The Court of Cassation – Second Civil and Commercial Division – issued a ruling rejecting an appeal, thereby upholding the validity of the lower court and appellate judgments that dismissed a lawsuit seeking the removal of a director of a prominent company.

In its reasoning, the Court stated that a director may only be removed if it is proven that he committed fraud, gross misconduct, deliberately harmed the company’s interests, pursued personal gain at its expense, or engaged in activities conflicting with its corporate purpose—none of which the appellants were able to establish in this dispute.

The Court further clarified that the mere absence of profits or the underperformance of certain business activities is not, in itself, sufficient grounds for removal, absent evidence of a breach of duty or mismanagement.

The judgment also underscored that although the appellants held a relative majority stake (51%), they failed to follow the proper legal procedure, namely convening an extraordinary general assembly in accordance with the Companies Law and the articles of association. This procedural lapse deprived their lawsuit of the necessary legal basis.

Commenting on the ruling, Dr. Fawaz Al-Khateeb, representing for the respondent (the director), stated:

“This judgment reinforces the principle of stability within companies. It affirms that the removal of a director is not a tool to be used arbitrarily by shareholders, even those holding a majority—but is subject to strict safeguards designed to protect the corporate entity and ensure continuity of business in an investment-driven environment. The ruling also underscores the importance of strict adherence to proper legal procedures under the Companies Law.

 

Source: Alrai, Alseyassah, Alanba, Dasman, cckwt