Dubai court orders manager to pay Dhs731,696 over failure to disclose company finances

The Dubai Civil Court has mandated that the manager of a general trading company pay Dhs731,696 from his personal funds, along with 5% interest until complete payment is made. This decision follows his failure to provide the company's comprehensive financial statements, which obstructed the execution of a final court judgment favoring a shipping company that owned a vessel.

The dispute arose from dealings between the shipping company, which owned the vessel, and the general trading company, which utilized the ship for diesel fuel supply and financing purposes. The shipping company had secured a final judgment granting Dhs731,696 to the general trading company for covering the ship's expenses and crew salaries. However, during enforcement proceedings, it was discovered that the general trading company lacked any funds or assets available for seizure.

In response, the execution judge required the manager of the general trading company to deliver a financial report detailing its assets. The manager's report indicated that the company possessed no bank accounts, real estate, vehicles, or employees and was not engaging in any business activities.

The court appointed an expert to assess the financial situation and discovered that by the end of 2020, the General Trading Company had receivables amounting to Dhs42.3 million and payables exceeding Dhs51.5 million. The manager did not provide complete financial statements to clarify the status of these receivables afterward.

The court confirmed that a limited liability company's manager isn't personally liable for its obligations unless fraud, misrepresentation, or a legal violation is evident. It concluded that the manager’s unjustified refusal to disclose the financial statements obstructed the execution of the judgment and impeded the shipping company's ability to claim its rights, amounting to fraud, misrepresentation, and a legal violation.

The court, in the presence of both parties, ruled that the manager must pay Dhs731,696 with legal interest at a rate of 5% per annum from the due date until full payment, along with fees, expenses, and Dhs1,000 in attorney's fees. All other claims were dismissed.