Limited Liabilities Companies (LLC) are overseen by at least one director in accordance with the company’s memorandum of association (MOA). Pursuant to the Commercial Companies Law of UAE (Federal law Number 2 of 2015), any partner or a third party can be appointed as a director of the company through a specific provision under MOA. Nevertheless, the director may be appointed through a resolution passed in the general assembly meeting. The director, for the most part, has all authorities required to oversee the management of the company, except if generally limited by the organization’s MOA. The Commercial Lawyer of Dubai, however, in this article will discuss the procedure behind dismissing the director from his duties and legal repercussions on his dismissal.

In reasonableness, the partners of LLC may on occasion have issues administration of the organization, which result in the dismissal of the director from his position.  It isn’t unrealistic that partners may face legal restrictions in expelling the director, for instance, passing a resolution in General Assembly. However, the company may witness issues if the director is also the partner of the company and is affiliated through MOA. In such circumstances, the company would require a majority of the vote to dismiss the director through the meeting of General Assembly. This is in accordance with Article 101 of the Commercial Companies Law requiring the partner to cast a ballot by partners representing at least 75% of the shareholding. Consequently, if the capital held by the director is more than 25%, the company may face issues in terminating him from his position.

In line with the aforementioned, the Article 85 of the Commercial Companies Law states that “Except if the articles of association of the organization or the agreement selecting the director provides for the contrary, the director will be dismissed by choice of the general assembly meeting, regardless of whether the executive is a partner or not. The court may expel the director at the solicitation made by at least one partner in the organization if the court considers that such expulsion is necessary.” This provision is an explicit way out of a tight knot situation where the director holds more than 25% of the shareholding in the company. As the provision would allow termination of director from his duties, upon the request made by a partner, should the matter is not resolved in general assembly meeting.

Albeit, the law allows for the dismissal of a director through special request in court with the assistance of Top Lawyers in Dubai, but the rationale behind his dismissal shall be reasonable and justified. The legislation does not embark any restrictions on the reasons for this dismissal and has left it to the discretion of the court. The Dubai Court of Cassation did, nonetheless, set up a precedent of reference that break of trust by the director is a genuine explanation behind his dismissal. Further reasons can be fraudulent activities, gross misconduct, causing losses in the company, inability to work due to any physical or mental condition or misdemeanour or felony case against him. It is pertinent to seek the assistance of Best Lawyers in UAE to comprehend the reasons for the director’s dismissal and consequently to file an application for his removal.