Understanding the Role, Responsibilities, and Liabilities of a General Manager in a Free Zone Company

Establishing a business in the UAE’s free zones, such as the International Free Zone Authority (IFZA), offers many advantages — 100% foreign ownership, attractive tax benefits, and simplified regulatory requirements. However, every company registered under IFZA must adhere to certain corporate governance structures and legal obligations, especially regarding the appointment of key roles like the General Manager, Directors, Secretary, and Shareholders.

This article outlines the responsibilities, legal obligations, and liabilities of these roles, particularly focusing on the General Manager (GM) as mandated by IFZA regulations and the UAE Commercial Companies Law (CCL).

Corporate Structure Requirements in IFZA

When incorporating a company under IFZA, the following structure requirements must be met:

• One General Manager (GM): The company must appoint a single GM responsible for managing daily operations and representing the company.
• One Secretary: Responsible for handling official documentation and compliance.
• At least One Director: Responsible for overseeing the company’s strategic direction.

For instance, one individual can assume multiple roles. The same person may act as the Director, Secretary, General Manager, and Shareholder, depending on the company’s preference. This flexibility allows entrepreneurs to streamline operations while remaining compliant.

Share Transfer Provisions

Shareholders play a pivotal role in the company’s ownership structure. IFZA regulations outline the process for transferring shares, ensuring transparency:

• If a shareholder wishes to transfer shares (with or without consideration) to a non-shareholder, written notification must be provided to the General Manager.
• Upon receiving this notice, the GM must promptly notify all other shareholders.
• Existing shareholders have the right of first refusal to acquire the offered shares at the agreed price.

This process protects shareholders’ interests and ensures ownership remains transparent and well-regulated.

Key Responsibilities of the General Manager (GM)

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The General Manager holds the most critical executive role in an IFZA company. Below are the principal duties assigned:

1. Corporate Representation

The GM officially represents the company in all business dealings, including government departments, banks, and third-party contracts. This authority covers everything from signing contracts to representing the company in legal matters.

2. Company Register Maintenance

The GM is responsible for maintaining an accurate and updated Shareholders’ Register. This register must be accessible to shareholders and other interested parties.

3. Financial Management and Reporting

• Manage the preparation of annual financial statements, including the balance sheet and profit and loss account.
• Prepare an annual report detailing the company’s financial position, activities, and profit distribution proposal.
• Present these documents at the Annual General Meeting (AGM) for shareholder approval.

4. Banking and Financial Authority

All company-related banking transactions — opening accounts, issuing cheques, securing credit facilities — must be authorized and signed off by the GM.

5. Regulatory Compliance and Risk Management

The GM must:

• Ensure compliance with IFZA regulations and broader UAE laws.
• Secure necessary permits and licenses for legal operations.
• Implement measures to protect employees, assets, and the company’s interests.

6. Accountability and Removal

The GM can be removed or replaced through a formal company resolution, holding them directly accountable to shareholders.

Legal Duties and Responsibilities Under UAE Commercial Companies Law (CCL)

Both the General Manager and Directors must act diligently, within the framework of the company’s Memorandum of Association (MoA), and always prioritize the company’s best interests.

Key duties include:

• Preserving the company’s rights.
• Operating strictly within authorized powers and company objectives.
• Avoiding fraudulent acts, abuse of power, or conflicts of interest.
• Preventing management errors or gross negligence.
• Ensuring proper reporting, share issuances, distributions, and management of general meetings.

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Criminal Liabilities of the General Manager and Directors

Violations of CCL or IFZA regulations can lead to severe consequences, including criminal penalties. Examples of potential criminal liabilities include:

• Failure to convene the General Assembly when company losses reach 50% of share capital.
• Refusing shareholder access to general meeting records or company books.
• Withholding documents required by auditors or regulatory authorities.
• Providing misleading information or concealing facts.
• Violating any company law, regulation, or IFZA directive.

Such offenses can attract heavy fines, penalties, and even imprisonment depending on the severity and impact of the breach.

Conclusion

The roles of General Manager, Director, and Secretary in an IFZA company carry significant responsibilities, with the General Manager being the cornerstone of operational and legal compliance. While IFZA allows flexibility in assigning roles, the importance of understanding the legal framework, liabilities, and obligations cannot be overstated. Business owners must carefully appoint qualified individuals who can uphold their duties, ensure compliance with UAE and IFZA regulations, and protect the interests of shareholders and stakeholders alike.

Maintaining corporate governance standards is not just about avoiding penalties — it lays the foundation for sustainable growth, investor confidence, and long-term business success in the UAE. For more visit Arnifi.
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