UNITED ARAB EMIRATES Law and Practice Contributed by: Stuart Paterson, Janine Mallis and Tania Forichon, Herbert Smith Freehills
typically results in a referral to a prosecuting authority.
ing in the course of the agency, provided that the act or omission of the agent which gives rise to such liability is within the authority of the agent. Accordingly, an individual corporate director’s or officer’s knowledge can be attributed to the company they represent, and such person may be held jointly liable together with the company if their actions arise out of the ordinary course of the agency. In the ADGM, if a company’s business is carried on with intent to defraud its creditors or those of any other person or for any fraudulent pur - pose, every person who is knowingly a party to running the business in that manner commits a contravention. 3.2 Claims Against Ultimate Beneficial Owners Onshore UAE The CCL allows a company to “acquire a legal personality” upon incorporation. A corporate veil exists between the company and its share - holders that can only be pierced/lifted in limited circumstances. This means that the company generally incurs debts and obligations on its own account, and a shareholder’s debt, for most corporations, is generally limited to its share in the company’s capital (Federal Supreme Court 669/2014). In rare circumstances, the corporate veil can be pierced to bring claims against the shareholders regarding company activities. The Dubai Court of Cassation has held that the corporate veil can be pierced when there has been fraud, trickery (cheating), or gross error from the shareholders. DIFC and ADGM As previously stated, under the DIFC Companies Law, a company incorporated in the DIFC will have a separate legal personality from that of its
3. Corporate Entities, Ultimate Beneficial Owners and Shareholders 3.1 Imposing Liability for Fraud on to a Corporate Entity Onshore UAE The CCL allows a company to “acquire a legal personality” upon incorporation. Article 66 of the New Penal Code also provides that persons with legal personality (eg, corpora - tions), with the exception of government agen - cies, are responsible for any criminal act com - mitted on their account or in their name by their representative, director or agent. Therefore, a limited liability company or other corporate entity may be liable in such circumstances. The penalty that may be imposed against a convicted corporation is limited to a maximum fine of AED5 million. However, the Civil Proce - dures Law also allows the victim to make a claim against the company for civil compensation. DIFC and ADGM Under DIFC Law No 5 of 2018 (the “DIFC Com- panies Law” ), a company incorporated in the DIFC will have a separate legal personality from that of its shareholders. A company’s liabilities, whether arising in contract, tort, or otherwise, are the company’s liabilities and not the per - sonal liabilities of any shareholder or officer of the company. Under DIFC Law No 5 of 2005 (the “DIFC Law of Obligations” ), a principal is jointly liable with their agent in respect of the liability of the agent aris -
407 CHAMBERS.COM
Powered by FlippingBook