UAE Revamps Cooperative Board Rules: Key Changes in Ministerial Decision No. 259/2024
The United Arab Emirates (UAE) has introduced significant amendments to the federal law governing the composition and operation of the Board of Directors for cooperatives through Ministerial Decision No. 259/2024 (the Decision). The Decision reviews the terms, conditions, and procedures related to board governance, aiming to enhance diversity and transparency within cooperative organisations.
Understanding Cooperatives
Cooperatives are associations of individuals who collectively address their social, cultural, and economic needs through a democratically controlled enterprise. Unlike commercial companies, which focus on maximising financial returns for shareholders, cooperatives aim to provide high-quality services and benefits to their members as highlighted by the Ministry of Economy. The UAE Ministry of Economy highlights the cooperative sector’s role in achieving the UAE Centennial 2071 objectives.
Some examples of cooperatives which currently operate within the UAE include:
- Union Coop is a cooperative which operates within the consumer industry. The largest consumer cooperative in the UAE.
- Sharjah Coop was founded in 1977 and was one of the first cooperative societies in the UAE, operating within the consumer retail market.
- Operating within the housing sector are cooperatives like the Dubai Building Cooperative Society which aims at improving its members’ economic and social conditions.
Regulation of Cooperatives
Cooperatives are governed by Federal Law No. 6 of 2022 (the Law) which sets out a number of requirements with respect to a cooperative’s board of directors, and the Decision provides further detail on the membership of the board of directors. The Decision promotes good governance by imposing rules and requirements regarding mandatory appointments, convening meetings, diversity within the board, criteria for membership and removing a board member.
Appointment and Promoting Diversity
The Decision requires the appointment of key positions such as Chairman, Vice-Chairman and Treasurer, and holding annual meetings.
Another notable aspect of the new law is its emphasis on diversity, particularly encouraging the participation of women in board membership. Cooperatives are urged to establish criteria that promote female representation, reflecting a broader commitment to inclusivity.
Criteria for Board Membership
Those running for board membership must satisfy specific criteria, including some of the following:
- Candidates should possess relevant qualifications and experience pertinent to their roles.
- Applicants must not have been convicted of a felony or any crime involving moral turpitude or dishonesty, unless they have been exonerated.
- Candidates should not have incurred penalties from the Ministry or relevant authorities in the two years preceding their application.
The Decision also outlines the nomination process, ensuring transparency by requiring the publication of nominees' names and resumes on the cooperative's website and recording them in a special register.
Termination of Board Membership
Termination of membership on the board is also regulated by the Decision. Termination may be done in any of the following ways:
- Resignation: Voluntary departure by the member.
- Absenteeism: Failure to attend three consecutive meetings or five meetings within the same year without a valid excuse approved by the board.
- Term Expiry: Completion of the membership term.
- Dismissal: Removal by the general assembly.
- Death: Passing of the member.
- Legal Capacity: Loss of legal capacity.
- Eligibility: Failure to meet membership conditions.
Sectoral Impact
Cooperatives operate across various sectors, including housing, health, tourism, and finance. The new law regulates the process of establishing board membership within cooperatives, which will stimulate business growth in the UAE. By fostering good governance, diversity and transparency, the Decision seeks to create a sustainable cooperative sector that enhances member benefits and supports national development goals.
