The memorandum of association (MoA) of a limited liability company (LLC) should not, as a rule, be amended unless approved by partners representing three-quarters of the capital. This quorum rule can have an additional requirement by the law, ie., the MoA provides for a numerical majority of the partners in addition to the above mentioned quorum. The same rule applies, also, to the capital. In all cases, it should not be increased or decreased unless approved partners who together represent three-quarters of the capital.

However, this should be all right unless the MoA provides for a numerical majority in addition to the required quorum of three quarters of the capital. Moreover, the resolution of the company regarding the capital, particularly on reduction, cannot be legally effective unless approved and ratified by all competent authorities, particularly the Ministry of Economy and Trade. The MoA can be amended after obtaining, among other things, the necessary quorum. However, the liabilities of the partners should not be increased without obtaining the unanimous approval of all partners.

This is a very important to safeguard the interests of all partners and to give each partner a say regarding his liabilities. One of the main similarities between LLCs and public joint stock companies is that the legals provisions regarding auditors of both types of companies are nearly identical. The general assembly of an LLC can select one or more auditors. However, the selected ones should be registered in the auditors' register according to the requirements of the law.

They should submit their report to the general assembly and not to the management. This is very important in order to make sure that there is no conflict of interest or misuse of inside information because it is likely that the managment could conceal any possible mistakes. Therefore the report should go to the general assembly who are authorised, after studying it, to take whatever actions they deem appropriate.

Another point, in relation to the auditors, is regarding their remuneration which should also be determined by the general assembly and not by the management. The general assembly at the end of each year shall discuss the report of the auditors and take all necessary decisions regarding it. Auditors are entitled to peruse and check all documents, accounts, books of the company while performing their duties and the management should not obstruct their work nor keep any requested information away from their knowledge.

The law gives the auditors all necessary powers to enable them to perform their duties appropriately. This is clear from the fact that at certain instances the auditors could approach the competent authorities and the ministry. This could take place in cases where the management refuses to call the general assembly. Auditors are empowered by the law to ask the management to convene the meeting and in case they fail to do so, could overstep them and directly contract the ministry to inform them about this situation.

A. Warsama Ghalib is legal advisor to the Central bank. The views expressed above are his own.