H.E Maryam Al-Suwaidi, Deputy Chief Executive Officer for Legal Affairs, Issuance and Researches, has said that the Commercial Company Law is very clear on two points related to payment of bonus to board members, adding that Article 118 of the Law states that such payment must not be more than 10% of the net profit of the company after deduction of costs, reserve and distribution of profit, which must not be less than 5%, to shareholders.
Speaking to the Arabic daily, "Al-Bayan", Al-Suwaidi said based on the above Article, it is unlawful to distribute allowances to board members unless after the distribution of profit of a minimum of 5% of the company's capital. "But it is also clearly possible for the shareholders, during an ordinary general assembly meeting, to waiver the distribution of the profit so that it can be converted to lawful reserve. In this case, payment of bonus to the board members can be made," she explained.
Regarding the rights of shareholders to file a lawsuit against board members in case the latter violates the law on this matter, Article 136 of the Commercial Companies Law says that any decision made to serve or harm the interest of a certain group of the shareholders, or to bring special benefit to board members or others at the expense of the interest of the company can be nullified, she further explained.
She buttressed her argument by quoting Article 114 of the Law, which states that: "Any shareholder may file a lawsuit severally if the company fails to do so over a mistake which may cause harm to him as a shareholder. The company must be informed about the intention to bring a lawsuit against it. Any provision in the company's statute that prevents such right is null and void".