A manager or member of the Limited Liability Company board of managers is a pillar of the company and its most important employee. Federal Law No. 2 of 2015 on Commercial Companies in the United Arab Emirates stipulates clearly and in detail the method of the manager's resignation.
THE RESIGNATION OF THE MANAGER SHALL BE TENDERED TO THE SHAREHOLDERS
The manager in the Limited Liability Company would sometimes resign from their position with no prior notice or announcement. For this reason, The Federal Law No. 2 of 2015 on Commercial Companies in the United Arab Emirates has regulated the case of the Managers' resignation with an explicit, clear, and unequivocal article. The manager's resignation shall be submitted to the shareholders and decided upon by the shareholders within a maximum of 30 days from the submission date.
WHAT SHAREHOLDERS SHOULD DO UPON RECEIPT OF THE MANAGER'S RESIGNATION
The shareholders must inform the competent authority which licensed the company (Economic Department for the mainland companies and the Free Zone Authority for the free zone companies) of the end of the manager's service within a maximum of 30 days from the date of termination of service. The company must appoint someone to replace the resigned manager during this period.
WHAT IF THE SHAREHOLDERS DISREGARD THE RESIGNATION?
The UAE Companies Law has also clearly regulated the case in which the shareholders do not agree to or disregard the resignation. The UAE Companies Law stipulates that the manager's resignation shall be deemed effective under the law after thirty days from its submission to the shareholders, provided that the competent authorities have been notified unless the Company's Memorandum of Association or the manager's appointment contract stipulates otherwise.
MANAGERS FACE PROCEDURAL OBSTACLES TO EXECUTING THEIR RESIGNATION AND REMOVING THEIR NAMES FROM THE OFFICIAL DOCUMENTS OF THE COMPANIES
Despite the clarity of the legal clause regarding the right of the manager to resign by following the procedure stipulated by law, if the shareholders do not agree to the resignation or disregard the resignation, the resigned manager will still face procedural obstacles to executing their resignations and remove their names from the Company's Memorandum of Association and its commercial license. They cannot execute the resignation if the resignation has not been decided upon or approved and implemented by 100% of the shareholders. The competent authorities will refuse to remove the manager's name from the company's Memorandum of Association and its trade license without receiving an amended Memorandum of Association or shareholders resolution signed by all shareholders that includes the decision to remove the manager and appoint an alternate Manager.
HOW TO SOLVE THIS ISSUE AND REMOVE THE MANAGER'S NAME FROM THE OFFICIAL COMPANY DOCUMENTS IN THE EVENT OF NOT HAVING 100% APPROVAL IN THE SHAREHOLDERS' RESOLUTION
In practice, managers who wish to resign will initiate the removal of their names from the company's Memorandum of Association and Commercial Licenses by submitting their resignation to the shareholders and notifying the competent authority; the Department of Economic Development for the mainland companies, and the Free Zone Authority for the free zone companies. Once the competent authority refuses to effect the resignation as a result of not receiving a shareholder's resolution or an amended Memorandum of Association (which must include the removal of the Manager and the appointment of an alternative), the resigned manager will have to recourse to the competent court and file a case to obtain a judgment to oblige the competent authorities to remove their name from the company's trade license and Memorandum of Association.
Originally Published 07 August 2022
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