Dubai court orders firm to pay investor Dhs195,000 for breaching contract

Civil court in Dubai annulled a partnership and share sale agreement between an investor and a company that had declared that its capital was Dhs500 million.

The court also ordered to restore the situation to what it was before the agreement and obliged the company to return Dhs165,000 to the investor and pay him Dhs30,000 in compensation for the damages he incurred, in addition to a legal interest of 5% annually from the date of the judgment, after it was proved that the company breached its contractual obligations and failed to implement the terms of the agreement.

The details of the case date back to November 2024 when an investor bought 330 shares of the company's stock, at a value of Dhs500 per share, totaling Dhs165,000, under an agreement after the company owner stated that its capital amounted to Dhs500 million divided into shares offered to investors.

The investor stated in the interrogations that after the completion of the deal, it became clear that those data were inaccurate, and that the declared capital did not reflect an actual reality, in addition to the failure to complete the legal procedures to include him as a partner, as the articles of association were not amended, nor was the share proved in the licence, nor was the process documented by general assembly minutes, adding that he did not receive any profits since the conclusion of the agreement.

The investor filed a lawsuit demanding the annulment of the contract and the refund of the full amount, with compensation of Dhs60,000, indicating that he was misled and his was seized without legal basis.

The court appointed an expert, who concluded in his report that the company failed to register the investor as a partner, did not provide audited financial statements or regular accounting records, and did not prove the realisation or distribution of profits, confirming that the paid amount entered the company's liabilities without the implementation of corresponding obligations.

The investor's lawyer, Abdullah Bin Hatem, stated that it was proved to the court that the company sold shares in violation of the law, as the sale must be made by the partners, which renders the contract void.

The court refused to hold the company's manager personally liable, emphasising the independent financial liability of the limited liability company and the absence of exceptional justifications to hold him responsible.

The court ordered the annulment of the contract and obligated the company to refund the full amount, with compensation to the investor of Dhs30,000 for the damages incurred as a result of his money being withheld without return and the loss of the opportunity to invest it.