevant company documents should be reviewed before taking legal action.

Corporate Governance Lawyer in the UAE

Legal Consultant Mohammed Jasem assists businesses with corporate governance, shareholder rights, management responsibilities, director removal, access to company accounts, and corporate disputes in accordance with the applicable UAE legal framework.