Published June 2016
The General Manager of a legal entity that is incorporated in the UAE, whether located on-shore or within one of the various free-zones, is generally entrusted with the sole responsibility for all executive decision making and day-to-day operations of that legal entity. As such, the General Manager of a UAE entity generally acts as a “one-man” board of directors. This is in contrast to the role of a General Manager in common law jurisdictions, where the entire board of directors is often collectively responsible to exercise executive control. The powers and authority of a General Manager are provided for in the constitutional documents of the legal entity, which may be as broad or as restrictive as the shareholders desire, and which can be supplemented by way of a power of attorney from the shareholders or partners if necessary.
Although the shareholders of a limited liability company (“LLC”) in the UAE are generally protected by the company as they are in common law jurisdictions pursuant to the concept of the “corporate veil,” very little protection is afforded to the General Manager of a UAE-based LLC. Rather, due to the extensive powers and authorities afforded to a General Manager, the laws in the UAE impose both civil and criminal liability on the General Manager as regards to the business, including for matters that were beyond the General Manager’s control (e.g. market forces, third party actions). Some examples of exposure a General Manager has, include:
In view of the above, and in order to assist General Managers in mitigating their exposure to potential liabilities and legal actions against them, General Managers are often advised to ensure that they adopt certain measures which include:
More often than not, General Managers in the UAE are unaware of their full responsibilities and the associated liabilities when appointed to what is considered the highest post of the company. These risks only become apparent when the liabilities begin to arise, at which point, it becomes difficult to manage the exposure.
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