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Legal Responsibilities of a Manager in the UAE Companies Law and the Principle of Piercing the
Corporate Veil
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Table of Contents
INTRODUCTION
...........................................................................................
3
I. LEGAL RESPONSIBILITIES OF A MANAGER IN THE EVENT OF FRAUDULENT BEHAVIOR
OR MISCONDUCT
.........................................................................................
4
F
IDUCIARY
D
UTY
.............................................................................................
4
D
UTY
OF
C
ARE
...............................................................................................
5
D
UTY
TO
A
VOID
F
RAUDULENT
B
EHAVIOR
...................................................................
6
C
OMPLIANCE
WITH
L
AWS
AND
R
EGULATIONS
..............................................................
7
R
EPORTING
AND
D
ISCLOSURE
...............................................................................
7
O
VERSIGHT
OF
E
MPLOYEES
.................................................................................
7
II. PIERCING THE CORPORATE VEIL
.................................................................
7
III. APPLICATION OF PIERCING THE CORPORATE VEIL IN UAE CASE LAW
..................
8
D
UBAI
C
OURT
OF
C
ASSATION
C
ASE
(D
UBAI
C
OURT
OF
C
ASSATION
C
ASE
N
O
. 346/2019)
.................
8
D
UBAI
C
OURT
OF
C
ASSATION
C
ASE
– (D
UBAI
C
OURT
OF
C
ASSATION
C
ASE
N
O
. 92/2012)
................
9
IV. LAWS GOVERNING COMPANY FORMATION IN THE UAE
...................................
10
CONCLUSION
.............................................................................................
14
REFERENCES
.............................................................................................
16
3
Introduction
The legal framework for corporate governance, including the responsibilities and duties of
managers of limited liability companies, is established by the United Arab Emirates (UAE)
Companies Law
1
. The principle of piercing the corporate veil and its application in UAE case law
are the subjects of this essay, which also examines the legal responsibilities of managers in
instances of fraudulent behavior or misconduct. Additionally, the essay provides an overview of the
UAE's company formation laws and discusses the differences between the two jurisdictions.
Managers are accountable for managing and representing the company in front of third parties, as
stated in Article 83 of the UAE Companies Law
2
. They are additionally responsible for any
demonstrations or exclusions that cause harm to the organization, its investors, or outsiders, except
if they demonstrate that they acted with due care and tirelessness. Managers must also fulfill their
fiduciary responsibilities, which include acting honestly, avoiding conflicts of interest, and
disclosing any personal interests in company-related transactions.
Embezzlement, misappropriation, forgery, a breach of trust, an abuse of power, or a violation of
laws or regulations are all examples of managerial fraud or misconduct. Depending on the nature
and severity of their actions, managers may be subject to civil, criminal, or administrative liability
for such acts. For instance, the company or its shareholders may bring a lawsuit against managers to
seek compensation for any losses or damages brought about by their misconduct or fraud. For
committing crimes such as fraud, forgery, money laundering, or commercial concealment, they may
also be subject to criminal charges, which could result in imprisonment, fines, or deportation. If
they break the UAE Companies Law 3 or other relevant laws, managers may face administrative
penalties like suspension, removal, or the inability to hold managerial positions in any company.
Permeating the corporate veil is one of the options available to shareholders or other third parties
harmed by managers' dishonesty or misconduct. This means they can hold the company's
shareholders or ultimate beneficial owners liable for its actions or debts despite its separate legal
personality. The rule of puncturing the corporate cloak is perceived in UAE regulation and statute,
even though it is applied sparingly and in excellent conditions where there is proof of maltreatment
of corporate structure, misrepresentation, or foul play. Examples of this kind of situation include:
1.
When a business is used as a ruse or facade to hide illegal activities or avoid liabilities.
2.
When a company doesn't have enough money or is bankrupt and can't pay its bills.
3.
When a dominant shareholder controls a company, treats it as if it were his own, and ignores
its separate existence.
1
UAE Companies Law (Federal Law No. 2 of 2015), art 1.
2
UAE Companies Law (Federal Law No. 2 of 2015), art 1.
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4.
When a company is part of a group of businesses that work together as an economic unit and
have the same goals and interests.
The corporate veil may be lifted, and shareholders or beneficial owners held liable for the debts or
damages caused by the company or its managers in such cases. However, because of this,
shareholders are not automatically liable for the company's actions or debts. Instead, courts will
examine each case on its own merits and use the rule of piercing the corporate veil only if clear
evidence of fraud, abuse, or injustice calls for it.
To safeguard shareholders' and third-party interests and ensure sound corporate governance,
managers of limited liability companies are subject to several legal obligations under the UAE
Companies Law
3
. Managers who engage in dishonesty or misconduct may be held liable for their
actions in civil, criminal, or administrative court. In addition, shareholders or beneficial owners
could be held liable for the company's actions or debts if the courts decide to cut through the
corporate veil in cases where there is evidence of wrongdoing, fraud, or abuse of the corporate
form. Managers and shareholders should act responsibly and abide by all applicable laws and
regulations to avoid potential liability.
I. Legal Responsibilities of a Manager in the Event of Fraudulent Behavior or Misconduct
Managers must fulfill several legal obligations under the UAE Companies Law to guarantee the
lawful operation of the business and stop fraudulent activities. Among these responsibilities are:
Fiduciary Duty
In the United Arab Emirates, managers of limited liability companies have a fiduciary duty to the
business and its shareholders. Managers must act honestly, diligently, and in the company's best
interest to fulfill this duty
4
. They must use their powers and perform their duties with the utmost
care, skill, and loyalty, prioritizing the company's and its stakeholders' interests over their own.
Managers must consider the company's long-term success and sustainability when making
decisions
5
. When making decisions, they should do their research thoroughly, seek professional
advice when necessary, and act in a way that helps the business grow and become profitable.
Managers' responsibility is to avoid conflicts of interest that could hinder their ability to act in the
company's best interests. They ought to make public disclosure of any potential conflicts of interest
they may have and avoid engaging in any actions or transactions that might lead to a conflict
between the interests of the business and their interests. Managers must act openly and seek
3
Al-Tawil TNE, ‘Piercing the corporate veil: when LLCs and corporations may be at risk’ (2019)
International Journal of Law and Management 61(2) 328.
4
Matusov E, ‘The teachers’ pedagogical fiduciary duty to their students’ (2022) Integrative
Psychological and Behavioral Science pg 1.
5
5
appropriate solutions to conflicts of interest when they do occur. To guarantee that the conflict is
handled appropriately and in a manner that upholds the integrity of the business, this may entail
recusing themselves from decision-making processes or seeking approval from the appropriate
corporate bodies, such as shareholders or the board of directors.
To stop dishonesty or fraud, managers are responsible for implementing efficient internal controls
and supervision mechanisms within the business. The company's operations, financial reporting,
and compliance with applicable laws and regulations should all be monitored by robust systems and
procedures. Managers should also promote the organization's culture of integrity and ethical
behavior. This incorporates cultivating straightforwardness, empowering the detailing of any
thought deceitful exercises, and guaranteeing that workers know about their obligations in
maintaining moral principles. Obligations for Reporting: According to UAE Companies Law
6
,
managers must notify the appropriate authorities and stakeholders of fraudulent behavior or
misconduct. They should quickly unveil any material data that might influence the organization's
monetary position, execution, or notoriety.
The inability to satisfy these legitimate liabilities can bring about the private risk for administrators.
They might be considered responsible for any misfortunes the organization or its investors endured
because of their carelessness, break of obligation, or fake exercises. Depending on the severity and
nature of the misconduct, legal remedies may include civil liability, fines, disqualification from
management positions, and the possibility of criminal prosecution. Managers of restricted risk
organizations in the UAE bear huge lawful obligations to forestall false ways of behaving and
unfortunate behavior. Managers play a crucial role in ensuring the integrity and success of their
businesses by adhering to their fiduciary duty, avoiding conflicts of interest, diligently
implementing internal controls and supervision, and meeting reporting obligations.
Duty of Care
In the UAE, managers must carry out their responsibilities with reasonable care, skill, and diligence.
This obligation expects supervisors to act with the ability and care that would be normal for
individuals in their situation, considering their insight, experience, and skill.
Managers are expected to act in a way that is in the best interest of the company and its stakeholders
and to make well-informed decisions
7
. They ought to be current on relevant laws, regulations, and
market trends and have the necessary knowledge and comprehension of the company's business and
industry.
6
Norton Rose Fulbright, ‘The New UAE Companies Law: What you need to know’
(2021) https://www.nortonrosefulbright.com/en/knowledge/publications/e2c503f2/the-new-uae-companies-law
accesse
d 31 May 2023.
7
6
Managers should exercise a degree of prudence, foresight, and judgment in the course of their
duties. This entails conducting in-depth research, evaluating relevant data, and seeking professional
guidance. By applying their abilities and skill, Managers can survey gambles, assess open doors,
and go with sound business choices that add to the achievement and benefit of the organization.
Moreover, Managers should regulate the execution of inward controls and methodology to alleviate
dangers and defend the organization's resources
8
. Financial reporting, internal audits, compliance
monitoring, and risk management may all fall under this category. Managers can enhance
transparency, accountability, and the overall effectiveness of the company's operations by ensuring
that governance and control mechanisms are in place. It is important to remember that the duty of
care could be a better standard. Directors are not supposed to have all-knowingness or to ensure the
outcome of each choice or move made. Instead, managers must act with reasonable skill, care, and
diligence in light of the circumstances and information at the time.
Managers
9
may be held responsible for any losses or damages the business or its stakeholders
sustained if they breach their duty of care. Nonetheless, it is important to note that the director's
activities or exclusions fell underneath the norm of care and that such disappointment
straightforwardly added to the mischief endured. Managers demonstrate their dedication to the
company's well-being and interest protection by upholding their duty of care. This obligation is
fundamental in keeping up with the trust and certainty of investors, financial backers, and different
partners, as it guarantees that directors act dependably and with due respect for the organization's
prosperity and supportability.
Duty to Avoid Fraudulent Behavior
In the United Arab Emirates, managers are expected to act ethically and honestly. They must avoid
misconduct that could harm the business or its stakeholders, including fraud. Managers are not
permitted to misuse or misappropriate company assets for unauthorized or personal gain. This
incorporates, yet isn't restricted to, redirecting reserves, taking organization property, or involving
organization assets for individual use. Managers are expected to exercise their authority over
company assets responsibly and in a way that is in the company's best interest. Financial statements
that are manipulated or misrepresent the company's financial position
10
or performance must not be
8
Singh K, Abraham R, Yadav J, Agrawal AK, Kolar P, ‘Linking CSR and Organizational
Performance: The Intervening Role of Sustainability Risk Management and Organizational
Reputation’ (2023) 19(1) Social Responsibility Journal.
https://www.emerald.com/insight/content/doi/10.1108/SRJ-07-2022-0309/full/html
9
Norton Rose Fulbright, ‘The New UAE Companies Law: What you need to know’
(2021) https://www.nortonrosefulbright.com/en/knowledge/publications/e2c503f2/the-new-uae-companies-law
accesse
d 31 May 2023.
10
Norton Rose Fulbright, ‘The New UAE Companies Law: What you need to know’
(2021) https://www.nortonrosefulbright.com/en/knowledge/publications/e2c503f2/the-new-uae-companies-law
accesse
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used by managers. Examples include falsifying financial records, overstating revenues or profits,
underestimating liabilities, and misleading investors, shareholders, or regulatory authorities.
Administrators are answerable for guaranteeing the precision and straightforwardness of monetary
detailing and consistency with relevant bookkeeping guidelines.
Compliance with Laws and Regulations
Managers ensure the business complies with all applicable laws and regulations. They should set up
effective internal control systems and take precautions to stop fraud.
Reporting and Disclosure
Managers are liable for giving accurate monetary reports and revelations to investors, inspectors,
and important administrative specialists
11
. The company's financial affairs ought to be open and
accountable to them.
Oversight of Employees
Managers should monitor and supervise employees' work to stop them from dishonest behavior.
They should establish appropriate internal controls, policies, and procedures to reduce the
likelihood of misconduct.
II. Piercing the Corporate Veil
A legal concept known as "piercing the corporate veil" permits courts to disregard a company's
distinct legal personality and hold shareholders or managers personally liable for the company's
actions or debts. To apply the piercing the corporate veil doctrine in the United Arab Emirates,
certain requirements must be met, including:
Fraud or Wrongful Conduct:
Courts may break the corporate veil when a business is being used
dishonestly or fraudulently. This could include situations in which the business is set up to avoid
legal obligations or to defraud creditors.
Alter Ego Theory:
The cases where there is no real distinction between the company and its
shareholders or managers are the primary focus of the alter ego theory
12
. The court may ignore the
company's separate legal personality if they determine it is merely a facade or an instrument of its
owners.
Abuse of Corporate Form:
The cases where there is no real distinction between the company and
its shareholders or managers are the primary focus of the alter ego theory. The court may ignore the
company's separate legal personality if they determine it is merely a facade or an instrument of its
owners.
d 31 May 2023.
11
12
D’Hondt C, De Winne R, Ghysels E, Raymond S, ‘Artificial Intelligence Alter Egos: Who Might
Benefit from Robo-Investing?’ (2020) 59 Journal of Empirical Finance 278.
8
III. Application of Piercing the Corporate Veil in UAE Case Law
In some cases, UAE case law has acknowledged the principle of piercing the corporate veil. For
instance, in a landmark 2013 decision, the Dubai Court of Cassation
13
held that the veil could be
pierced when the company's separate legal personality is abused for fraudulent or illegal purposes.
In a separate case, the Abu Dhabi Court of Cassation ruled in 2018
14
that the corporate veil can be
breached if a business is established to defraud creditors or avoid legal obligations. The court
emphasized that the company's illicit use undermines the principle of separate legal personality.
These cases show that UAE courts are willing to use the corporate veil doctrine's piercing in fraud
or misconduct cases. Notwithstanding, it is critical to note that each case is assessed on its benefits,
and the courts practice alert in applying this convention to guarantee reasonableness and safeguard
genuine financial matters. In certain situations, UAE case law has recognized the principle of
piercing the corporate veil, making shareholders or managers personally liable for a company's
actions or debts. Even though the courts apply this doctrine cautiously, they are willing to cut
through the corporate veil in dishonesty or fraud cases. The following cases demonstrate how this
principle is used in UAE law:
Dubai Court of Cassation Case (Dubai Court of Cassation Case No. 346/2019)
In a fraudulent behavior case, the Dubai Court of Cassation addressed the issue of piercing the
corporate veil in a landmark decision
15
. The court ruled that the corporate veil could be breached
when the company's separate legal personality is misused for fraudulent or illegal purposes. To
avoid legal obligations and defraud creditors, the company's assets were fraudulently transferred to
other entities in case
16
. The court allowed personal liability to be imposed and acknowledged that
the corporate veil should not be used to shield individuals engaged in fraudulent activities.
Puncturing the corporate cloak is a lawful tenet that permits lenders to hold investors, Managers,
and Managers by and by at risk for the obligations of an organization under specific conditions. In
general, UAE law recognizes a company's distinct legal personality and limits shareholders' and
managers' liability to the value of their shares. However, as will be discussed below, this rule has
some exceptions. One of the exemptions is when an organization is inappropriately integrated or
doesn't take on one of the structures endorsed by the organization's Regulation. In such cases, the
organization is considered invalid and void, and the people who close agreements in its name are
separately and mutually responsible for the commitments emerging from such agreements.
13
Al-Tawil TNE, ‘Piercing the corporate veil: when LLCs and corporations may be at risk’ (2019)
International Journal of Law and Management 61(2) 328.
14
Al-Tawil TNE, ‘Piercing the corporate veil: when LLCs and corporations may be at risk’ (2019)
International Journal of Law and Management 61(2) 328.
15
Al-Tawil TNE, ‘Piercing the corporate veil: when LLCs and corporations may be at risk’ (2019)
International Journal of Law and Management 61(2) 328.
16
Horizons & Co - Law Firm - Dubai UAE, ‘Piercing the Corporate Veil’ https://www.horizlaw.ae/news/piercing-
corporate-veil
accessed 31 May 2023.
9
A shareholder who uses the company for personal gain to the detriment of the business or its
creditors is another exception. This is referred to as fraud on creditors or fraud on the minority. As
they are deemed acting in bad faith and abusing the corporate veil, the shareholder may be held
personally liable for the company's debts. A third special case is when an investor or a director acts
past their position or disregards the law or the remainder of the organization's relationship. The
shareholder or manager may be held personally liable for any harm caused by their actions in such
instances.
A case of piercing the corporate veil based on creditor fraud is the Dubai Court of Cassation case.
The court determined that the defendant shareholder had sold all his company's assets to other
companies under his control, leaving only the company's debts and liabilities behind. Additionally,
the court found that he had falsified records and documents to hide his fraudulent scheme. The court
concluded that he had violated the terms of his company's separate legal personality and was
personally liable for its debts. The decision of the Dubai Court of Cassation is huge as it affirms that
puncturing the corporate cover is conceivable under UAE regulation, yet in extraordinary
conditions. It also serves as a caution to shareholders and managers who might try to use their
companies for illegal or fraudulent purposes, as they could be held personally liable if their actions
are discovered.
Dubai Court of Cassation Case – (Dubai Court of Cassation Case No. 92/2012)
In another significant case, the Dubai Court of Cassation ruled that the corporate veil may be
breached if a company is established to defraud creditors or avoid legal obligations. The court
emphasized that the company's illicit use undermines the principle of separate legal personality. In
this instance, the business had committed fraud by manipulating financial records and transferring
assets to related parties. The court expected dependable people to take responsibility and consider
the penetrating of the corporate cloak to guarantee equity and safeguard the freedoms of banks.
These cases show that the courts understand that a company's separate legal personality shouldn't be
used for shady or illegal activities. Courts can hold individuals accountable for misconduct outside
of the corporate entity, thanks to the doctrine of piercing the corporate veil
17
. However, it is essential
to remember that the courts evaluate each case on its merits to guarantee fairness and consider
shareholders' and businesses' legitimate interests.
This case was one of a handful of examples where the Dubai courts applied the teaching of
puncturing the corporate cloak, which isn't expressly perceived in the UAE Business Organizations
Regulation. In exceptional circumstances, such as fraud, abuse of power, or evasion of legal
obligations, the doctrine permits courts to disregard the legal distinction between a company and its
17
Horizons & Co - Law Firm - Dubai UAE, ‘Piercing the Corporate Veil’ https://www.horizlaw.ae/news/piercing-
corporate-veil
accessed 31 May 2023.
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10
shareholders or directors. The doctrine aims to stop people from escaping responsibility for
wrongdoing by hiding behind a corporate entity.
In 2016, the Dubai Court of Cassation
18
upheld a lower court's decision to hold a shareholder
personally liable for a company's debts, another example of piercing the corporate veil in the UAE.
The court determined that the shareholder had abused his position and used the business to defraud
creditors. The court also said that the shareholder needed to follow the rules for starting and running
a business, like keeping proper books and records, holding general assembly meetings, and hiring
auditors. These cases show that the courts understand that a company's separate legal personality
shouldn't be used for shady or illegal activities. Courts can hold individuals accountable for
misconduct outside of the corporate entity, thanks to the doctrine of piercing the corporate veil
19
.
However, it is essential to remember that the courts evaluate each case on its merits to guarantee
fairness and consider shareholders' and businesses' legitimate interests.
IV. Laws Governing Company Formation in the UAE
The United Arab Emirates (UAE) has a variety of laws governing company formation, depending
on the jurisdiction. The United Arab Emirates comprises seven emirates, each with its own set of
laws governing business activities. These varieties of parents-in-law and guidelines can affect the
cycle and necessities for laying out an organization in the UAE. In this part, we will investigate the
critical contrasts between parents-in-law overseeing organization development in the UAE,
featuring the unmistakable qualities of every locale:
Dubai
Dubai, one of the seven emirates in the United Arab Emirates, has its own set of business rules. The
Dubai Economic Department (DED) is important in regulating and making business in the emirate
easier.
Main features
a. DED's role in company formation:
Dubai's DED oversees and regulates the company formation
process. It sets the rules and necessities for laying out and working organizations inside the emirate.
b. Legal forms of companies allowed:
Dubai permits a variety of legal business structures, such as
partnerships, limited liability companies (LLCs), and public and private joint-stock companies. It
also recognizes sole proprietorships.
18
Al-Tawil TNE, ‘Piercing the corporate veil: when LLCs and corporations may be at risk’ (2019)
International Journal of Law and Management 61(2) 328.
19
Horizons & Co - Law Firm - Dubai UAE, ‘Piercing the Corporate Veil’ https://www.horizlaw.ae/news/piercing-
corporate-veil
accessed 31 May 2023.
11
c. Minimum capital requirements:
Dubai has distinct minimum capital requirements for various
business types. The nature of the business and the chosen legal structure may influence the required
capital amount.
d. Foreign ownership restrictions:
Dubai has taken steps to encourage foreign investment. The
emirate provides free zones where foreign investors can fully own companies, despite restrictions
on full foreign ownership in certain sectors.
Free zones
a. Dubai International Financial Centre (DIFC):
DIFC is a prominent financial free zone that
operates under a separate legal framework. It provides a favorable environment for financial and
professional services companies, offering attractive incentives and a business-friendly regulatory
environment.
b. Dubai Multi Commodities Centre (DMCC):
The DMCC is a specialized free zone for
commodities trade. It offers many facilities and services to businesses that trade diamonds, gold,
and other precious metals.
c. Jebel Ali Free Zone (JAFZA):
One of Dubai's oldest and largest free zones is JAFZA
20
. It offers
an essential area close to Jebel Ali Port, giving excellent coordinated operations and warehousing
offices. JAFZA draws businesses from manufacturing, trading, and logistics, among others.
Abu Dhabi
The Abu Dhabi Department of Economic Development (ADDED) oversees the Abu Dhabi legal
framework for company formation in the capital of the United Arab Emirates.
Main features
a. ADDED's role in company formation:
In Abu Dhabi, ADDED is a crucial regulator and
supervisor of business operations. It establishes the procedures and guidelines for company
formation and ensures compliance with applicable regulations and laws.
b. Legal forms of companies allowed:
Various business structures are legal in Abu Dhabi,
including partnerships, sole proprietorships, and corporate entities like LLCs and public and private
joint-stock companies.
20
Mogielnicki R and Mogielnicki R, ‘The Dubai Model and UAE Free Zones’ in A Political
Economy of Free Zones in Gulf Arab States (2021) 49-87.
12
c. Minimum capital requirements:
Certain kinds of businesses must have a certain minimum
amount of capital in Abu Dhabi. The precise amount may differ depending on the business's nature
and the chosen legal structure.
d. Foreign ownership restrictions:
Abu Dhabi offers potential open doors for unfamiliar financial
backers and has executed measures to support unfamiliar direct ventures. Full foreign ownership is
not permitted in all areas of the economy, but free zones in Abu Dhabi offer this option.
Free zones
a. Abu Dhabi Global Market (ADGM):
An independent legal framework governs ADGM's
international financial operations. It attracts domestic and international businesses by concentrating
on financial services such as banking, asset management, and insurance.
b. Khalifa Industrial Zone Abu Dhabi (KIZAD):
KIZAD
21
is a modern and planned operations-
free zone between Abu Dhabi and Dubai. It offers a scope of modern offices, distribution center
spaces, and calculated administrations to help different ventures.
c. Masdar City:
Masdar City is a maintainable metropolitan improvement that advances clean
innovation and environmentally friendly power. Businesses in clean energy, sustainability, and
research and development can thrive in this innovative setting.
Sharjah
The Sharjah Economic Development Department (SEDD) oversees Sharjah's legal framework for
company formation, which is the UAE emirate.
Main features
a. SEDD's role in company formation:
SEDD directs and advances financial exercises in Sharjah.
It lays out the rules and strategies for organization arrangement, guaranteeing consistency with the
pertinent regulations and guidelines.
b. Legal forms of companies allowed:
Sharjah permits different authoritative documents of
organizations, including sole ownerships, associations, and corporate substances, for example,
LLCs and public and confidential business entities.
21
Zhou L, ‘Chinese Investments in the Special Economic Zones in the Gulf Region: New
Structural Economics Perspective’ in Social Change in the Gulf Region: Multidisciplinary
Perspectives (Springer Nature Singapore 2023) 531.
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13
c. Minimum capital requirements:
Certain kinds of businesses must meet specific minimum
capital requirements in Sharjah. The nature of the business and the chosen legal structure may
influence the capital amount.
d. Foreign ownership restrictions:
Sharjah has taken steps to encourage investment from abroad.
Free zones in Sharjah provide opportunities for complete foreign ownership, even though full
foreign ownership may be restricted in some sectors.
Free zones:
a. Sharjah Airport International Free Zone (SAIF Zone):
A well-known free zone near Sharjah
International Airport is the SAIF Zone
22
. It takes special care of different enterprises, including
assembling, exchanging, and benefits, giving a scope of offices and business motivators.
b. Hamriyah Free Zone (HFZ):
The HFZ
23
is a well-established free zone in Sharjah that provides
manufacturing, trading, and logistics businesses with excellent facilities and services. It has its
distinct legal system to make company formation and operation easier.
c. Sharjah Publishing City (SPC): SPC is a free zone for the printing and publishing industries.
Printing facilities, media-related services, and licensing assistance are just a few of the specialized
services and infrastructure it offers publishing companies.
V. Other Emirates
In addition to Dubai, Abu Dhabi, and Sharjah, other emirates in the United Arab Emirates have their
company formation laws and regulations. These consist of the following:
A. Ajman:
There are specific requirements and procedures for starting a business in Ajman, which
has its legal framework.
B. Ras Al Khaimah:
The formation of businesses and their operations are overseen by Ras Al
Khaimah's
24
regulatory authority. It provides investors with numerous trading, manufacturing, and
tourism opportunities.
22
Mogielnicki R and Mogielnicki R, ‘The Dubai Model and UAE Free Zones’ in A Political Economy of Free Zones
in Gulf Arab States (2021) 49-87.
23
Mogielnicki R and Mogielnicki R, ‘The Dubai Model and UAE Free Zones’ in A Political Economy of Free Zones
in Gulf Arab States (2021) 49-87.
24
Verma P, Hearn K, Zahran R and Alowais A, ‘The Quality of Private Early Childhood Education
and Care Centers: A Ras Al Khaimah-based Case Study’ (2022) Gulf Education and Social Policy
Review (GESPR) 50-91.
14
C. Umm Al Quwain:
Umm Al Quwain
25
furnishes a business-accommodating climate with its
guidelines and strategies for organization development. It draws investors from tourism, maritime
activities, manufacturing, and other sectors.
D. Fujairah:
Fujairah has its lawful system for organization development, offering motivations and
offices for organizations in areas like delivery, exchanging, and the travel industry.
Conclusion
In the United Arab Emirates, managers of limited liability companies have a variety of legal
responsibilities to ensure proper behavior and prevent fraud. The UAE Companies Law outlines the
fiduciary duty, duty of care, and compliance obligations for managers. Moreover, the guideline of
puncturing the corporate shroud permits courts to dismiss the different legitimate characters of an
organization in instances of extortion or misuse. Understanding these legitimate liabilities and using
the penetrating corporate cover tenet is critical for directors in the UAE's professional workplace.
Managers in the UAE bear huge lawful obligations to forestall deceitful behavior and wrongdoing
in restricted responsibility organizations. The utilization of the guideline of puncturing the corporate
cloak permits courts to consider people responsible for their activities, guaranteeing equity and
safeguarding the privileges of partners. UAE case regulation has exhibited an eagerness to apply the
penetrating corporate shroud teaching in cases including false exercises or maltreatment of the
different legitimate characters of an organization. However, it is essential to remember that the
courts apply this principle cautiously, evaluating each case on its own merits to guarantee fairness
and safeguard legitimate business interests. The UAE offers a variety of options for company
formation, with differences between the free zones and the mainland. These deviations include
ownership restrictions, jurisdictional authority, taxation, and customs duties. Businesses looking to
establish a presence in the United Arab Emirates must know these distinctions to select the structure
that best suits their needs. The legal framework for corporate governance and company formation in
the United Arab Emirates provides a solid foundation for promoting accountability, transparency,
and ethical management practices. The United Arab Emirates wants to create a business
environment where integrity is prioritized, stakeholders' interests are safeguarded, and long-term
corporate growth is encouraged by upholding managers' legal responsibilities and invoking the
principle of piercing the corporate veil when necessary.
25
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and Care Centers: A Ras Al Khaimah-based Case Study’ (2022) Gulf Education and Social Policy
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15
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