2.3.1. Application

This section applies to:

(a)      the Board of a Reporting Entity; and

(b)      each individual Director who is a member of such a board.

Guidance: Directors duties and fair treatment of shareholders

(1)   Where a Person referred to in MAR 2.3.1 is required under any legislation applicable to such a Person to comply with a similar or more stringent requirement than the requirements in this section, compliance with those other requirements would be sufficient compliance for the purposes of the relevant requirement in this section.

(2)    For example, in the case of a reduction of share capital, more stringent procedures such as a special resolution (i.e. a vote of at least 75% of the shareholders in voting), may be required under the company law or other legislation applicable to a Reporting Entity in its jurisdiction of incorporation. Where this is the case, compliance with the more stringent requirements applicable to the Reporting Entity suffices for the purposes of compliance with the requirements in this section dealing with a shareholder approval by simple majority in MAR 2.3.8.

2.3.2. Directors’ duties

A Director of a Reporting Entity must act:

1. (a)    on a fully informed basis;
2. (b)    in good faith;
3. (c)     honestly;
4. (d)    with due diligence and care; and
5. (e)    in the best interests of the Reporting Entity and its shareholders.

Guidance: Directors’ duties

In order to meet the obligation to act with due diligence and care, a Director should (amongst other things) ensure that he or she has enough time and capacity available to devote to the job. See also the best practice standards in MAR Schedule 3 which apply to Directors of Reporting Entities who are subject to the Corporate Governance Principles.

The directors' duties contained in the AIFC Companies Regulations applicable to companies incorporated under the regulations should also be carefully considered and adhered to. These include the duty to promote the success of the Company. This is a subjective test – in other words, the duty on a Director is to act in a way he or she considers to be in the best interests of the Reporting Entity to promote its success. Directors of Recognised Companies under the AIFC Companies Regulations should obtain appropriate advice on their duties under the law applicable to that Recognised Company.

2.3.3. Equality of treatment

The Board of a Reporting Entity must ensure equality of treatment of all holders of Securities of a particular class or type in respect of all rights attaching to the Securities of that class or type of Securities.

2.3.4. Reduction of share capital

The Board of a Reporting Entity must ensure that a Reporting Entity does not reduce its Share capital unless:

1. (a)     the reduction does not materially prejudice the Reporting Entity’s ability to pay its creditors;
2. (b)     a public disclosure is made as soon as possible of any proposed change in its capital structure, and, following the redemption of listed Shares, if any, information on such redemption including details of the number of Shares redeemed and the number of Shares of that class outstanding following the redemption.
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2.3.5. Pre-emption rights

The Board of a Reporting Entity must, except where otherwise provided in the constituent documents of the Reporting Entity, ensure that a Reporting Entity provides pre-emption rights under which, on an issue of Shares by the Reporting Entity for cash, the shareholders of the Reporting Entity are offered any Shares to be issued in proportion to their existing holdings prior to the Shares being offered to third parties, unless there is prior approval of the issue of Shares without pre-emption rights by shareholders in meeting, by a majority vote.

2.3.6. Communications with shareholders

(1) The Board of Reporting Entity must ensure that all necessary information and facilities are available to its shareholders to enable them to exercise the rights attaching to the Shares on a well-informed basis.

(2)    Without limiting the generality of the obligation in (1), the Board must ensure that the shareholders:

1. (a)     are provided with the necessary information relating to the matters to be determined at meetings to enable them to exercise their right to vote, including the proxy forms and notice of meetings; and
2. (b)     have access to any relevant notices or circulars giving information in relation to the rights attaching to the Securities.
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2.3.7. Proxy solicitation

The Board of a Reporting Entity must ensure that for each meeting at which shareholders are eligible to exercise voting rights attaching to their Securities, each shareholder is given the right and means to vote by proxy.

2.3.8. Other matters requiring shareholder approval

(1)The Board of a Reporting Entity must, subject to (2), ensure that a majority of shareholders in voting approves:

(a)      any alteration of the constitutional documents of the Reporting Entity including any alteration to the memorandum of association, articles of association, bylaws or any other instrument constituting the Reporting Entity;

(b)      the appointment or removal of a Director of the Reporting Entity and the terms of such appointment;

(c)      the appointment or removal of the Auditor of the Reporting Entity; and

(d)      the placing of the Reporting Entity into voluntary liquidation;

(2)The requirement in (1) does not apply, subject to any requirements in the constitutional documents of the Reporting Entity, in relation to the appointment or removal of a Director or Auditor of a Reporting Entity in circumstances where the immediate appointment or removal is necessary in the interests of the Reporting Entity.

Guidance: Other matters requiring shareholder approval

The circumstances in which the immediate removal of a Director or Auditor may become necessary include matters affecting that Person’s fitness and propriety, such as professional misconduct of such a Person.