UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy
sidered part of their pension. The trustee will oversee the appointed manager and provide the Court with a monthly report on the status of the debtor’s business operations. 7.2 Personal Liability of Directors Directors and board members may be held person - ally liable to the extent of their personal assets if they incur obligations on the company while knowing that the company will not be able to meet those obliga - tions upon maturity. Liability may be established if these obligations were incurred due to the directors’ gross negligence or wrongdoing. If the company is declared bankrupt, the Bankruptcy Court may require board members, managers or any person responsible for the actual management of the company, or those in charge of liquidation (in proceedings outside the framework of this law), to pay an amount proportion - ate to the fault attributed to them, upon the request of the trustee, the unit overseeing the debtor (if subject to regulatory oversight) or a creditor. 7.3 Duties and Personal Liability of Officers Upon the initiation of bankruptcy proceedings, the trustee will assume responsibility for defending the company against any claims filed against it, and will act as the company’s representative in court. If the debtor is engaged in a criminal case or a lawsuit concerning their personal status, the trustee must be involved if the case includes financial claims. The court may also permit the debtor to participate in law - suits related to bankruptcy adjudication procedures, and may allow a creditor with a vested interest to take part in these proceedings. Any trustee who embezzles funds from the debtor during their management will face imprisonment or a fine of up to AED1 million, or both. The court will mandate the return of the embezzled funds and may, upon request from the affected parties, also order compensation if deemed necessary. 7.4 Other Consequences for Directors and Officers If a company is declared bankrupt, the Bankruptcy Court may require board members, managers or other responsible individuals to compensate the company based on their fault, at the request of the trustee, regu -
latory body or any creditor. This compensation aims to address the company’s debts if it is proven that these individuals engaged in any of the following within two years before insolvency: • reckless business practices like selling assets below market value to avoid bankruptcy; • transactions involving mismanagement of funds with inadequate compensation; or • preferentially paying certain creditors. Claims for liability must be filed within two years of the bankruptcy judgment, or the right to claim is lost. Those who provide written evidence of their objec - tions will be exempt from liability. Following a final judgment declaring a company bank - rupt, the board members, managers and auditors may face imprisonment or a fine up to AED500,000, or both, if they are found guilty of: • granting excessive bonuses to board members, the CEO or managers in the three years before the company ceased payments, if this contributed to the insolvency; • failing to maintain proper commercial records to reflect the company’s true financial status or neglecting to conduct required inventories; • refusing to provide requested data to the trustee, Bankruptcy Court or appellate court, or intention - ally providing false information; • misusing company funds after payments have ceased, with the intent to protect these funds from creditors; • settling any debt in violation of the proposed preventative settlement or approved restructuring plan, or misusing funds contrary to the terms of the proposal or plan; • paying off one creditor after the company has stopped payments in a way that harms other credi - tors, or granting unfair advantages to one creditor to gain approval for a settlement or restructuring plan; • selling company assets at significantly below mar - ket value to delay or obstruct the company’s pay - ment suspension or bankruptcy declaration, or the termination of a proposed settlement or restructur - ing plan; or
490 CHAMBERS.COM
Powered by FlippingBook