Is the general manager unlimited liable for the activities of a company in the UAE?

Entities incorporated in the UAE, whether onshore or in a free zone, are required to appoint a general manger who has sole responsibility for the management and operation of the entity. In the UAE, the powers and authority of the general manager are extensive and are generally contained in the constitutional documents of the entity (for example the memorandum of association) or a power of attorney from the shareholders.

UAE law imposes both civil and criminal liability on the general manger in relation to the business of the entity including for matters beyond the control of the general manager. For example, a general manager may be personally liable for a bounced cheque issued by the entity and signed by the general manager and in the event of liquidation, the management of the company will be scrutinised and if found lacking, will expose the general manager to potential personal liability for the debts of as well as potential criminal proceedings.

The UAE Commercial Companies Law No. 2 of 2015 provides that a general manger will be liable towards the company, the shareholders and third parties for all acts of fraud, misuse of power, and violations of the provisions of the Commercial Companies Law or the memorandum of association of the company or for errors in management.

General managers are advised to take the following steps to mitigate their potential exposure and to provide a defensive against a claim for liability:

Ensure that they act within the scope of powers and authority contained in the memorandum of association or power of attorney.
Ensure that there are sufficient funds in the bank account of the entity before signing cheques.
Consider director’s liability insurance or request indemnification from the entity for actions taken in the normal course of business.
Ensure that the entity is managed with due care and in a diligent manner and good corporate governance records are maintained to reflect this.