Will Company Be Liable Is Manager Issue Personal Cheque to Debtors?

business

|

February 26, 2020

|

1978 views


| Your comment matters, please click here to rate article!



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:

a. Any fraudulent activities; b. Loses incurred due to misuse of power; c. Breach of Companies Law provisions of the Memorandum of Association of the company; d. Any other gross or negligent act.

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.

Related Links


Copyright © of this article is retained by the author and/or other copyright owners. We explicitly grant you permission to download a copy, without any alteration, of this article for personal non-commercial research or study, without prior permission or any charge. This article can be utilized on your website or for marketing, however, we grant you permission to host this article on your website and no other rights. This content should not be altered in any way or sold commercially in any format without prior permission of the copyright holder. During reference of this article, full biographic details entailing the name of the author, his designation, the institute and the publishing date of the article shall be provided.


Client Testimonials

I owe the success of my case to Dr. Hassan's diligent approach. He remained focused, put me at ease and always went the extra mile. Dr. Hassan tirelessly put my case in the best possible light and I cannot thank him enough. I would highly recommend Dr. Hassan - I am grateful to him from the bottom of my heart.

Raphael Lauria
Manager, FME General Trading

Dr. Hassan Elhais is among the best legal consultants I have ever worked with. He has an amazing ability to reduce complex issues into a simple concept that non-legal people can understand. He consistently develops innovative litigation strategies that help us to achieve our ultimate legal goals.

Zhuo Liu
Client

...the extraordinary effort that has been exerted by the staff, and we specially thank Dr. Hassan Mohsen Alhais. Wishing your continues success & excellence...

H.H. Sheikh Saeed Bin
Mohammed Hashir Al Maktoum

I believe everyone should recognize what a difference Dr. Hassan Elhais work has made to people's lives; and especially to our family's life, because we will remain forever grateful to each and every one of his team.

Luis Pozueco
Client

Dr. Hassan Elhais never fears cases that involve exposure and he always gives me his honest assessment of our chances of success, which is invaluable to me.

Bassam Yamout
Director, JM Metal Trading LCC

He aided us not only in providing legal advice but also in all legal issues that required a long term strategic approach to achieve most favorable and optimum outcomes he provided us with high level of professional service.

Philippe Delbecq
Client

Dr. Hassan Elhais is a responsible, reputable counsel who operates to high levels of service.

British Client

Dr Hassan Elhais is responsive, thorough and creative with his advice, and is a valued advisor and legal consultant.

Asma Mattar
Manager, Italian Style

Regardless of the complexity of the matter I know Dr. Hassan Elhais will consider not only legal strategy but also business practicalities in providing advice and litigation options.

Dr. Massimo Hakim
Chairman, Italian Style

I recommend Dr. Hassan Elhais to anyone who says 'I'm in legal trouble'. I was extremely satisfied with the high standard of his work. He has always been there when I have needed him and I refer all my clients, family and friends to him/his firm.

Manish Gupta
Marketing Manager, Express Digital System

Dr. Hassan Elhais was very professional and he listened to my needs. He was very prompt, efficient and always kept me informed. Dr. Hassan Elhais's service was excellent and I would definitely recommend him to friends and colleagues.

James Horsley
British Client

Comments

No comments found.

Leave a Comment

Your email address will not be published. Required fields are marked *

Want to know more?
Then talk to us.


Select your Language:

        

Main Menu