the attached file
Wrongful and fraudulent trading in the UAE: The concepts of wrongful trading and fraudulent trading under the English system do not exist per se under the UAE Commercial Company Law; however, they are notionally existent under arts 84 and 162-1 of the new Commercial Company Law 2015 and arts 878–880 of the UAE Commercial Transaction Code, will be discussed in the following subsections. Articles 84 and 162-1 state that directors and managers are liable towards the company, shareholders and third parties for all acts of fraud, misuse of power and violation of the provisions of this law or the articles of association of the company, or an error in management (i.e. mismanagement). The UAE law takes fraudulent trading quite seriously. In the UAE Law, fraudulent trading has both civil as well as criminal liability. As shown above, the UAE Commercial Companies Law contains provisions along with the UAE Penal Code to determine the suitable penalties to be imposed on executive-level staff who commit frauds on the company, or simply create companies to defraud their customers. In the UAE Law, any misuse of executive power in the corporate context is considered to be a serious violation. Therefore, the concept of the corporate veil is not applicable to the directors in this case or any relevant cases; the directors can be subjected to civil and criminal lawsuits by the shareholders of the company that was affected, or its creditors, or any other party victimised in the case. However, art.162-2 of the new Company Law provides that if in the UAE a director can provide sufficient evidence of not being supportive of or involved in a case of fraudulent trading, then all the previous charges against them will be lifted. Fraudulent trading in the UAE law can take two forms: civil and criminal liability. Articles 84 and 162-1 of the Commercial Companies Law explain that if and when directors or managers of a company are discovered to have been involved in fraudulent trading activities, they will be personally liable, and any kind of protection that prevents them from being personally answerable will be lifted. However, it is explained that when directors act within the limits of their authority and powers, they will not be in danger of facing charges such as those in fraudulent trading. However, with regard to civil liability, directors who are confirmed to be dealing with such people, and are found to be guilty with respect to fraudulent trading activities, are disqualified from becoming a director in any other company or holding a position in an organisation of that stature or rank, as a punishment for their acts. The civil liabilities of the guilty directors become effective once their criminal liability charges have been passed and they have received the term of punishment that is applicable. As noted earlier, the UAE Law does not directly address wrongful trading. However, arts 84 and 162/1 of the Commercial Company Law explain that directors/managers of a company could be held personally liable for their actions if they were found to be negligent or grossly negligent of their actions. Wrongful trading has civil liabilities, and in the case that the directors are found to be negligent, then they can be prevented from serving as a director in any other organisation; but in the case that the wrongful trading has led to bankruptcy (which would then be regarded as a wrongful bankruptcy), then this might extend to criminal liability.