UAE legal Q&As: Company I bought goods from didn’t deliver and has closed

A reader asks about pursuing compensation against the owner of a company that received a payment in full but then never delivered the goods, while another considers his options after loaning a friend Dh20,000 without a written contract.

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?

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.

I lent one of my friends Dh20,000 in cash in front of two witnesses. He did not sign any receipt so I wondered if I could file a civil case against him on the basis of the witness statements as he has not returned the money to me?

Unfortunately, as per Article 35/1 of Law of Proof in Civil and Commercial Transactions 10 of 1992 and its amendments, “in non-commercial matters, if the value of the transaction is greater than Dh5,000 or if the value is unspecified, testimony of the witnesses shall not be permitted in establishing its existence or its termination, so long as there is no agreement or any written indication to the contrary”. As it is not a commercial transaction, it would be very difficult to file your case on the basis of the witness statements, and it would not likely be considered a breach of criminal law. However, if you have any written communication with your friend where he admitted by email or text that he owes you this money or promised to pay you back then you can file a case on the basis of this communication.

If you have a question for our lawyer, please email it to with the subject line “Know the law”.

Published: August 20, 2017 09:35 AM


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