Corporate Governance Regulatory Framework for Non-Listed/ Private Companies in UAE



This article is written by P.K. Abduraheem, one of the Founders of Gulfvakil, and was originally featured on Legaladviceme.com and Mondaq.com.


This is the third and last article in a series of articles on corporate governance practices under the best practice principles and the UAE legal system through innovative suggestions of its implementation for your organisation.


(1) Read first article: Importance Of Corporate Governance And Its Basic Principles: What is Corporate Governance?

(2) Read second article: The Regulatory Framework on Corporate Governance in the UAE


The key pillars of Corporate Governance:

Transparency and accountability, two frequently used words in the management and administrative world. And rightfully so.


Conceptually, these are interconnected. Anything transparent can have greater accountability with potential productivity and stability. Corporate governance is structured under these phenomenal concepts. Good governance goes beyond compliance. In today's globalized world, it is a principle of sustainable development. Eventually, it is a question of sustenance for companies to opt for the governance mechanism in their corporate strategy.


Legal framework around corporate governance for private companies in UAE:

Unlike the common law jurisdictions, the UAE commercial legal framework does not mandate the requirement of a deep governance mechanism for private companies. The gulf market, in general, is easily penetrable due to multiple factors. Entry and exit happen tremendously. But the stable performance depends upon the quality of corporate strategy in line with the objectives of the company. The institutions, small and giants collapse alike due to internal corruption and failure of senior management.

Since there is no internal mechanism to describe ‘who does what’ within the organisation, it enables the unscrupulous elements to save their hands from the law. It is simply logical to keep the governance away to cut the cost at the initial level. But it should not be at the cost of losing the value of the organisation.


It is a usual complaint from SME industry that a trusted employee cheated, ex-employee joined a competitor, piracy of data, ex-employee using the technical know-how, management is not under control...etc. Ultimately, the business has become a big headache to the owners substantially result in collapse with higher liability.


The absence of proper documentation or existence of improper documentation is an issue which the industries suffer from often. Besides, the contractual relationship is not documented with appropriate terms and conditions or the legal documents are signed without knowing the repercussions of it.


Corporate governance practice eradicates the potential issues in the industry by placing an appropriate mechanism in compliance with the law of the land for keeping the organisation structured under the umbrella of the corporate manual of the organisation.


It acts, along with delegated documentation, as the master document for administration, management, operation and the end solution for achieving the objectives of the company through transparency, accountability and productivity with stable performance. The proper implementation of governance safeguards the company and mitigate the risk.


How can I implement a Corporate Governance Framework for my organization?

This requires the right knowledge of local legal frameworks and the best practices in the market. Hire one of our lawyers to assist you in this process. Contact us now at communications@gulfvakil.com.

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