Legal Insights
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The United Arab Emirates is taking a significant step in promoting gender diversity within the corporate sector. Under the Ministerial Resolution No. (137) of 2024, private joint-stock companies are now required to allocate at least one board seat for women once the current board’s term concludes. This initiative aligns with the UAE’s continuous efforts to enhance global competitiveness and emphasizes the nation’s dedication to empowering women. The UAE fosters inclusive growth and encourages sustainable development by integrating women into leadership positions.
A similar requirement for public joint-stock companies was mandated in 2021. Initiated by the UAE Securities and Commodities Authority (SCA), that earlier directive mandated all public joint-stock companies listed on the Abu Dhabi and Dubai stock exchanges to include at least one woman on their boards. The positive outcomes observed—in both institutional performance and economic results—have paved the way for extending this requirement to private joint-stock companies.
Private joint-stock companies have been given until January 2025 to adjust their corporate structures in compliance with this directive. The Ministry of Economy has urged these companies to incorporate the requirement into their upcoming board restructuring plans, underscoring the importance of embracing this change as part of the UAE’s move towards adopting international best practices in corporate governance.
Understanding Private Joint-Stock Companies
In the UAE, private joint-stock companies are corporate entities where capital is divided into shares of equal value, and shareholders’ liability is limited to their shareholding. Unlike public joint-stock companies, these private entities do not offer their shares to the general public. They are often family-owned businesses, subsidiaries of larger corporations, or significant players in real estate, manufacturing, and services.
Examples include major family-owned conglomerates and influential firms that play a vital role in the UAE economy.
Key Provisions for Board of Directors in UAE Law
Articles 143-172 of the Federal Decree Law No. (32) of 2021 on Commercial Companies outline the regulations governing the formation and functioning of boards of directors for both public and private joint-stock companies:
- Formation and Composition: The number of directors on the board is specified in the company’s articles of association. Directors are elected by the general assembly of shareholders, usually serving terms of up to three years, and they can be re-elected.
- Responsibilities and Duties: The board manages the company, sets strategic directions, and ensures compliance with laws and regulations. Directors must act honestly and in the company’s best interests, avoiding conflicts of interest unless properly disclosed and approved.
- Meetings and Decision-Making: Boards are required to hold regular meetings with proper notice given to all directors. Decisions are based on majority voting, following the quorum defined in the company’s articles.
- Remuneration: Directors’ compensation is determined by the general assembly and may include a percentage of the company’s profits, within the legal limits.
- Liability and Accountability: Directors can be held liable for damages resulting from fraudulent acts, misuse of power, or violations of the law or company articles. Shareholders can take legal action against directors for misconduct that harms the company.
- Dismissal and Resignation: Directors can be dismissed by the general assembly before their term ends if necessary. They may also resign, provided it doesn’t harm the company and proper procedures are followed.
The issuance of Ministerial Resolution No. (137) of 2024 marks a significant milestone in the UAE’s journey toward gender equality and inclusive economic development. By requiring at least one woman on the boards of private joint-stock companies, the UAE strengthens its commitment to women’s empowerment and sets an example for the region and the world.
As the January 2025 implementation date approaches, companies have the opportunity to lead the way in embracing diversity and reaping the associated benefits in corporate governance and performance.
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