Dubai: Liability of Shareholders in a Limited Liability Company

Analysis

A Limited Liability Company as defined by Article 218 of the UAE Commercial Companies Law is a company in which the liability of its partner is limited only to the extent of their shares in the capital.

However, The Dubai Court of Cassation in its rulings established an exception to this general rule laid by law. The court in the following judgment rendered its decision extending the liability of the partners in a limited liability company to reach their personal assets provided the satisfaction of certain extraordinary specific circumstances as we will see.

Summary of Facts:

• The Claimant (a creditor of a limited liability company) obtained a court judgment (First Action) against its debtor (the limited liability company, referred to as “the LLC”) obligating the latter to pay the sum of AED 781,619.07 with interest.

• The Claimant, upon failing execution of the First Action, sought recourse against the shareholders of its debtor ,the LLC, by filing another commercial action against the Respondents (shareholders of the LLC).