Implementing Effective Corporate Governance for UAE Companies

Implementing Effective Corporate Governance for UAE Companies


It is important to know what is needed to implement effective corporate governance in your company. Corporate governance best practices are not restricted to companies which are legally structured as corporations or large scale businesses; having good corporate governance principles in any size of business is key to reduce risk, enhance transparency and have practices to be able to monitor your business in an effective manner. Broadly, the term ‘corporate governance’ relates to the processes, practices and structures of a company to enable a business to meet its financial, operational and strategic goals overall achieving longstanding sustainability and corporate performance.

What are the key elements required to implement effective corporate governance?

1. Implement a qualified board

Boards should be comprised of directors and shareholders who are experienced and have deep knowledge of the business. The majority should be independent, and not always members of day to day management of the company to ensure diverse and unbiased views.

2. Define roles and responsibilities

It is important that all roles and responsibilities are defined, specifically the General Manager (GM). The UAE Commercial Companies Law states that most liabilities of ‘directors’ also apply to ‘managers’ and the GM is the person in charge of day to day management of the business. A ‘manager’ must have; relevant experience and qualifications; must act honestly; not abuse their powers and comply with the Memorandum of Association (MOA) and any other applicable laws. Key responsibilities for a General Manager include:

  • Responsibility of the GM to prepare the Balance Sheet and Profit and Loss Account (Audited Accounts)
  • The Audited Accounts must be prepared 3 months from the end of the Company’s financial year
  • The Balance Sheet and & Profit and Loss Account must be presented to the Shareholders for approval in the AGM
  • The GM is also responsible for the VAT submissions Determining who is accountable among the board should be clear; this can be done through written mandates, delegating certain responsibilities to each respective person, prepare written job roles and responsibilities, and decipher the roles of the shareholders vs management.

3. Commitment to ethical behaviour

All key ‘managers’ of the company must not breach their duties, unanimous board decisions result in joint liability therefore, absence at a meeting does not exempt liability. The Companies Commercial Law states that managers/directors liability cannot be exempted by the way of including language to this respect into the MOA. Directors/Managers must declare any conflicts of interest in which they may not be able to vote. A policy should be produced including code of conduct which will outline the company’s ethics requirements. It is important to instil a business culture of respect and integrity which are also compliant with the company policies and UAE law.

4. Evaluate performance

Measurable performance targets for managers/directors should be set and their performance should be evaluated on a regular basis which should be tied to compensation &/or potential termination of duties in the event of poor performance.

5. Implement effective risk management practices

Businesses should asses risks they could potentially face and produce risk management procedures considering these. This can include financial risks, risks to company reputation, bad PR, operational risks, supplier risks and legal risks. Both short term and long terms risks should be identified and determine what performance effect they could have on the business – by producing a risk management framework, these risks could be reduced. Other items which could be adopted to reduce overall risk, include:

  • Know your job and the company’s business
  • Observe legal and regulatory developments
  • Evaluate duties and responsibilities prior to accepting managing roles in multiple (group) companies
  • Maintain good corporate governance proceedings
  • Internal reporting
  • Recording and record keeping
  • Understand the corporate structure of the company
  • Remember to act in the best interest of the company
  • State capacity when acting as a Manager
  • Caution in marketing of products and promises to customers
  • Undertake due diligence on business partners
  • Do not ignore T&Cs or fine print in agreements
  • Consider internal checks/tests
  • Avoid issuance of Post-Dated Cheques where possible

Annual General Meetings are also the responsibility of the GM and are a mandatory requirement under UAE Commercial Companies Law.

It is important that partners and management of UAE Companies ensure that they remain compliant with the law, maintain good Corporate Governance and hold AGMs annually.

How can PRO Partner Group Assist?

PRO Partner Group can assist you in preparing for and conducting your Annual General Meeting (AGM) as well as assist you with ensuring good Corporate Governance whether you are a mainland LLC or a Freezone Company in UAE. For more information on these services please contact Jessica Ashford on +971 50 411 0496 or or please contact a member of the team on in Abu Dhabi +971 (0)2 448 5120, or Dubai +971 (0)4 456 1761.


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