Ask the law: Manager faces lawsuit as company in financial trouble
Liability of manager over the company’s debts clarified
Question:
A questioner asks: I am a manager in a limited liability company. The company is going through financial difficulty. For 6 months, there have been several lawsuits against the company before the civil court, and there is a lawsuit against the company and against me personally in my capacity as a director in the company. My question is, can I be included in my personal capacity in the lawsuit? Is it possible to issue judgments against me personally and implement them on my own money? Please advise.
Answer:
To answer such question, I would advise the questioner that:
You are not be liable with your own money for the company’s debts and should not be included in the case against the company except when it was proven that you had committed any fraudulent acts, abuse of power or violation of the provisions of any applicable law as per Article 84 of the Federal Decree-Law no. (32) of 2021 on Commercial Companies which states that “every manager in a Limited Liability Company shall be liable towards the Company, the partners, and the third parties for any fraudulent acts committed by such manager and shall also be liable for any losses or expenses it incurs due to abuse of power or violation of the provisions of any applicable law, the Memorandum of Association of the Company or the contract of his appointment or for any gross error made by the manager. Any provision in the Memorandum of Association or the contract appointing the manager in conflict with the provisions of this clause shall be deemed null and void”.
It is established in the jurisprudence of Dubai court that “the manager of the limited liability company is the one who undertakes its management, and that if he enters into a transaction with others in its name and for its account and within the limits of its activity, then the company is solely responsible for the effects of this transaction.
"It is also established that the manager of the limited liability company is not responsible with his private money (means: for The Company’s debts) except in the case of proven fraud or clearly apparent fraud or violation of the law or the company’s system and its management. Fraud is not presumed, but must be claimed and evidence must be established”.
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