Manager's Personal Liability for Fraud and Gross Negligence

Court: Dubai Court of Cassation

Appeal Number: 695/2025 Commercial

Legal Principle Summary

In a significant recent ruling, the Dubai Court of Cassation affirmed that a manager's personal financial assets are not immune from execution if it is proven that they have deviated from their fiduciary duties. The manager's actions do not shield them from liability if they involve fraud or gross negligence.

Reasoning of the Judgment

The court clarified that while a manager's actions generally bind the company, this principle does not protect the manager if they commit acts involving:

Fraud or deceit.
Abuse of authority.
Gross negligence in performance.

Legal Basis

Citing Articles 84 and 54 of the Companies Law, the court emphasized that:

The manager is obligated to compensate the company for any losses or expenses incurred due to the misuse of authority or violation of the law.
Any provision in the company's memorandum of association that purports to exempt the manager from personal liability for their mistakes is void.

Case Facts

The court established the manager's breach of responsibility based on the following findings:

Failure to appoint an external auditor and concealing the company's true financial position.
Causing substantial administrative fines to be imposed by the Ministry of Human Resources and Emiratisation.
Inability to substantiate the expenditure of company funds with acceptable official documents.

Final Ruling

The judgment concluded by upholding the manager's dismissal and holding him personally liable for all the related financial amounts.