What are the rules for suspending partner/manager in loss-making firm?
A look at what the law on commercial companies stipulates
Question: We are three partners in a limited liability company. The company is currently going through a financial problem and is exposed to major losses. It has become clear to us through the annual budgets that the cause of these losses is the director. Is it possible to suspend the manager from work and appoint another manager from outside the company and not a partner, knowing that the current manager is partner in the company? Is it possible to file a criminal lawsuit against the manager, and can he also be prosecuted in a civil case to demand compensation and return the money to the company?
Answer: You have the right to remove the manager and appoint a new one from outside the company. Article 85 of Federal Decree Law No. (32) Of 2021 on Commercial Companies states that unless the Memorandum of Association (MOA) of the company or the appointment contract of the manager provides otherwise, the manager shall be removed by a resolution of the General Assembly, whether the manager is a partner or not.
The court may also order that the manager be removed based upon the request of one or more partners of the company, if the court is convinced that such removal is well-justified.
You have the right to file a criminal and compensation case against the manager because according to Article 84 of the same law, every manager of the Limited Liability Company shall be held liable vis-à-vis the company, the partners and third parties for any fraudulent acts committed by such manager.
He shall also be liable for any losses or expenses incurred by the company due to improper exercise of the powers or violation of the provisions of any law in force, the MOA of the company or the appointment contract of the manager or for any gross error committed by the manager.
Any provision in the MOA or the appointment contract of the manager in conflict with the provisions of this clause shall be null and void.