A manager of a company is considered as its face bearing an extensive range
of responsibilities despite the commitments and obligations mentioned in the
Companies Law of UAE. Yet, the law does not highlight personal obligations of
loyalty and constancy.
This article by Best Corporate Lawyers of UAE will critically focus on the
special obligations of the manager in Limited Liability Company along with
liability of the company if the manager fails to perform his activities.
According to Article 84 of the Companies Law explicitly mentions that a manager
of the limited liability company (LLC) will be held liable towards third parties
under the following circumstances:
Importantly, any provision in the employment contract of the manager or in the
Memorandum of Association of the company inconsistent with Article 84 of the Law
or any other provision of the Companies Law will be considered null and void.
In line with the foregoing, Lawyers of Dubai have entertained numerous cases
where debtors file cases against the company or the manager for dishonoured
cheques issued by manager through his personal account for paying off the
debtors. In this regards, the courts always face dilemma regarding companys
liability in such acts committed by the manager.
Similarly, in Dubai Court of Cassation Case number 359 of 2004, wherein, the
plaintiff (a travel company) registered a case against the first and second
defendant (the company and its manager respectively) for demanding AED 30,000
along with 12% interest as the cheques issued by the manager from his personal
account was dishonoured.
The Court of First Instance held the second defendant (manager) liable towards
the plaintiff in his personal capacity for issuing a cheque from his personal
bank account along with 9% interest. However, the plaintiff again registered an
appeal to order both the defendants pay them jointly along with 12% interest,
which was rejected.
The matter was thereafter registered before the Court of Cassation on the
grounds that the lower courts judgment contravenes with the law as it rejected
the action against first defendant. Wherein, the court overturned and stated
that the cheques issued by the manager were for the benefit of the company.
Thus, the commercial institution was responsible for the activities done under
his name either by an employee appointed by him personally or by the manager who
he appointed.
Whereas, in another case of Federal Supreme Court case number 471 of 2009, the
court reviewed the legal questions like the liability of the manager/director of
the LLC in cases of fraud and misrepresentation and the liability of the company
in the cheques issued by the manager.
In this case, the plaintiff filed a case for the payment of cheques issued by
the company (first defendant) and signed by the managing director (the second
defendant). The plaintiff explicitly sought compensation from the second
defendant in his personal capacity, arguing that the director had clear
knowledge of the financial position of the company and still issued a cheque
which was ought to be bounced. The Court of First Instance and Appeal rejected
the claim stating that there was no element of fraud or misrepresentation.
The matter was registered before Federal Supreme Court wherein the Court held
that the director was personally liable for the dishonoured cheques and
critically stated that a director of an LLC company will still be held liable
for the actions taken on behalf of company even if such actions were not taken
in bad faith. Irrespective of the fact that the director was unaware that the
cheques would be dishonoured, he will still be liable towards the action taken
on behalf of the company.
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