The Company Director Checklist. Dubai International Financial Centre. United Arab Emirates

Transcription

1 The Company Director Checklist Dubai International Financial Centre United Arab Emirates Contact: Ibrahim Elsadig ENN/ /

2 Item Section Check Item Section Check Understand Understand directors duties 5 8 Contribution expected 1 Give notice of potential conflicts 8, 10 Appropriate remuneration 1 Give notice of shareholdings in other companies 8, 10 Appropriate corporate governance procedures 1, 17 Understand reporting and disclosure obligations 10, 11 Meet Appropriate compliance / due diligence 17 Chairman and Vice-chairman 2 Indemnity clause in the Company s Constitution and indemnity agreement 18 Other directors 2 Insurance in place 19 Senior management team 2 Assets structured 21 Company s auditors 2 Company s lawyers 2 Review Historical accounts 3 Company s Constitution 3 Board papers and minutes 3 NASDAQ Dubai announcements and press 3 ENN/ /

3 TABLE OF CONTENTS INTRODUCTION... 1 BEFORE APPOINTMENT BY A COMPANY... 3 ONGOING DUTIES... 4 TO WHOM ARE DUTIES OWED?... 5 DUTIES... 5 CONFLICTS OF INTEREST DEFENCES MARKET DISCLOSURE STATUTORY FILINGS OTHER SOURCES OF LIABILITY SPECIAL CIRCUMSTANCES SELF-DEFENCE ENN/ / Page (i)

4 INTRODUCTION The United Arab Emirates (UAE) is a union of seven Emirates. Its legal regulation is broadly comprised of federal laws, which generally apply in all of the Emirates, and local laws, which apply to specific Emirates only. In addition, each Emirate contains a number of different free zones. Certain UAE laws (local and federal) do not apply in the free zones; typically, for example, each free zone has its own rules and regulations concerning the regulation of companies registered in such free zone. There are many types of company in the UAE. The most common of which is a limited liability company (an LLC). Many of the free zones have adopted the model of an LLC in creating their own Free Zone Company and Free Zone Establishment regime (typically Free Zone Establishments will only have one shareholder whereas Free Zone Companies will have more than one and, as a consequence, there are differences in their operation and powers). The most advanced free zone (in terms of legal regulation) is the Dubai International Financial Centre (the DIFC). The DIFC has adopted (in relation to civil and commercial matters only, other matters, including criminal law, are outside the DIFC s jurisdiction) a common law system, including in relation to the regulation of companies, and has its own court system and stock exchange (see below). As a common law system, the DIFC courts have looked to other common law jurisdictions, typically England, for judicial guidance in their decisions. In many instances, English law precedents have been afforded persuasive authority. Only shares in the following types of company can be publically traded in the UAE: (a) (b) UAE Public Joint Stock Companies (PJSCs) (or equivalent companies established outside the UAE). Shares in PJSCs can be listed on the UAE s two stock exchanges called the Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) (each of which is regulated by itself and the Emirates Securities and Commodities Authority (ESCA)); and DIFC Companies Limited by Shares (a DIFC Company) (or equivalent companies established outside the UAE). Shares in DIFC Companies can be listed on the DIFC s stock exchange called NASDAQ Dubai (regulated by both the exchange itself and the Dubai Financial Services Authority (the DFSA)). This Company Director Checklist (this Checklist) has been designed as a practical guide to the main duties and obligations of a director of a DIFC Company listed on NASDAQ Dubai. We have produced a similar checklist in relation to the directors of UAE PJSCs listed on DFM or ADX. SCOPE Many aspects of the law in the DIFC are based upon law in other common law jurisdictions, primarily the laws of England and Wales. However, the DIFC is a new jurisdiction and many of its legislative provisions have not been tested in the DIFC court to date, consequently regulatory authorities, public bodies and courts are applying often relevant laws for the first time and as a result the application of many of its laws and regulations is uncertain. The content of this Checklist should be reviewed on this basis. A director of a listed company and the listed company itself should always obtain specific advice in regard to disclosure and other obligations they may be subject to as a result of such listing. APPLICABLE LAWS The primary pieces of relevant legislation are: DIFC Companies Law (DIFC Law No. 2 of 2009) (the DIFC Companies Law); ENN/ / Page 1

5 DFSA Offered Securities Rules (the Offered Securities Rules); NASDAQ Dubai Listing Rules (Version 1.0, 25 September 2005 ) (the Listing Rules); DFSA Takeover Module (the Takeover Module); DIFC Insolvency Law (DIFC Law No. 3 of 2009) (the DIFC Insolvency Law); DIFC Law of Obligations (DIFC Law No.5 of 2005) (the DIFC Law of Obligations); and DIFC Markets Law (DIFC Law No. 12 of 2004) (the DIFC Markets Law). While this Checklist refers to regulations produced by the DFSA, it does not cover the duties and obligations of firms and individuals authorised by the DFSA to undertake activities in relation to financial services. You should seek specific advice about the increased obligations that are imposed on directors of such firms. SNR Denton: Middle East offices in Dubai, Abu Dhabi, Manama, Cairo, Doha and Muscat. Associate offices in Amman, Kuwait and Riyadh. Associate firm in Beirut. This Checklist does not constitute legal or other advice. The information in this Checklist is not specific and by using it you agree to accept the terms and limits of liability available on You should not rely or act on any of the information contained in this Checklist without getting specific professional advice. You are solely responsible for any actions taken in connection with this Checklist. To the extent permitted by law, SNR Denton, its partners, employees and agents accept no liability and disclaim all responsibility for the consequences of your or anyone else s reliance on any information contained in this Checklist or for any decision based on it or by any reference to this Checklist. This Checklist was issued on 14 July Any person proposing to become a director of a Company Limited by Shares listed on NASDAQ Dubai should be aware it is a relatively new exchange in international terms. Many of the laws, rules and regulations of the DIFC, the DFSA and NASDAQ Dubai have not been tested by the courts of the DIFC, and the principal companies law in the DIFC, the DIFC Companies Law, does not contain a sophisticated corporate governance or codified directors duties regime. In this regard, the DIFC Companies Law has been supplemented by ESCA, which is bridging the gap in governance of public companies in the DIFC. However, the DFSA and the courts of the DIFC are interpreting and enforcing several of the laws and rules for the first time and, as such, the position and criteria are subject to change. SNR Denton is the collective trade name for an international legal practice. SNR Denton & Co. is registered with the DFSA and regulated by the Solicitors Regulation Authority of England and Wales. The SNR Denton & Co. partnership comprises SNR Denton Middle East Partners LLP and SNR Denton Middle East Limited. Any reference to a partner means a partner, member, consultant or employee with equivalent standing and qualifications in one of SNR Denton s affiliates. Please see snrdenton.com for Legal Notices. ENN/ / Page 2

6 Before Appointment by a Company (the Company) 1. Understand why you have been approached and what you are expected to contribute; the remuneration package on offer; and any existing corporate governance procedures. The prerequisites to accepting an appointment should be that: you have something worthwhile to contribute; you can meet the expectations for your contribution; you are not expected to be a passive director; the remuneration package meets your expectations; and adequate corporate governance procedures are in place to ensure you can perform and are protected (see section 17). 2. Meet the Chairman and Vice-chairman; other directors (including recently retired directors); the senior management team; the Company s auditors; and the Company s lawyers. You should: obtain a briefing on the history and strategy of the Company; understand the major drivers of performance and key performance indicators; get a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of the Company; get a background/resume on the other directors and key members of the management team; understand relationships and roles within the management team; ENN/ / Page 3

7 understand who are the key suppliers or customers; understand the status of relationships with employees; obtain an industry briefing; get the auditors input and perceptions on historical accounts and disclosure issues; and understand key legal relationships, any past or current litigation and issues with compliance and regulators. 3. Review the past five years historical accounts; the Company s Memorandum and Articles of Association (the Company s Constitution); the Company s licence (commercial/financial/professional, as appropriate); the Company s commercial registration; board papers and minutes for the prior year; announcements to NASDAQ Dubai; and press clippings for the prior year. You should: have any abnormal losses explained; review accounts for trends; establish whether valuations of intangible assets are realistic; review the Company s Constitution for any restrictions on your power as a director or any shareholder-specific provisions (such as a power to veto board decisions); review board papers and minutes to get a feel for current issues; and review the Company announcements to ensure the Company has made full and timely disclosure to the market. Ongoing Duties 4. Think About: In particular, watch out for: ENN/ / Page 4

8 the information provided to you by the Company, and the quality of that information; the information you have obtained from independent sources, and how it compares with the information provided by the Company; whether there are any gaps in the information you have been provided with or you have obtained; your impressions of the Company s team of officers and advisers; and your duty to act in the best interests of the Company. The dominant director does any directors (or officer) exercise undue control over the Company s assets or affairs? Inactive non-executive directors do the non-executive directors act as a check on the actions of management and executive directors? Lack of independence for example, does the Company have independent directors, an audit committee and/or an independent auditor? Inadequate internal controls for example, does the board function effectively, are reporting procedures adequate, are each of the directors and the Company s shareholders sufficiently informed about the Company s operations and financial status, and are concerns dealt with in a timely and effective manner? To Whom are Duties Owed? 5. To whom are duties owed? The Company, its shareholders, NASDAQ Dubai and certain See the following sections of this Checklist. interested third parties (including relevant authorities). Duties 6. What duties are owed under the laws of the DIFC? (Articles 53 and 54 of the DIFC Companies Law, In discharging their duties, a director must: act honestly, in good faith and lawfully, with a view to the best interests of the Company; The duties in the DIFC Companies Law are judged objectively. Understand the skills of your fellow directors among the board of directors do you have the right mix, given the requirements of the ENN/ / Page 5

9 Article 37 and Part 8 of the DIFC Law of Obligations) Action/Issue exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; ensure that they does not misuse information received directly, or indirectly, which could reasonably be regarded as confidential or where they knows or ought to know the information is confidential; be aware of the provisions in relation to companies giving their directors financial assistance. This can be in the form of: a loan, debenture, credit facility or similar; or a guarantee, security or indemnity in connection with a financial instrument such as those above, whether provided by the Company or another person; or any other form of financial assistance as may be prescribed in the DIFC Companies Regulations, save where: Company? If not, consider replacing directors or adding to the board. Consider the: size of the Company; composition of the board; and distribution of work within the board. You should take a diligent interest in the information available and the information you should reasonably be reviewing. If this is not being provided, require it to be. Turn up to board meetings unless you truly cannot attend (you will be retired if you fail to attend three times in a row without an excuse acceptable to the rest of the board) and organise special meetings if an urgent decision needs to be made. On important decisions, or where there are strong reasons to scrutinise a decision, a board discussion may not be enough. at least 90 per cent of the shareholders attending a general meeting of the Company consent; and all of the directors resolve that the financial assistance does You may need: a written report from management and the opportunity to question them; or not materially prejudice the financial interests of the Company or its interests; comply with the following fiduciary duties owed to the Company an independent report to the board. No specific penalties are listed in the DIFC Companies Law in relation to breaches of Article 53. However, the DIFC Companies ENN/ / Page 6

10 of: loyalty; not being in a position where a conflict arises; no secret profits; confidentiality; and exercising care, skill and diligence; and Law sets out a number of grounds on which an application may be made to court where there has been a breach of the DIFC Companies Law. It is therefore possible that an action could be brought against a director for a breach of their duties pursuant to Article 53. The following is a summary of the most likely grounds for a claim to be brought against a director for breach of their duties. comply with corporate governance requirements on, for example: Compensation for loss suffered Article 133: A director may be liable pursuant to Article 133 of the DIFC board composition and annual re-election; the establishment and maintaining of committees (typically an audit, remuneration and nomination committee); and the prohibition on dealing in the Company s shares in specified periods throughout the financial year. Companies Law to pay compensation to anyone who has suffered loss or damage as a result of their breach of the DIFC Companies Law. A director may be liable to pay compensation pursuant to Article 133 where they have intentionally, recklessly or negligently committed a breach of their obligations pursuant to the DIFC Companies Law. A director does not therefore need to be knowingly in breach of their obligations to be liable if they are reckless or negligent as to the fulfilment of their duties as a director, then they may also be liable to compensate individuals who have suffered loss as a result. Where a person brings an action against a director pursuant to Article 133, the court may make an order for: (i) ENN/ / Page 7

11 compensation; (ii) recovery of property; or (iii) any other order that the court sees fit. Unfair prejudice Article 134: Article 134 of the DIFC Companies Law provides that if the Company s affairs are being conducted in such a way as to be unfairly prejudicial to the interests of its shareholders generally or to the interests of one or more shareholders, the court may make one of a number of orders, including: an order regulating the Company s affairs; an order requiring a person to do or refrain from doing any act or thing; an order authorising proceedings to be brought in the name of or on behalf of the Company; and any order the court sees fit. It is therefore possible that the court may allow the Company itself to bring an action against a director if a shareholder complains that a breach by a director of their duties amounts to an unfair prejudice on the shareholders. Financial assistance: Financial assistance will be deemed to be given to a director if it is made to their spouse or child, or to a company of which they, their ENN/ / Page 8

12 7. To what extent is delegation possible? (Part 3 of the DIFC Law of Obligations) The DIFC Companies Law does not contain any provisions in relation to delegation of directors authority. However, the Company s Constitution should be reviewed to ensure there are no prohibitions, spouse or their child owns (directly or indirectly) more than 20 per cent. Breach of fiduciary duty: Where a director is in breach of their fiduciary duties they are liable to pay damage in respect of any loss suffered by the Company and any benefit they has acquired as a result. The Company can also apply to the court to set aside any agreement with the director or where the director has dealt with any property of the Company in breach of their duties. Defences: Article 137 of the DIFC Companies Law provides a defence for directors in relation to breaches of the DIFC Companies Law. It provides that if it appears to the court that an officer may be liable in respect of their conduct for a breach of the DIFC Companies Law but has acted honestly, then the court may, having regard to the circumstances of the case, excuse the individual and relieve him from their liability. It is, however, not a defence to a claim for misuse of confidential information that the director did not know they were misusing confidential information. In all cases, we recommend that reliance on the delegate must be in good faith, after the directors make individual independent assessments of the delegation to the delegate having regard to ENN/ / Page 9

13 restrictions or precedents to be followed. Similarly any other contractual arrangements between a director and the Company should also be reviewed. Directors should be aware that where a relationship of service exists (whether contractual or otherwise) the principal (in this case, the directors) may be held to be vicariously liable for the acts of an employee carried out in the course of that employee s duties. their knowledge of the company and the complexity of the matter delegated. When any authorities are delegated, clear instructions must be provided setting out the authority provided and when, for example, recourse must be made to the board. Delegation of authority will not absolve the directors from their duties or responsibilities. Conflicts of Interest 8. What is the position on conflicts of interest in the DIFC? (Articles 54 and 144 of the DIFC Companies Law) A director must, as soon as possible, disclose the nature and extent (whether direct or indirect) of all interests they have in a current or proposed transaction of the Company for the transaction not to be voidable. A director with a conflict of interest cannot participate in the making of a decision in relation to which they are conflicted. The disclosure obligation is triggered where the interest does or may conflict to a material extent with the interests of the Company and only relates to the interests of which the director is aware. Disclosure may be made by a notice in writing to the Company. Where a director does not disclose an interest, they may be liable to account to the company for any profit, gain or benefit derived from the transaction. On application by the Company, a shareholder or the DIFC Registrar of Companies, the court may also set aside such transaction. A director can avoid liability and the transaction is not voidable, notwithstanding a failure to disclose the interest, if the transaction is approved by shareholder resolution. The nature and the extent of the interest must be described in reasonable detail in the notice calling the general meeting at which the resolution authorising the transaction was passed. Defences 9. Why turning a blind eye will not relieve you of any There are no defences under the DIFC Companies Law for directors not involved in the Company s decision-making process. If a resolution or decision of the board of directors is being made in relation to which a director dissents, they should ensure that their ENN/ / Page 10

14 potential liabilities. Action/Issue A director not involved in the decision-making process may still be deemed to be liable if their actions or inactions are deemed negligent. dissent is formally noted in the minutes of such meeting. Market Disclosure 10. Understanding your disclosure obligations as a director of a DIFC Company (Rules 8 and 9 of and Appendix 2 to the Offered Securities Rules and the Listing Rules). A director must disclose their financial interests in the Company and the interests of any: close relative; person controlled by them; body corporate that they are a director of or partnerships they are a partner of; and person that they act in concert with, when these interests change or exceed defined levels in the Offered Securities Rules. Directors are responsible for ensuring that the Company complies with the ongoing reporting requirements of the Offered Securities Rules. The Offered Securities Rules set out a wide range of events and matters requiring disclosure, for example: material developments in the Company that constitute pricesensitive information and other matters that may affect the Company s share price; changes to the Company s governing body; You should seek specific legal advice in relation to your disclosure obligations. A breach of a director s and/or the Company s disclosure obligations can result in criminal and civil penalties depending on the severity and nature of the breach. Please note: NASDAQ Dubai issued consultation paper No. 1 of 2011 containing proposed changes to the Listing Rules. The consultation period closed on 17 March. No further information about these proposed changes has been published since. ENN/ / Page 11

15 information regarding new directors; significant transactions; transactions with connected persons and associates; and interim and annual financial statements and reports. Similar obligations are also imposed by the Listing Rules. Statutory Filings 11. Understanding what the Company must do to comply with its statutory obligations. (the DIFC Companies Law, the Offered Securities Rules and the DFSA Markets Law) Understand that the Company has statutory obligations relating to, for example: keeping minutes of meetings; maintaining the shareholders register and filing the annual return; ensuring that the Company accounts are prepared, approved by the directors, examined and reported on by the auditors and laid before the AGM for discussion by and approval of the shareholders within six months of the end of the financial year of the Company; appointing auditors to carry out the duties described above; complying fully with the auditors; holding an AGM; and disclosure and filing obligations to NASDAQ Dubai, for example You may be civilly liable, in certain circumstances, for a breach by the Company of these disclosure obligations. Regarding the potential for criminal sanctions for breaches of these disclosure obligations please see section 12 below. ENN/ / Page 12

16 on a material information affecting the share price. Other Sources of Liability 12. Understand your potential liability under other legislation and the systems adopted by the Company to minimise breaches of the UAE Penal Code (Federal Law No. 3 of 1987) and the DIFC Law of Obligations). Environmental There is no specific DIFC law of the environment. Various common law torts are codified under the DIFC Law of Obligations, for example nuisance. Criminal Note that the DIFC does not have jurisdiction to pass criminal legislation. However, you may be criminally liable if your actions breach the UAE Penal Code which applies in the DIFC or any other legislation of the UAE that specifies it applies in the DIFC, for example the anti-money laundering regime. Under the UAE Penal Code, directors may be fined or imprisoned for a wide range of acts, including fraud, embezzlement, disclosure of the Company s confidential information for their personal benefit or the issuance of cheques in bad faith when funds are not available to satisfy them. Special Circumstances 13. What is the position if the Company may be insolvent in the DIFC? (Article 128 of The court has a wide discretion of orders that it can impose on a delinquent director, including orders to: repay money or return property to the Company; In circumstances where you have a mere suspicion that the Company is insolvent, you should immediately take legal advice. The DIFC s Insolvency regime is in its infancy and rules that ENN/ / Page 13

17 the DIFC Companies Law and the DIFC Insolvency Law) 14. What special responsibilities and liabilities are associated with a float on NASDAQ Dubai? (the Offered Securities Rules and the Listing Rules) Action/Issue compensate the Company in respect of any misfeasance or breach of duty; contribute to the Company s assets; or requiring the director to do, or not to do any act or thing. On the removal of the Company from the companies register, the liability of every director continues as if the Company had not been dissolved. However, all powers cease, except if sanctioned to continue by the liquidation committee or creditors, on appointment of a liquidator. An initial public offering is a detailed process and separate advice should be sought. Under the Offered Securities Rules, directors must, for example: take all reasonable steps to comply with the Offered Securities Rules; and ensure that the contents of the prospectus is true, accurate and verifiable as directors can be held liable for any error, inaccuracy or falsehood contained therein. Under the Listing Rules, directors must, for example: appoint an ongoing contact to liaise with NASDAQ Dubai; take all reasonable care to ensure that any statement, document or other information which is made available to NASDAQ Dubai directors may be familiar with from other jurisdictions concerning continued trading may not exist or be applied differently. To minimise the liability, a company that is about to be listed usually conducts a due diligence process, which is an exhaustive review of its operations usually carried out by professional advisers such as accountants and lawyers. You do not need to be involved in the detail of the due diligence or prospectus drafting but, at a minimum, you should: understand the methodology being applied for the due diligence (usually by reading the due diligence planning memorandum); read a draft of the prospectus early enough to ensure that your comments can be taken into account; read the final prospectus before you approve it; and ENN/ / Page 14

18 as part of the application is not misleading, false or deceptive and does not omit anything likely to affect the import of such statement, document or other information; take all reasonable steps to comply with the sponsor; complete a Director s Undertaking form, which requires directors to provide information about themselves, their education and roles at other issuers. By signing the form, directors also agree to use all reasonable endeavours to insure ensure you get sign-offs from the accountants and lawyers addressed to you, stating how the due diligence was conducted and signing off on the prospectus. You should also seek specific legal advice on your position. Please note: NASDAQ Dubai issued consultation paper No. 1 of 2011 containing proposed changes to the Listing Rules. The consultation period closed on 17 March. No further information about these proposed changes has been published since. 15. What special responsibilities and liabilities are associated with a takeover in the DIFC? (the Takeover Module) that the Company complies with its obligations under the Listing Rules and the Offered Securities Rules. Generally, directors of both bidding and target companies must comply with the following obligations under the Takeover Module: maintain secrecy prior to any bid unless the potential target is the subject of rumour and speculation or there is an untoward movement in their share price and there are reasonable grounds to conclude it is the potential bidder s actions that have led to the situation; obtain independent advice in relation to the takeover; ensure that any document produced or statement made during the course of a bid satisfies the highest standards of accuracy, adequately and fairly presents the information and does not mislead shareholders or create market uncertainty; and A potential bidder should seek legal advice at an early stage in considering any takeover, and a target company should seek advice immediately on becoming aware of a potential takeover. ENN/ / Page 15

19 keep all shareholders informed about the entities involved in the bid. Generally, directors of bidding companies must: make an announcement of a firm intention to bid when the target company has been informed of this intention; be aware that an acquisition of shares that takes a shareholding in a potential target above 30 per cent, whether individually or collectively with concert parties, will trigger a mandatory takeover offer for the remaining shares; and be aware that they will be able to force minority shareholders to sell within 120 days of the offer closing if they receive acceptances equal to 90 per cent of the shares to which the offer relates. Generally, directors of target companies: must be aware that a sale of shares that takes a purchaser s shareholding in the directors company above 30 per cent, whether individually or collectively with concert parties, must be accompanied by a condition of that sale that the purchaser fulfils their obligations to make a mandatory takeover offer for the remaining shares. The directors cannot resign their positions until the later of the first closing date of such a bid and the date when it becomes unconditional; ENN/ / Page 16

20 16. What special responsibilities and liabilities are associated with a joint venture? circulate their views on the bid to all shareholders in a Target Circular, including whether the target board will recommend the bid or not, with enough information for the shareholders to reach a properly informed decision; and be aware that minority shareholders can force the sale of their shares within one month of the offer closing if the bidder receives acceptances equal to 90 per cent of the shares to which the offer relates. When working in a joint venture company do not forget that your duties are primarily to your company and not to any party who nominated or appointed you to your position. Be particularly aware of situations which may give rise to conflicts of interest and the unfair prejudice provisions in Article 134 of the DIFC Companies Law (see sections 6 and 8 above). Self-defence 17. Good corporate governance processes The risk of liability arising is minimised if you have good corporate governance processes in place. At a minimum: the structure and composition of the board should be appropriate and in compliance with the Offered Securities Rules; the functions and roles of the board and its members should be clear; the information systems should be adequate; and the processes and practices should be appropriate. Structure and composition: consider issues such as the size of the board, its mix of skills, the proportion of executives and independents and committee structures. The Offered Securities Rules mandate certain proportions of non-executive to executive and independent to non-independent directors and the existence of an audit committee and a follow-up and remuneration committee. Functions and roles: the principal tasks of the board, the level of the board s involvement (as opposed to management involvement), appropriate time allocations for tasks, and the ENN/ / Page 17

21 relationship with the management team should be clearly understood and responsibility for due diligence recorded. Information systems: format for monthly reports and minutes, mechanisms for directors access to information and key performance indicators should be clearly defined. Processes and practices: meeting practices, decision-making mechanisms, reporting lines and processes for directors performance evaluation should be clearly understood. 18. Indemnities Make sure that the Company has granted you a deed of access and indemnity, which will, typically: indemnify you for liabilities you incur as a result of your position as a director; Whilst the DIFC Companies Law does not expressly limit the scope of indemnities, it is common that a company cannot indemnify its directors for fraudulent, negligent or dishonest behaviour. agree to keep insurance in place for your directors and officers liability while you are a director and for 15 years after you resign; and agree to give you access to the Company s records while you are a director and after you resign for the purposes of defending yourself in proceedings. 19. Insurance Ensure the directors and officers (D&O) liability insurance is strong and from a reputable broker or insurance provider. Review the D&O liability insurance policy and make sure it covers Most insurance policies are on a claims made basis, which means that you will obtain cover if the policy is in force when the claim giving rise to the liability is actually made as opposed to ENN/ / Page 18

22 you for all the positions you hold in the group and for liability after you have retired. Understand the exclusions and the level of cover available. when the act giving rise to the liability occurred. This means it is important to ensure that insurance remains in place after you have resigned. Insurance cannot cover you where the conduct involves wilful breach of duty, improper use of information or improper use of position or for penalties. 20. How do I resign? Review the requirements in the Company s Constitution; otherwise deliver your resignation in writing to the Company. Your resignation will be effective at the end of the day stated in the resignation or, if none, the day the notice is given. It does not need 21. Can I structure my assets to minimise losses? It is common for directors to structure their assets so that while they personally have few assets, assets are held by their spouse or in a family company. to be accepted and cannot be rejected. You should get specific professional advice on this. ENN/ / Page 19