Question:
I am a partner in a limited liability company (LLC) and I own 60% of the total capital of the company. My question is: do I legally have the right to change the director of the company? What are the reasons according to which the partner has the right to change the manager; and what are the legal procedures that must be followed to change the manager?
Please advise.
Answer:
To answer this question, I would advise the questioner the following:
You have the right to dismiss the manager following the procedures mentioned in the Memorandum of Association of the Company, or the contract appointing the manager.
In case this matter is not discussed in both contracts, then the manager shall be dismissed by a decision of the general assembly of the company which shall be deemed valid only if they are passed by the majority of membership interests represented at the meeting, unless the Memorandum of Association provides for a higher majority.
In case the general assembly refused to dismiss him, then you may dismiss him by filing a case in the court based on justified reasons where the court will check the reasons provided and takes its decision.
Article 85 of the UAE Commercial Companies Law No. 32 of 2021 states (“Unless the Memorandum of Association of the Company or the contract appointing the manager provides otherwise, the manager shall be dismissed by decision of the general assembly, whether the manager is a partner or not. Also, the court may dismiss the manager at the request made by one or more partners in the Company if the court deems that such dismissal is justified.”)
There are many reasons to dismiss the manager including, but not limited to, any fraudulent acts committed by such manager, any losses or expenses it incurs due to abuse of power or violation of the provisions of any applicable law.
Article 84 of the same law states (“Every manager in a Limited Liability Company shall be liable towards the Company, the partners, and the third parties for any fraudulent acts committed by such manager and shall also be liable for any losses or expenses it incurs due to abuse of power or violation of the provisions of any applicable law, the Memorandum of Association of the Company or the contract of his appointment or for any gross error made by the manager. Any provision in the Memorandum of Association or the contract appointing the manager in conflict with the provisions of this clause shall be deemed null and void”).
He may be dismissed if he competes with the company as stated in Article 86 of the law (“The manager may not, without the approval of the general assembly of the Company, undertake the management of a competing Company or a Company with similar objects nor conduct, for his own account or for the account of third parties, deal in a competitive trade or similar to that of the Company, otherwise the manager may be dismissed and required to pay compensation.”)
He may also be dismissed if he did not prepare the accounts as mentioned in Article 87 of the law (“The manager of the Company shall prepare the annual balance sheet and the profit-and-loss account, and he shall also prepare an annual report on the activity and financial position of the Company and submit his recommendations on the distribution of the profits to the general assembly, within (3) three months from the end of the fiscal year.”)
