One of the common disputes in Joint Liability Companies is the extent to which the non-managing partner has the right to monitor and inspect the company’s business and works.
Since such disputes lead to the non-stability of work and cause damages to its business, The Commercial Companies Law regulates that matter on Paragraph No. ( 2 ) of Article No. ( 45 ), which states :
“A partner who is not a manager may not interfere in the management affairs unless agreed otherwise. However, such partner may demand to inspect the works of the company as well as check its books and documents and to make notes thereon to the manager of the company.”
And whereas the above-mentioned article obligates the management of the company to enable the partners to check and review the documents, books, and works of the company. In addition, a partner may make notes on the works of the company, on which the manager shall respond and explain. However, the law does not mention the mechanism for the process.
Therefore, it is important the company management issues a regulatory decision setting a mechanism to periodically provide the other partners with the financial statements and important documents and books that are deemed necessary to be reviewed by the rest of the partners.
The regulatory decision should determine a deadline for the partners to submit their notes and feedback on the reports they received. In addition, a deadline shall be decided for the manager to reply to the partners’ notes and explain necessary matters.
Prepared by/ Mr. Mohamed Samaha
Abdullatif Aljassmi Advocates and Legal Consultants
21 Sep 2022