EXTENT OF DIRECTORS’ / OFFICERS’ LIABILITY IN A LIMITED LIABILITY COMPANY

The UAE courts reiterate in a recent pronouncement wherein the managing director/ manager of a limited liability company (‘the company’) shall happen to be personally liable for the company’s liabilities if none of the communication of that company explicitly mentioned that the company is limited by liability and did not mention the extent up to which the company is limited in its liability.

UAE courts took the view that since the person dealing with the company was not aware of the amount of liability, up to which the company was liable; it was managing director / manager’s duty to mention in all communications, agreements the extent of limited liability.

In light of that it is strongly suggested that companies (limited partnerships, limited civil company, limited liability companies, free zone companies or establishments) mention on each of their communication, business documents the following information, more specifically and explicitly

‘That the company is a company with limited liability’

‘To mention the paid up share capital of the company to which extent the company is limited in its liability’

Mentioning on the corporate stationery only the acronyms ‘LLC, FZCO, FZE, Pvt. Ltd’ etc does not convey the amount to which the liability is limited.

Accordingly, it is now become mandatory to mention the words ‘limited liability’ and ‘the amount of paid up capital’ on the letter heads, all agreements, contracts, local purchase orders, financial instruments, business communications and any other corporate stationery.

In the absence of above being explicitly stated, the signatory could be held personally liable for the liabilities of the company.