Thursday June 26th, 2025 Dominic Elvin
Becoming a company director is a dream for many, but a reality earned by only few.
The Situation
You’re a top executive or key decision maker in your organization with many years of experience. The natural next step is finding a position on a board of a big company. Achieving this will give you great personal pride, respect and possibly remuneration, but what responsibility will you have? What is expected of you in law? What can you be liable for?
The Power of the Director
In the UAE, as in many mature markets, a director’s powers are primarily derived from a company’s constitutional documents namely, the Memorandum (MOA) and Articles of Association (AOA), except for those powers exclusively conferred under Federal Decree-Law No. 32 of 2021 on Commercial Companies (CCL), which reserves certain decisions exclusively for the General Assembly.
For Public Joint Stock Companies (PJSCs), the Securities and Commodities Authority (SCA) further supplements this framework with robust corporate governance standards that directors are expected to uphold, whilst the Central Bank of the UAE (CBUAE) has its own Corporate Governance Regulation for Banks .
Below, we explore the general duties of a director that promote responsible governance, safeguard shareholder interests, and maintain corporate reputation:
1. Duty to Act in Accordance with Powers
Directors must operate within the objectives of the company and to not exceed the powers specifically granted to them by the constitutional documents.
2. Duty of Due Care, Diligence and Loyalty
Directors are expected to perform their responsibilities with the level of care, skill, and diligence that a reasonable person would exercise in a similar role, whilst acting in the best interests of the company. This includes staying informed about the company’s operations and making decisions in good faith – to ensure the long-term sustainability or the company.
3. Duty to Avoid Conflicts of Interest
Directors must disclose any personal interest in transactions or contracts involving the company. They must not participate in voting on such matters.
4. Duty to Comply with Laws and the Company Constitution
Directors are responsible for ensuring that the company adheres to the CCL, its MOA and AOA, and all other applicable laws and regulations.
5. Duty to Avoid Misuse of Power or Fraudulent Acts
Directors are expected to act with the highest ethical standards and are liable to the company, the shareholders, and the third parties for all acts of fraud, abuse of power, and violation of the law.
6. Duty in Times of Financial Distress
Managers and directors have specific duties in situations where the company is in financial distress under UAE Federal Law If the company’s losses reach 50% of its capital, directors must call a general assembly to decide whether to continue or dissolve the company.
Why is this important?
It’s critically important that directors perform their duties properly because they are the stewards of the company. Adhering and living the principles of directors duties has significant benefits to the company including ensuring long term sustainability, protecting shareholder’s rights and maintaining a positive reputation .
In the UAE context, strong director performance aligns directly with ‘Vision 2030’ which has a particular focus on sustainability, innovation and good governance – all key hallmarks to entice foreign investment, enhance market confidence and contribute to the success of the UAE economy.
With all this being said, do you still want to be a director?