Appointing a manager in a company registered within UAE is one mandatory requirement under the Commercial Companies Law of the country (Federal Law number 2 of 2015). Some companies name one of the partner or shareholder as a manger on the trade license, whereas some prefer to appoint a third person to hold and decide the management of the company. Regardless of the power a manager or a director hold (as per his rights and obligations defined in the memorandum of association of the company), it is always accompanied with a set of responsibilities and liabilities, if relying on the Companies Law of UAE. That being said, managers or directors of the company draw their authorities or powers from the memorandum of association of the company. However, commercial lawyers of Dubai have often seen the list of general powers (to act on behalf of the company) granted to the managers/directors, which sometimes are insufficient for performing specific acts such as a financial transaction. On the other hand, such general powers issued to managers may suffice the day to day requirements, however, may not be acceptable by courts in specific events such as entering into litigation on behalf of the company or signing specific agreements or contracts or even significant financial transactions. Henceforth, companies prior to entering into a major financial transaction of the company shall properly review the authorities or legal capacity of the managers or the signatory.

The Legal Perspective

As afore-mentioned, UAE commercial Companies Law governs companies registered within UAE mainland and most free zones. The Law explicitly defines the rights and obligations of all parties involved in any company such as shareholders, managers or directors or investors of the company. Wherein, the law guarantees an authorization of a manager of the company to carry out all relevant activities for the company in reference to the objectives of the company and the powers so granted to him. (This is in reference to Article 22 of the Law). Accordingly, the activities undertaken by the manager shall be binding on the company subjected that such activities are authorized under the company’s constitution and relied on by the third parties. Accordingly, the decisions or acts of the manager will be binding on the company if he is authorized under the law to perform all and any managerial activity.

In parallel legislation (Commercial Transaction Law of 1985), a manager requires specific authorization to perform specific acts for the company which do not fall under the criteria managerial activities. Importantly, activities such as taking credit on behalf of the company or mortgaging any asset of the company are some specific activities performed or approved by the manager would require special authorization or a power of attorney as per Article 935 of the Commercial Transactions Law.

It is apparent from the foregoing provisions and explanation by Civil Lawyers of Dubai that one must carefully scrutinize the power of a signatory prior to signing any contract with such company as his powers shall be explicitly mentioned. However, as the legal world is evolving, Lawyers of Dubai has seen the new approach of UAE courts based on “Good Faith” principle thereby accepting the commercial cases or rejecting the defences of not having specific authority to sign the contracts on the grounds that such agreement was signed on good faith. In any event, it is probably to approach professional lawyers of Dubai to ascertain the exact circumstances of the case and to advise you accordingly.