Understanding Partner Liability in UAE LLCs: Legal Risks and Personal Guarantees

In the UAE, creditors, including banks, have the legal right to file lawsuits against companies facing financial difficulties to recover outstanding debts. In a limited liability company (LLC), partners’ liability is generally limited to their capital contribution. However, a bank may sue the company and its partners if personal guarantees were provided by the partners, which can lead to personal assets being at risk.

When an LLC is sued, the ruling and subsequent execution would typically target the company’s assets rather than the personal assets of the partners. However, if any partner has signed personal guarantees or taken loans on behalf of the company, they could be held personally liable, and their own assets could be subject to legal action. It is essential to review the terms of the agreements with creditors to understand the extent of personal liability.

If a partner decides to leave the company, it does not automatically exempt them from legal claims that arose during their tenure as a partner. The partner remains liable for debts and obligations incurred while they were a part of the company, even if they exit before legal proceedings conclude. Thus, departing a company in financial distress does not necessarily protect a partner from being involved in ongoing or future lawsuits related to prior obligations.

This legal framework underscores the importance of thoroughly reviewing partnership agreements and any personal guarantees given to creditors. For those facing legal action from creditors, it is strongly recommended to consult with a legal expert to assess the extent of liability and explore possible defenses or negotiations with the creditors.

In summary, partners of an LLC in the UAE are generally protected from personal liability unless personal guarantees are involved. However, leaving the company does not spare a partner from obligations incurred while they were involved. For any legal complexities, seeking professional legal advice is crucial to protect personal and business interests.

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