There are always rules and regulations governing businesses and companies, and among them is defining the duties and powers of the board of directors, which is the supreme authority in companies.
A director must always carry out their responsibilities on the Board of Directors with the care of a prudent person. A director must act in accordance with the goals of the firm and the authority entrusted to him by the shareholders.
Duties of the Board of Directors
- Implementing a policy that ensures stakeholder welfare;
- Ensuring the company has sound administrative, financial and accounting systems;
- Establishing procedures to manage conflicts between board members, senior management, shareholders and so on;
- Ensuring the application of governance rules in the company.
Powers of the Board of Directors
The Board of Directors shall have all the required powers to do such acts as required for the object of the company, other than as reserved by the UAE Federal Law No. 2 of 2015 on Commercial Companies or the Articles of Association of the company to the General Assembly. However, the Board of Directors may not enter into loans for periods in excess of three years, sell or pledge the property of the company or the store, mortgage the company’s movable and immovable properties, discharge the debtors of the company from their obligations, make compromise or agree on arbitration, unless such acts are authorized under the Articles of Association of the company or are within the object of the company by nature. In other than these two events, such acts require to issue a special decision by the General Assembly.
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Liability of the Board of Directors
- The members of the Board shall be liable towards the company, the shareholders and the third parties for all acts of fraud, misuse of power, and violation of the provisions of UAE Federal Law No. 2 of 2015 on Commercial Companies or the Articles of Association of the company or an error in management. Every provision to the contrary shall be invalid.
- Liability as provided for in above shall apply to all the members of the Board if the error arises from a Decision passed unanimously by them. However, in the event of the decision passed by the majority, the members who object to such decision shall not be held liable provided they state their objection in writing in the minutes of the meeting. Absence from a meeting at which the decision has been passed shall not be deemed a reason to be relieved from liability unless it is proven that the absent member was not aware of the Decision or could not object to it upon becoming aware thereof.
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Abdultaiyab Bahrainwala
Partner / Senior Lawyer
Abdultaiyab Bahrainwala, LLM, LLB advises on all aspects of UAE Property Laws, Commercial Laws, Corporate Laws, Labour Laws,
+971 4 427 0842
FAQ about the Duties, Powers, and Liability of the Board of Directors
1-What is the board of directors?
The board of directors (B of D) is the body in charge of defining strategy and overseeing management in the case of publicly traded organizations. The board typically meets on a regular schedule. For any company that is publicly traded, a board of directors is necessary.
2-What is the role of the board of directors?
The board of directors of a public business are elected by the shareholders, and its main duty is to protect the interests of the shareholders. In fact, directors are obligated by law to prioritize the interests of shareholders before their own. The board performs a supervisory function by monitoring business operations and rating performance.
3-Who appoints board directors?
Either the board of directors may appoint a director by adopting the same 50% ordinary resolution at a general meeting of shareholders, or shareholders may do so.
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