• Capacity of company and power of directors to bind it

    • 35. A company's capacity

      The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company's constitution.

    • 36. Power of directors to bind the company

      (1) In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company's constitution.
      (2) For this purpose—
      (a) a person "deals with" a company if he is a party to any transaction or other act to which the company is a party,
      (b) a person dealing with a company—
      (i) is not bound to enquire as to any limitation on the powers of the directors to bind the company or authorise others to do so,
      (ii) is presumed to have acted in good faith unless the contrary is proved, and
      (iii) is not to be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company's constitution.
      (3) The references above to limitations on the directors' powers under the company's constitution include limitations deriving—
      (a) from a resolution of the company or of any class of shareholders, or
      (b) from any agreement between the members of the company or of any class of shareholders.
      (4) This section does not affect any right of a member of the company to bring proceedings to restrain the doing of an action that is beyond the powers of the directors.

      But no such proceedings lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.
      (5) This section does not affect any liability incurred by the directors, or any other person, by reason of the directors' exceeding their powers.
      (6) This section has effect subject to section 37(constitutional limitations: transactions including directors or their associates).

    • 37. Constitutional limitations: transactions involving directors or their associates

      (1) This section applies to a transaction if or to the extent that its validity depends on section 36 (power of directors to bind the company).

      Nothing in this section shall be read as excluding the operation of any rule of law applicable in the Abu Dhabi Global Market by virtue of which the transaction may be called in question or any liability to the company may arise.
      (2) Where—
      (a) a company enters into such a transaction, and
      (b) the parties to the transaction include—
      (i) a director of the company or of its holding company, or
      (ii) a person connected with any such director,
      the transaction is voidable at the instance of the company.
      (3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (2)(b)(i) or (ii), and any director of the company who authorised the transaction, is liable—
      (a) to account to the company for any gain he has made directly or indirectly by the transaction, and
      (b) to indemnify the company for any loss or damage resulting from the transaction.
      (4) The transaction ceases to be voidable if—
      (a) restitution of any money or other asset which was the subject matter of the transaction is no longer possible, or
      (b) the company is indemnified for any loss or damage resulting from the transaction, or
      (c) rights acquired bona fide for value and without actual notice of the directors exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or
      (d) the transaction is affirmed by the company.
      (5) A person other than a director of the company is not liable under subsection (3) if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.
      (6) Nothing in the preceding provisions of this section affects the rights of any party to the transaction not within subsection (2)(b)(i) or (ii).The Court may, on the application of the company or any such party, make an order affirming, severing or setting aside the transaction on such terms as appear to the Court to be just.
      (7) In this section—
      (a) "transaction" includes any act, and
      (b) the reference to a person connected with a director has the same meaning as in Part 10 (company directors).