UAE Legal Q&As: Company I Bought Goods From Didn't Deliver and Has Closed

Published 13 June 2018 by Al Rowaad Advocates and Legal Consultancy

Question: My business agreed with a company to buy some goods in bulk and we paid the full amount owed. Later on they kept delaying delivering the goods for month after month. We ended up going to their premises only to find that the company was closed. Our understanding is that the company was a sole trader, so we thought that we could file a commercial case against the owner personally to get the debt from his own assets. However, later on we found that the person we were dealing with, whom we thought to be the owner of the company, was just a manager and the company was a LLC. All their papers, their invoice, logo and stamps did not indicate that this company was LLC. Do I have the right to take any legal action?

Answer: The issue at the heart of this matter is that if it were a Limited Liability Company, partners would not be personally liable to cover any of the company's liabilities if it were to be liquidated. However, if it were a sole establishment then the owner would be personally liable. You will feel now that your money is difficult to retrieve. However, Commercial Companies Law 2 of 2015 gives you the protection you need. Article 72 of this law indicates that each LLC has to add to its name the acronym "LLC" to ensure everyone is aware of its status. If the manager breached this requirement, he then becomes personally liable jointly with the company to pay the amount plus compensation, if there is any. The same fact is repeated in Article 84 of the same law, which considers that the manager is personally liable for any breach of this law.