ARTICLES & UPDATES

Members of the Board of Directors are entitled to annual bonuses and may also receive compensation for additional tasks assigned to them by the Board. While the Board operates collectively, it is permitted to distribute work among its members based on the nature of the company’s activities. 

The Board may delegate specific tasks or oversight responsibilities to one member or a committee, or authorize them to exercise certain powers or competencies entrusted to the Board. Such tasks remain part of the Board’s official duties, and the member exercises them in their capacity as a Board member. Some argue that this delegation does not justify additional remuneration for the managing director or committee members.

Legally, the entitlement to Board bonuses is linked to the company achieving profits, and such bonuses should not exceed the percentage set by law or the company’s articles of association. However, in practice, when profits are not achieved, bonuses may still be paid under different designations such as attendance fees, consultancy rewards, or additional task fees. 

The law does allow the Board to receive a bonus of up to KWD 6,000 per year if the company incurs losses, a relatively modest amount given the extra effort required from the Board to revive the company. Therefore, Board members’ compensation should be proportional to the interests of the company and its shareholders and sufficient to attract highly qualified and experienced individuals.

Executive managers’ commissions are governed by their employment contracts. Any additional commissions or bonuses outside the scope of the contract must be approved by the Board and supervised by the General Assembly. This is because the executive manager’s role is to implement the Board’s decisions and carry out tasks such as contracting with third parties under the Board’s authority.

Certain types of commissions, however, are not permissible. For instance, a commission for securing a loan is not justified, even with Board approval, as the work does not constitute an achievement warranting compensation. From the bank’s perspective, the gain is internal, and banking regulations and employee contracts reinforce this. Such commissions remain legitimate only if they comply with banking regulations and loan conditions; otherwise, providing false documents or information can lead to criminal liability.

Other commissions, such as payments for merely changing a service provider, are generally not linked to company profits and may often involve an external agreement between the employee and the provider. Such arrangements are improper and may violate employment contracts and fiduciary duties, particularly if the provider is not the best choice for the company. The same principle applies to commissions for facilitating the divestment of income-generating assets.

A further question arises regarding commissions from different entities under a parent company. Each entity has its own legal personality and governance, and any bonuses or commissions outside the scope of the employment contract, company agreement, or articles of association must be approved by the Board and the General Assembly.

In conclusion, all commissions, bonuses, and additional remunerations must comply with the law, company regulations, and fiduciary obligations to ensure transparency, fairness, and alignment with shareholders’ interests.

By Attorney Abdulrazzaq Abdullah E-mail: azq@arazzaqlaw.com