FACTS
Unfortunately, the Company accrued significant financial debts and was unable to sustain its operations. Complications arose when the Shareholder ignored our client’s repeated attempts to address the company’s operational problems. This neglect has led to a complete halt in the business activities, and an inability to pay employees wages and other financial obligations, which placed our client in an extremely difficult position.
As a result, our client had no choice but to submit his resignation to the Shareholder and request the removal of his name from the company’s commercial license. Due the Shareholder’s lack of response, our client was compelled to file a case before the Dubai Courts.
OUR ARGUMENTS/COURT RULING
Based on our arguments, the Court appointed an expert who investigated the matter. The expert concluded that the company has encountered substantial operational and financial problems which have led to complete halt in its business activities.
Additionally, the plaintiff’s (our client) resignation complies with the terms of his employment contract and applicable laws. However, the Shareholder has failed to respond to his request within 30 days from the date of the receipt of the resignation as stipulated by Article (85) of the UAE Commercial Companies Law.
Consequently, the Court approved the resignation of the general manager and ordered the removal of his name from the company’s commercial license.
OUR OPINION
In our opinion, the situation could have been completely avoided under the new UAE Federal Law No. (51) of 2023 concerning Financial Restructuring and Bankruptcy (New Law). However, the negligence (or possibly poor advice) of the Shareholder has led to such unfortunate outcome.
In essence, the New Law has introduced a Preventive Settlement mechanism supervised by the Court. This mechanism allows the debtor to manage their business and assets while negotiating the settlement terms with creditors without the need to appoint a trustee, as was the case in the old Federal Bankruptcy Law No. (9) of 2016.
It is the Shareholder’s failure to seek financial restructuring and adhere to specific insolvency procedures pursuant to the New Law, that has placed our client (being the general manager) in an extremely difficult position, when the company has encountered financial challenges.
EXPERT LEGAL ADVICE
If you have any questions related to this case or need general legal advice concerning UAE Commercial Companies Laws or other related business matters in the UAE, please contact us here
