Company debts reach LLC managers and owners through fault, guarantees and licensing gaps, not through signing contracts

Limited liability is the starting point, and the courts defend it

The Commercial Companies Law (Federal Decree-Law No. 32 of 2021) limits each partner's liability to his capital contribution, and a sole owner's to the capital in the memorandum (Article 71). A manager answers to the company, the partners and third parties for fraud, and for the company's losses caused by misuse of his powers, breach of the law, the memorandum or his appointment terms, or gross error; a clause excusing him is void (Articles 24 and 84(1)).

A signature for the company is not a guarantee

A bank sued a DMCC company and its owner jointly for about USD 1.46 million; the owner had signed the bank's general terms as the company's representative and owner. In March 2025 the Dubai Court of Cassation dismissed the claim against him: a free-zone LLC has its own personality and assets, whoever contracts through a representative binds the principal, and a guarantee is never presumed.

The Federal Supreme Court took a similar line in February 2023, quashing as inadequately reasoned a judgment that treated two authorised signatories as guarantors of a loan of about AED 19.2 million because they had signed the facility application, mortgages and a promissory note. Joint liability needs agreement, which may be implied, or law; a guarantee must be express, and the file held none identifying the debt, its amount and maturity.

Both rulings applied the 1985 Civil Transactions Law, the Supreme Court also the 1993 Commercial Transactions Law. The 2025 Civil Transactions Law, in force since 1 June 2026, keeps the rule that joint liability is not presumed (Article 373), but for commercial debts the 2022 Commercial Transactions Law makes co-debtors, and guarantors with the debtor, jointly liable unless the law or agreement says otherwise (Article 69). The question is whether the person signed as debtor or guarantor at all.

In February 2023 the Abu Dhabi Court of Cassation cleared a manager who had signed an acknowledgment of debt for his company, but upheld the joint liability of the executive who signed a related company's cheques: under the 1993 Commercial Transactions Law, whoever draws a cheque for another's account answers to the holder unless he proves the funds were there, a rule Article 630 of the 2022 law keeps.

Real guarantees bind, but the creditor has six months

In June 2024 the Dubai Court of Cassation upheld the release of two partners who had guaranteed their LLC's obligations under a construction addendum: the debt fell due on 6 June 2022, when an earlier judgment became final, and they were sued on 31 March 2023.

The Court applied Article 1092 of the 1985 Civil Transactions Law, which requires the creditor to claim within six months of maturity, and confirmed that it covers commercial guarantees. The rule is not one of public policy, so a guarantor may agree to stay bound for longer, but only in clear and unequivocal terms.

The 2025 Civil Transactions Law keeps the period in Article 1006: the guarantor is released unless the creditor starts court proceedings against both the debtor and the guarantor within six months from the day after the debt falls due. The new text is silent on extensions by agreement, and we know of no ruling on that. Under Article 4 the new law does not reach earlier facts unless it says otherwise, so older guarantees may still be argued under Article 1092.

Managers who take money too early, or act for an unregistered company

In August 2020 the Federal Supreme Court upheld a manager's joint liability with his company to refund an off-plan buyer in Umm Al Quwain. The company had collected about AED 1.26 million before it held a developer's licence; the courts below treated that as fraud for which a manager answers to third parties under Article 84 of the 2015 Companies Law (now Article 84(1) of the 2021 law), and the Supreme Court found that view reasonable.

Licences and minutes showed he was manager at the time, and neither his later sale of his share nor the company's liquidation helped him: a dissolved company keeps its personality for the liquidation (now Article 21(3)), and its former manager can be sued for earlier acts.

In December 2020 the Federal Supreme Court held under the 1984 Companies Law that a foreign company operating in the UAE without a licence and commercial registration is not a separate person for those dealings, and that the individuals who carried them out are personally and jointly liable; it sent the case back to establish who had. Article 336 of the 2021 law keeps the rule, except for foreign companies licensed in free zones.

How much fault is enough is not settled

Each top court (Abu Dhabi, Dubai, Ras Al Khaimah and federal) has a General Assembly that settles its line when its chambers disagree; only the principles of the Federal and Local Judicial Principles Unification Authority bind every court (Federal Law No. 10 of 2019, Article 18). Rulings on manager fault have differed.

In February 2023 the Abu Dhabi Court of Cassation required fraud, misuse of authority, breach of the law or the company's documents, or gross fault before a manager could be made to pay a company debt. The Ras Al Khaimah Court of Cassation lifted limited liability only for fraud, gross error or taking company funds in March 2019, but in June 2020 treated management below an ordinary prudent person's standard as itself an abuse of authority, upholding the attachment of a partner-manager's own bank funds after his company took an advance payment and never performed. All three applied the 2015 Companies Law, whose grounds Article 84(1) of the 2021 law repeats.

In June 2026 the Abu Dhabi Court of Cassation's General Assembly set a similarly low bar for enforcement, overruling cases that demanded the Article 84 grounds. Under Article 322 of the Civil Procedure Code, an execution judge may, after an inquiry, detain a company's legal representative or another person, or ban them from travel under Articles 324 to 326, without an execution title against them, if their abnormal conduct, such as hiding assets or manipulating the accounts, prevented or delayed execution. Fraud is not needed, mismanagement is enough, and the conduct may predate the judgment.

Article 322 is federal, but Dubai applies its own controls: under the Dubai Court of Cassation's General Assembly Resolution No. 9 of 2024, which also covers company representatives, detention needs proof of the debtor's solvency, hidden assets or attachable assets, save listed exceptions such as refusing documents the judge requests.

Bankruptcy: directors pay for proven fault, owners stay outside

In February 2025 the Dubai Court of Cassation quashed an order making the directors and managers of a bankrupt retail group jointly liable for about AED 265.6 million. The claimant must prove each director's own fault, such as fraud, abuse of power, breach of the law or the articles, or mismanagement, under the law in force when each act took place; the appeal court had applied a 2021 amendment to acts from 2015 and 2016.

A general assembly's discharge did not protect the directors, and because the acts could be offences, the claim survived as long as the criminal action, five years from the acts for a misdemeanour. Article 169 of the 2021 Companies Law, which Article 84(2) applies to LLC managers, keeps both rules, though a claim over an act the assembly specifically approved lapses after a year unless the act is a crime.

The 2023 Bankruptcy Law, in force since 1 May 2024, sets the current test in Article 246: directors, managers and anyone actually running the company may be ordered to pay an amount proportionate to their fault for listed conduct in the two years before payments stopped, such as disposing of assets for too little, paying one creditor to harm the rest, or mismanagement that left assets covering less than 20 per cent of the debts. Taking every precaution a reasonable person could is a defence, written reservations exempt, and the claim lapses two years after the bankruptcy judgment.

Owners are not drawn in merely by owning. In May 2021 the Federal Supreme Court upheld a refusal to declare the partners of a bankrupt free-zone company bankrupt with it: founding a company and taking its profits does not make a partner a trader. The 2023 law extends a company's proceedings to partners with unlimited liability and former partners still liable for its debts (Article 244), and to anyone who traded on his own account in the company's name and treated its assets as his own (Article 245).

Sole establishments, removal and expulsion

The Abu Dhabi Court of Cassation held in August 2024 that a sole establishment has no personality separate from its owner and forms part of his estate, and the Ras Al Khaimah Court of Cassation said in March 2020 that its obligations bind him. In the Abu Dhabi case an owner who bought out an LLC's partners and recorded a change of form on his licence could not sue on the LLC's contract: the LLC lasts until dissolved and liquidated, and the contract had never been assigned.

Under Article 85(1) of the Companies Law, as replaced by Federal Decree-Law No. 20 of 2025, the general assembly may dismiss a manager unless the memorandum or appointment contract says otherwise, and the court may do so at a partner's request for legitimate cause. In August 2024 the Dubai Court of Cassation held that removal leaves the manager a partner, while expulsion ends his membership and needs serious reasons (then Article 677 of the Civil Transactions Law); a final removal judgment did not dispose of a separate expulsion request.

Rulings differ on whether an LLC partner can be expelled at all. The Dubai judgment applied the civil-law rule to one, as the Federal Supreme Court did for a commercial company in a March 2020 Ajman case because the 2015 Companies Law was silent. The Abu Dhabi Court of Cassation held in April 2024 that the rule covers only civil companies and partnerships, so an LLC partner who keeps his shares cannot be forced out. The 2025 Civil Transactions Law re-enacts the rule for majority partners (Article 628) but leaves commercial companies to the Companies Law (Article 606), so the split remains.

What owners and managers check in their own company

Capacity on every signature. Documents carry the company's full registered name with its LLC suffix, whose omission makes managers liable for its obligations (Article 72(2)), and the signatory's capacity; finance documents and acknowledgments are read for wording that adds a personal undertaking, and owners' guarantees are logged with the debt covered and its maturity.

Licences before money. The licence covers the activity before customers pay, and a foreign group's people do not trade in the UAE until its branch or free-zone entity is licensed and registered.

Records that show who decided what. The commercial register matches the memorandum, since managers answer for loss from unregistered amendments (Article 15(4)); changes are notified within 15 business days (Article 15(3)), dissent is minuted in writing, and the accounts can be produced if an execution judge asks.

Structure and exit. A sole establishment puts the owner's whole estate behind the business, while a single owner can hold an LLC (Article 71(2)). Buy-outs run through registered share transfers and contract assignments, not a change of licence, and since rulings differ on expulsion, exit terms belong in the memorandum or a shareholders' agreement.

This article describes UAE court rulings and legislation as of 1 November 2026. It is general information, not legal advice. Polaris is not a law firm; in disputes we work alongside licensed UAE advocates.