Manager Ordered to Pay Dh731,696 for Withholding Company Financial Records

The Dubai Civil Court has ordered the manager of a general trading company to pay Dh731,696 from his personal funds, together with 5% annual interest until the amount is paid in full, after finding that his failure to disclose the company's financial statements obstructed the enforcement of a final judgment.

 

The dispute involved a shipping company that owned a vessel and a general trading company that used the vessel for diesel fuel supply and financing activities. The shipping company had obtained a final judgment awarding it Dh731,696 in connection with the vessel's expenses and crew salaries. However, when enforcement proceedings began, it emerged that the general trading company had no funds or assets that could be seized to satisfy the judgment.

 

The execution judge subsequently ordered the company's manager to submit a financial report setting out its assets and financial position. In his report, the manager stated that the company had no bank accounts, real estate, vehicles or employees and was not carrying out any commercial activity.

 

The court then appointed an expert to examine the company's financial position. The investigation found that, as of the end of 2020, the company had receivables of about Dh42.3 million, while its liabilities exceeded Dh51.5 million. However, the manager failed to submit complete financial statements that could explain the status of the company's substantial receivables or establish what had happened to them.

 

The court noted that, as a general principle, the manager of a limited liability company is not personally responsible for the company's obligations. Personal liability may arise, however, where there is evidence of fraud, misrepresentation or a breach of the law.

 

In this case, the court found that the manager's unjustified refusal to provide the company's financial statements had prevented the execution of the final judgment and hindered the shipping company's ability to recover the amount awarded to it. The court considered the conduct to constitute fraud, misrepresentation and a violation of the law.

 

The court therefore ordered the manager, in the presence of both parties, to pay Dh731,696 from his personal funds, together with legal interest at 5% a year from the date the amount became due until full payment.

 

The manager was also ordered to bear the court fees and expenses and to pay Dh1,000 in legal fees. All other claims were dismissed.

 

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