UAE Corporate Governance Reform – Executive Chair now permitted

The UAE Securities and Commodities Authority (SCA) has introduced a pivotal reform to the corporate governance framework for public joint stock companies (PJSCs) through Chairman’s Board Resolution No. 24 of 2025. Effective from 26 August 2025, this decision amends the existing Governance Guide (Decision No. 3/R.M of 2020), allowing the combination of the roles of Board Chairman and Company Manager (CEO) under strict conditions. This article outlines the key changes, practical implications, and strategic considerations for directors and in-house counsel.

What has changed?

Previously, the Governance Guide prohibited any individual from holding both the Chairman and CEO roles. Decision 24 of 2025 introduces a conditional exception, permitting the combination of these roles if the company meets enhanced governance requirements.

Key Amendments:

• Chairman–CEO Dual Role Permitted: Companies may combine the roles, provided their Articles of Association allow it and shareholders approve via special resolution.
• Board Independence Threshold Raised: At least 75% of board members must be independent if the roles are combined.
• Committees Must Be Fully Independent: All permanent board committees (e.g. Audit, Nomination, Remuneration) must comprise only independent directors.
• Mandatory Governance Committee: A new board-level committee must be formed to oversee the performance of the Company Manager and annually assess the justification for the dual role.
• Chairman Recusal Requirement: The Chairman must recuse themselves from chairing or voting on matters overseen by the Governance Committee.
• Enhanced Shareholder Rights: Shareholders must approve the dual role arrangement and receive full disclosure of its rationale and impact.

Strategic implications for boards and legal teams

1. Board Composition and Structure

Companies considering a unified leadership model must reassess their board composition. Achieving 75% independence may require recruiting new directors or reclassifying existing ones. Independence is defined strictly, with no exemptions for government-affiliated directors.

Boards must also ensure that all committees are reconstituted to meet the full independence requirement. This may involve removing executive or non-independent members from key oversight functions.

2. Governance Committee Oversight

The Governance Committee plays a central role in maintaining checks and balances. It must:

• Evaluate the CEO’s performance annually.
• Review the continued appropriateness of the dual role.
• Recommend whether the arrangement should be renewed or terminated.

This committee must be composed entirely of independent directors and operate with a clear mandate. In-house teams should support its formation, charter development, and reporting protocols.

3. Shareholder Engagement and Disclosure

The requirement for shareholder approval introduces a new governance dynamic. Boards must prepare a detailed justification study outlining:

• The rationale for combining roles.
• Measures to preserve board independence.
• Oversight mechanisms in place.

This study must be presented at the general assembly and disclosed in the company’s annual governance report and website. Legal teams should ensure compliance with disclosure obligations and prepare for increased scrutiny from institutional investors.

4. Risk Management and Conflict Mitigation

Combining the Chairman and CEO roles concentrates power, raising potential governance risks. The recusal requirement ensures that the individual does not influence decisions about their own performance or tenure.

Companies must implement clear protocols for meeting leadership, conflict handling, and succession planning. The Vice Chairman, who must be independent, assumes leadership in relevant discussions.

Compliance Timeline and Next Steps

Decision 24 of 2025 is already in force. Companies must act promptly to:

• Review and, if necessary, amend their Articles of Association.
• Reconstitute boards and committees to meet independence thresholds.
• Form a Governance Committee with defined responsibilities.
• Prepare shareholder resolutions and justification studies.
• Update governance disclosures in annual reports and websites.

In-house legal teams should coordinate with company secretaries, board chairs, and investor relations to ensure seamless implementation.

Conclusion

Decision No. 24 of 2025 marks a significant evolution in UAE corporate governance. It introduces flexibility for leadership structures while reinforcing oversight, transparency, and shareholder empowerment.

For companies seeking to combine the Chairman and CEO roles, the message is clear: it is possible, but only with robust governance safeguards. For others, the decision serves as a reminder that board independence and accountability remain central to regulatory expectations and investor confidence.

Comparison Table: Before vs After