United Arab Emirates
Answer ... Only public joint stock companies (PJSCs) may engage in banking and insurance business, unless otherwise provided by special laws regulating the field. Accordingly, with regard to the corporate governance and management of the company, insurance companies must abide by the provisions of:
- the Commercial Companies Law;
- Federal Law 6/2007; and
- Securities and Commodities Authority Decision 3/RM/2020 on the Approval of the PJSC’s Governance Manual, which applies to local PJSCs listed on the market, with the exclusion of foreign listed companies. Among other governance requirements, the decision specifies that a PJSC must be managed by a board of directors whose formation method, exclusive number of members and membership team are specified by statute. The general assembly elects the members of the board of directors by way of secret cumulative vote. The board of directors will elect, by secret ballot and from among its members, a chairman and a vice chairman. The chairman and majority members of the board of directors must hold UAE nationality. The board of directors may select a managing director from among its members, whose competencies and remunerations will be specified by the board. A secretary must be appointed by the board of directors, independent of the company’s management but who reports directly to the board, and not from among the members of the board.
United Arab Emirates
Answer ... The statute of the company must specify the executive and non-executive members and independent members. However, at least one-third of the members of the board of directors must be non-executive independent members with the experience and technical skills required to serve the interests of the company. A managing director is elected by the board from its members by secret ballot.
Among other fit and proper criteria as stipulated by Decision 3/RM/2020, Article 30 of Federal Law 6/2007 prescribes that no one may be a member of the board of directors, a general manager or an authorised manager of an insurance company if he or she has ever been:
- convicted of a crime or a felony of dishonour, distrust or public morals;
- pronounced bankrupt and not subsequently rehabilitated; or
- held liable for grave violations of any provisions of law in his or her capacity as general manager or board member of a company, including liability for causing a company to enter into compulsory liquidation.
Additionally, Article 31 stipulates that the chairman and the members of the board of directors of the insurer, its general manager, its authorised manager and anyone acting on their behalf, and any managers or senior officers must not, among other things:
- participate in the management of another competing insurer or compete with its operations;
- conduct any activity in conflict with the insurer’s interest;
- carry out the operations of an insurance agent or a broker; or
- receive commission for any insurance operations.
The resignation of members of the board of directors is covered in Article 21 of Securities and Commodities Authority Decision 3/RM/2020, which provides that, among other things:
- a director can resign from his or her position by written notice;
- the general assembly may dismiss all or any of the directors; and
- when a director’s fixed term elapses and is not renewed, his or her duties will terminate.
A board member will be deemed to have resigned if:
- he or she fails to attend board meetings on three consecutive or five intermittent occasions, within the term of the board, without an excuse acceptable to the board; or
- his or her membership is contrary to the provisions of the Companies Law.
United Arab Emirates
Answer ... Articles 16 and 17 of Securities and Commodities Authority Decision 3/RM/2020 stipulate the obligations of members of the board of directors, as well as the obligations of non-executive members of the board of directors. Moreover, based on Article 22 of the Commercial Company Law, the duty of the managing director is to preserve the rights of the company and act with due care. Also, he or she must carry out all acts that are consistent with the object of the company and within the limits of the powers vested in him or her by virtue of the authorisation issued by the company to this effect.
Moreover, as per the Commercial Company Law, any provision in the memorandum of association or statute of the company authorising it or any of its subsidiaries to agree to exempt any person from any personal liability that such person bears in his or her capacity as a current or former officer of the company will be deemed null and void. The duties of the directors and managers include, among other things:
- to act diligently and in accordance with the objectives of the company;
- to manage the company in accordance with the applicable laws without any breach or fraudulent act or misuse of the power; and
- to ensure the effective functioning of the board, setting and accrediting the agenda of every board meeting, taking into consideration matters proposed by the members.
The directors and senior executives also have specific technical and daily duties under the Commercial Companies Law.
United Arab Emirates
Answer ... Article 29 of Securities and Commodities Authority Decision 3/RM/2020 stipulates the remuneration of the chairman and members of the board of directors. It provides that the remuneration of the chairman and members of the board of directors may consist of a certain percentage of the net profit, provided that this does not exceed 10% of the profits for the fiscal year, after deducting all depreciations and reserves. The company may pay additional costs, fees or allowances, or a monthly salary, to the members of the board of directors – in line with the policies proposed by the nominations and remuneration committee, and reviewed by the board of directors, and approved by the general assembly of the company – if the member is employed in any committee or exerts special efforts or performs additional activities to serve the company beyond his or her ordinary duties as a member of the board of directors. No attendance allowance may be paid to the chairman or to a member of the board of director for attending board meetings.
Any fines imposed on a company due to breach of the law or statute by the board of directors in the previous fiscal year will be deducted from the remuneration of the board of directors. However, the general assembly may not deduct such fines if it finds out that those fines are not the result of a default or error on the part of the board of directors.