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- Ask Elhais
June 12, 2014
In a limited liability company the manger can be appointed in the company’s memorandum of association or in a separate agreement. His appointment can be for a limited period or an unlimited period. It can also be stated in the memorandum of association that the manager cannot be dismissed. In the later case, the manager can only be dismissed by the full majority of the shareholders’ votes. The manager has the right to take any action in the best interest of the company, unless there were restrictions by law, whereby the manager has no right to sell the company’s sole properties without being delegated by the shareholders.
Without prejudice to the aforementioned if the manager’s authorities were not restricted in the memorandum of association, he can have the right to take any kind of action in the best interest of the company. For example, despite of the fact that a special power of attorney is required in order to engage an arbitration agreement, if the manger’s authorities were not restricted in the memorandum of association he can engage in such agreement without that power of attorney. This was provided by Dubai Court of Cassation in award no. 164/2008 Civil Cassation.
The manager is legally responsible towards the shareholders and third parties in respect to the actions he takes on the behalf of the company. This can be clarified as follows:
A) Towards the shareholders:
All the manager’s actions should be within his authorities and in the best interest of the company. Whereas the law gave the shareholder the right to sue the manager if he committed an unacceptable mistake that cost the company and the shareholder losses, additionally he has the right to claim for remedies in order to recover those losses. This was provided by Dubai Court of Cassation in award no. 69/2007 Civil Cassation.
B) Towards Third Parties:
Originally if a third party desires to claim a right from a company he should sue it directly. As an exception he has the right to sue its manager directly in his personal capacity if it was proved that the manager was not legally authorized to engage such action with the third party or deceived him or committed any act against the law.
Furthermore if the manager’s authorities were lately restricted, and was not executed before the responsible authorities, a third party cannot be confronted with those restrictions.
In some cases even after the company’s manager is dismissed or has resigned, he remains liable for some actions. For example, the manager is held responsible for the cheques issued by him if their due dates were after his resignation date and there were no funds to pay them on the date they were signed.