Occasionally, shareholders in a Limited Liability Company resolve to terminate a manager previously appointed under the company's Memorandum of Association and decide to appoint a new manager through a shareholders' resolution at a General Assembly Meeting.
The Powers of the Newly Appointed Manager
The powers of the newly appointed manager are determined either by reference to the same powers previously held by the dismissed manager under the Memorandum of Association, or by stating new powers in the Shareholders' Resolution. The shareholders then notarise the resolution before the Notary Public and execute it at the Department of Economic Development (for mainland companies) or the relevant free zone authority, updating the Commercial License to remove the dismissed manager and add the newly appointed one — without necessarily amending the Memorandum of Association itself.
It Is Preferable to Update the Memorandum of Association
If the new manager is appointed by shareholders' resolution but the Memorandum of Association is not updated, some UAE banks may refuse to allow the newly appointed manager to carry out financial transactions on the company's behalf — even where the manager holds a Commercial License bearing his name and a duly attested shareholders' resolution confirming his powers, including representing the company before banks.
Because of this practice among local and international banks, shareholders are effectively obliged to update the Memorandum of Association to reflect the resolution.
Percentage of Shares Required to Remove and Appoint a Manager
Under UAE Commercial Companies Law, the shareholders' absolute consent (100%) is required only to amend the Memorandum of Association in a way that increases shareholders' obligations. Accordingly, the clause relating to company management — including the removal and appointment of managers — can be amended with the same majority required to amend the Memorandum of Association generally: 75% of shareholders present at the General Assembly Meeting, provided the legal quorum is met (75% at the first meeting, 51% at the second, and any percentage at the third, subject to proper notice).
Practice Differs From the Legal Position
Although the law is clear, and several Dubai Court of Cassation judgments have confirmed that managers can be removed and appointed with the same 75% majority required to amend the Memorandum of Association, the Notary Public in the UAE may in practice refuse to attest shareholders' resolutions or General Assembly minutes — including resolutions to remove and appoint managers — unless all shareholders are present and sign, regardless of the size of any absent shareholder's stake.
How to Solve Such an Issue
Where a legally compliant resolution lacks 100% shareholder consensus, the only way to have it attested and executed is to apply to the competent court for a judgment confirming the validity and enforceability of the resolution. This delays implementation and imposes additional costs on shareholders.
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