Are partners liable to settle LLC debt?

Are partners of an LLC (limited liability company) liable to settle the company’s debt from their personal accounts? How many partners is an LLC allowed to have? Do shareholders have the right to interfere in operations?

Under UAE law, an LLC is a company where the number of partners must be at least two, but not exceed 50. A partner’s liability for the company’s debt is limited to the extent of his/her share in its capital.

The Dubai Court of Cassation in its rulings established an exception to this general rule. In one of its judgements, the court extended the liability of partners to their personal assets under specific and extraordinary circumstances.

An LLC must have a general assembly consisting of all shareholders, which must meet at least once a year during the four months following the end of the financial year. The agenda of such a meeting must include hearing the manager’s report concerning the activities and the financial status of the company during the year, the auditor’s report, and a discussion of the balance sheet and profit and loss account in addition to ratifying them.

Shareholders who are not directors have the right to inspect company operations, examine its books and documents in addition to providing advice and guidance to the manager. Any of the shareholders, whether in person or by his agent, has the right to examine minutes of the general assembly meeting and resolutions and he shall also have the right to examine the balance sheet, profit and loss account and the annual report.

An LLC must have an auditor of accounts elected by the general assembly, who must submit a report stating the result of the examination to the general assembly.

The company must set aside 10 per cent of its net profits to form a statutory reserve, and the shareholders may decide to stop setting aside such monies if the reserve reaches one-half of the capital; and the court construed from the above that shareholders of a limited liability company are required by the law to be aware and informed of its profit and loss accounts.

The general rule is that a shareholder in an LLC is responsible only to the extent of his share/shares in the capital of the company. The exception to this rule is that such a shareholder will be held personally liable if he exploited the principle of an LLC’s independent liability to conceal fraudulent acts or misappropriation of funds.

The manager of an LLC is liable towards the company, the shareholders and third parties for indemnifying loss arising out of his fault and neglect in management, all acts of fraud and abuse of power and any breach of the law or the company’s constitutive documents.

My wife is on my sponsorship. She has found a temporary job as an IT engineer for one year in a company in Dubai for a temporary project. In her visa, it is mentioned that she is not allowed to work. Can she work under this status or does she have to get a work permit from the Ministry of Human Resources and Emiratisation? What are the penalties she might face?

I would like to clarify to the questioner that if a person is caught working without a work permit, penalties might be applied and the fine can go up to Dh50,000. The worker might also be jailed and deported. Therefore, the questioner’s wife should get a temporary work permit from the ministry to avoid legal action in this regard.