{"id":4166,"date":"2026-09-25T14:40:26","date_gmt":"2026-09-25T14:40:26","guid":{"rendered":"https:\/\/tme-legal.com\/?p=4166"},"modified":"2026-09-25T15:06:03","modified_gmt":"2026-09-25T15:06:03","slug":"director-liability-uae-2026","status":"publish","type":"post","link":"https:\/\/tme-legal.com\/en\/director-liability-uae-2026\/","title":{"rendered":"Director Liability in the UAE 2026: The AED 152 Million Cassation Ruling and the New Governance Duties"},"content":{"rendered":"[vc_row type=”full_width_background” full_screen_row_position=”middle” column_margin=”50px” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none” class=”blog-image”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” bg_image_animation=”none”][image_with_animation image_url=”4160″ alignment=”” animation=”None” border_radius=”none” box_shadow=”none” max_width=”125%”][\/vc_column][\/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”60px” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none” top_padding=”60″ bottom_padding=”80″][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/4″ tablet_width_inherit=”default” sticky_content=”true” sticky_content_functionality=”css” bg_image_animation=”none”][nectar_global_section id=”1425″][nectar_global_section id=”1435″][\/vc_column][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”3\/4″ tablet_width_inherit=”default” bg_image_animation=”none”][vc_row_inner column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” text_align=”left”][vc_column_inner column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”5\/6″ tablet_width_inherit=”default” bg_image_animation=”none”][vc_column_text]\n

September 2026 \u00b7 Corporate Law \u00b7 Corporate Governance \u00b7 Director Liability<\/em><\/p>\n

Limited liability protects shareholders. It has never protected directors and managers from the consequences of their own conduct, and a recent judgment of the Dubai Court of Cassation has made the point in the most concrete terms available: a personal award of AED 151.97 million<\/strong>, jointly and severally, against two former executives of a UAE company.<\/p>\n

The judgment lands at the same time as a substantial reform of the governance provisions of the Commercial Companies Law. Federal Decree-Law No. 20 of 2025<\/strong>, issued on 1 October 2025, expanded the express duties owed by directors, introduced related-party disclosure thresholds, required independent directors for certain categories of company, and imposed new record-keeping obligations. The two developments point in the same direction: the standard of conduct expected of UAE boards is rising, and the courts are prepared to enforce it against individuals. This article sets out what the executives did wrong, where the statutory exposure sits, and what boards – particularly in holding and group structures – should be doing about it now.<\/p>\n

1. The case: Dubai Court of Cassation, Appeal No. 866 of 2024<\/h2>\n

The claim was brought by a UAE-based company against its former Vice-Chairman and CEO, together with the manager and authorised signatory of one of its subsidiaries. The company alleged that the executives had approved major contracts and made substantial payments on its behalf while withholding critical information from the board, and while failing to comply with the conditions the board had attached to those transactions – including a requirement to carry out the necessary due diligence.<\/p>\n

The company claimed damages exceeding AED 470 million. The Court of Cassation upheld the Court of Appeal, confirming that the former executives were jointly and severally liable<\/strong> to pay AED 151.97 million<\/strong> in compensation to the company for material and moral damages, together with interest. The ruling is final and binding.<\/p>\n

Three features of the decision are worth isolating, because they are what makes it useful as a governance benchmark rather than simply a large number:<\/p>\n

    \n
  • The wrong was procedural, not fraudulent in the ordinary sense.<\/strong> The executives were not found to have stolen from the company. They approved transactions they were not authorised to approve on the terms on which they approved them, and they did not put the board in a position to exercise its judgment.<\/li>\n
  • Withholding information from the board is itself the breach.<\/strong> The board had set conditions. Those conditions were not met, and the board was not told. That is the conduct the Court penalised.<\/li>\n
  • Liability was joint and several.<\/strong> Each executive is exposed for the whole amount, not a share of it. Recovery between them is their problem, not the company’s.<\/li>\n<\/ul>\n

    The claim was brought by the company itself, against its own former officers, after they had left. Directors who assume that departure closes the file are relying on a comfort the law does not give them. The relevant limitation periods run from discovery or from the commencement of proceedings, not from the date of resignation.<\/p>\n

    2. Where the statutory exposure sits<\/h2>\n

    The UAE framework does not have a single “directors’ duties” provision. Exposure is distributed across the Commercial Companies Law, the insolvency regime and, ultimately, the general law of civil liability.<\/p>\n\n\n\n\n\n\n\n\n\n
    Provision<\/th>\nApplies to<\/th>\nExposure<\/th>\n<\/tr>\n<\/thead>\n
    Article 22, CCL<\/td>\nAnyone authorised to manage a company<\/td>\nMust preserve the company’s rights and exercise the care of a diligent person, acting within the scope of the authorisation issued by the company<\/td>\n<\/tr>\n
    Article 23, CCL<\/td>\nThe company<\/td>\nThe company is bound by the acts of its manager carried out in the usual course of management – which is why acting outside that scope shifts exposure to the individual<\/td>\n<\/tr>\n
    Article 84, CCL<\/td>\nManagers of an LLC<\/td>\nPersonal liability to the company, the partners and third parties for fraudulent acts, and for losses or expenses caused by improper use of power, breach of the law, the memorandum of association or the appointment contract, or gross error<\/td>\n<\/tr>\n
    Article 162, CCL<\/td>\nBoard members and executive management of joint stock companies<\/td>\nLiability to the company, the shareholders and third parties for fraud, abuse of power, breach of the CCL or the articles of association, and errors in management<\/td>\n<\/tr>\n
    Article 246, Bankruptcy Law<\/td>\nDirectors, managers and any person responsible for the actual management of the company<\/td>\nLiability to contribute to the company’s debts for prescribed acts in the period preceding insolvency, proportionate to the individual’s fault<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    Two features of Article 162 deserve particular attention, because they close the two defences directors most often reach for.<\/p>\n

    Exculpation clauses are void.<\/strong> Any provision in the articles of association, the memorandum or the appointment contract that purports to relieve a director or manager of this liability is invalid. A well-drafted indemnity may allocate the economic burden between company and individual, but it cannot extinguish the liability itself.<\/p>\n

    Not being in the room is not a defence.<\/strong> Where a decision is passed unanimously, liability extends to all board members. Where it is passed by majority, a director who objected escapes liability only if the objection is expressly recorded in the minutes<\/strong>. A director who was absent must show that they were unaware of the proposed action or, if aware, unable to object. Silence in the minutes is, in practice, agreement.<\/p>\n

    3. What Federal Decree-Law No. 20 of 2025 changed<\/h2>\n

    The Amending Law, issued on 1 October 2025, is best known for its capital-structuring reforms – multiple share classes in LLCs, statutory drag-along and tag-along rights, non-profit companies, and the re-domiciliation framework. Its governance provisions have attracted less attention but are more consequential for individual directors:<\/p>\n

      \n
    • Expanded express duties.<\/strong> Directors are now expressly required to act with due care and in the best interests of the company. The duty is stated rather than left to be inferred from Article 22 and general principles.<\/li>\n
    • Related-party transaction disclosure.<\/strong> Directors must disclose related-party transactions that exceed prescribed statutory thresholds.<\/li>\n
    • Independent directors.<\/strong> Certain categories of company may now be required to appoint independent directors.<\/li>\n
    • Record-keeping and governance disclosure.<\/strong> Enhanced obligations to maintain board minutes and conflict-of-interest registers, and to make prescribed governance disclosures to regulators or, for certain events, in public records.<\/li>\n
    • Deadlock resolution.<\/strong> Under the revised Article 85(4), where shareholders cannot agree on board appointments, the competent authority may appoint a non-shareholder as interim director or manager for up to one year.<\/li>\n<\/ul>\n

      The record-keeping obligations and the Cassation judgment are the same point approached from two directions. The Court penalised executives for failing to put information in front of the board; the Amending Law now requires the board to maintain the records that would evidence what it was told and when. For a director, contemporaneous minutes are no longer administrative housekeeping – they are the primary defence.<\/p>\n

      The effective dates and transitional application of the Amending Law vary by provision. Companies should not assume that every governance obligation applied from the date of issuance, and should confirm the position for each requirement before treating a gap in past compliance as a breach.<\/p>\n

      4. Insolvency: Article 246 of the Bankruptcy Law<\/h2>\n

      The Commercial Companies Law governs liability to the company and its shareholders. Where the company fails, a separate and in some respects broader regime applies under Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy<\/strong>, in force since 1 May 2024.<\/p>\n

      Article 246 extends potential liability beyond formally appointed directors and managers to any person responsible for the actual management of the company<\/strong>, together with those in charge of its liquidation. Where prescribed conduct in the period preceding insolvency is established – taking undue risks with the company’s affairs, disposing of assets at an undervalue, or granting preferential treatment to a creditor, among the scenarios set out in the law – the bankruptcy court may order the individual to pay an amount proportionate to their fault, applied towards the company’s debts. One of the scenarios addressed by the law is the case where the company’s assets are insufficient to meet at least 20 per cent of its debts and mismanagement contributed to that position. Proceedings must be commenced within two years<\/strong>.<\/p>\n

      The “actual management” test is the provision that catches holding structures.<\/strong> It does not depend on a formal appointment. An executive of a parent company who directs the affairs of a UAE subsidiary – by giving instructions the local board habitually follows – can fall within Article 246 if that subsidiary later enters bankruptcy. Group treasury arrangements, intercompany transfers made under pressure from the parent, and shareholder-directed payments to selected creditors are precisely the conduct the article addresses.<\/p>\n

      5. What this means for holding and group structures<\/h2>\n

      Three exposures recur in group structures and are worth testing specifically:<\/p>\n

        \n
      • Nominee and appointee directors.<\/strong> A director appointed to a subsidiary board by a shareholder owes duties to the subsidiary, not to the appointing shareholder. Where the two conflict, following the shareholder’s instruction is the exposure, not the defence.<\/li>\n
      • Shadow direction from the parent.<\/strong> Where the parent’s executives make the decisions and the local board records them, the parent’s executives may be treated as responsible for the actual management under Article 246 – while the local directors remain liable under the CCL. Both layers are exposed at once.<\/li>\n
      • Delegated authority that has drifted.<\/strong> Most Cassation cases of this kind turn on the gap between the authority actually conferred – by the constitutional documents, a board resolution, a power of attorney or an internal approval matrix – and what was signed. That gap widens quietly as a group grows.<\/li>\n<\/ul>\n

        6. Directors’ and officers’ liability insurance<\/h2>\n

        A judgment of this size against individuals is, unsurprisingly, being read as a case for D&O cover. Cover is worth having, but it is not a substitute for governance, and two points should be understood before relying on it. First, D&O policies respond to negligence and breach of duty, not to dishonesty; most contain conduct exclusions that bite once fraud or deliberate misconduct is established. Second, cover written outside the UAE may not respond as expected to an onshore judgment, and the scope of defence costs cover in the period before liability is determined is often where the practical value of a policy is decided.<\/p>\n

        Boards should review the limit against realistic exposure, confirm that subsidiary directors and de facto managers within the group fall within the definition of insured persons, and check how the policy treats claims brought by the company itself – which is precisely how this claim arose.<\/p>\n

        7. Board defensibility checklist<\/h2>\n
          \n
        • Map delegated authority. Reconcile the constitutional documents, board resolutions, powers of attorney and any internal approval matrix, and identify where they conflict.<\/li>\n
        • Set and record monetary and subject-matter thresholds above which board approval is mandatory, and make them operative in the signing process rather than aspirational.<\/li>\n
        • Where the board attaches conditions to an approval, require written confirmation that each condition has been satisfied before execution, and minute the confirmation.<\/li>\n
        • Ensure due diligence requirements are documented, allocated to a named person and evidenced on file.<\/li>\n
        • Maintain contemporaneous board minutes that record what information was provided, by whom, and what was decided. Record dissent expressly.<\/li>\n
        • Establish and maintain the conflict-of-interest register and the related-party disclosure process required under the Amending Law.<\/li>\n
        • For group structures, review whether parent executives are exercising actual management over UAE subsidiaries and address the exposure that creates.<\/li>\n
        • Review D&O cover for limit, insured-person definition, conduct exclusions and treatment of company-brought claims.<\/li>\n
        • On appointment or departure, take a documented record of the position – directors remain exposed for their period in office long after they leave.<\/li>\n<\/ul>\n

          Frequently asked questions<\/h2>\n

          Does limited liability protect directors in the UAE?<\/h3>\n

          Limited liability protects shareholders in respect of the company’s obligations. It does not protect directors and managers from liability for their own conduct. Articles 84 and 162 of the Commercial Companies Law impose personal liability on managers and board members towards the company, its shareholders or partners, and third parties.<\/p>\n

          Can a director be released from liability by the articles of association or an indemnity?<\/h3>\n

          No. Provisions that purport to relieve directors or managers of this liability are void. An indemnity may allocate the economic burden as between company and individual but cannot extinguish the underlying liability.<\/p>\n

          Is a director liable for a decision they did not attend or did not vote for?<\/h3>\n

          Where a decision is passed unanimously, liability extends to all board members. Where it is passed by majority, a director who objected is protected only if the objection is expressly recorded in the minutes. A director who was absent must show they were unaware of the proposed action or, being aware, unable to object.<\/p>\n

          Does personal liability apply to free zone companies?<\/h3>\n

          Free zone entities are governed by the companies regulations of the relevant free zone authority, and the financial free zones – the DIFC and ADGM – operate separate corporate and insolvency regimes with their own directors’ duties. The exposure exists in each regime; the source and the tests differ. Advice should be taken by reference to the specific jurisdiction of incorporation.<\/p>\n

          Can someone who is not a registered director be held liable?<\/h3>\n

          Yes, in insolvency. Article 246 of the Bankruptcy Law extends liability to any person responsible for the actual management of the company, which can capture individuals who give instructions the board habitually follows without holding any formal position.<\/p>\n

          How long does exposure last after leaving the board?<\/h3>\n

          Departure does not end exposure for the period in office. Under the Bankruptcy Law, claims against directors, managers and de facto managers must be brought within two years of the commencement of proceedings. Claims under the Commercial Companies Law follow the general limitation rules and can be brought well after resignation, as the Cassation case illustrates.<\/p>\n

          How TME Legal Can Assist<\/h2>\n

          Governance exposure is easiest to fix before there is a dispute and almost impossible to fix afterwards. We advise boards, shareholders and individual directors on:<\/p>\n

            \n
          • delegation-of-authority reviews across mainland and free zone entities, reconciling constitutional documents, board resolutions, powers of attorney and approval matrices;<\/li>\n
          • board process design – approval thresholds, conditions precedent to execution, minute-taking standards and dissent recording;<\/li>\n
          • compliance with the governance requirements introduced by Federal Decree-Law No. 20 of 2025, including related-party disclosure and conflict-of-interest registers;<\/li>\n
          • group and holding structure reviews addressing shadow and de facto management exposure under Article 246 of the Bankruptcy Law;<\/li>\n
          • director onboarding and exit documentation, including position statements and handover records;<\/li>\n
          • representation of companies and of individual directors in liability claims before the UAE courts.<\/li>\n<\/ul>\n

            This article is provided for general information purposes as at August 2026. It summarises a judgment of the Dubai Court of Cassation and the position under Federal Decree-Law No. 32 of 2021 as amended by Federal Decree-Law No. 20 of 2025, and Federal Decree-Law No. 51 of 2023, as reported in publicly available sources. UAE judgments are decided on their own facts and do not create binding precedent in the common law sense. This article does not constitute legal advice and should not be relied upon as such. Professional advice should be obtained before taking or refraining from any action.<\/em><\/p>\n[\/vc_column_text][\/vc_column_inner][vc_column_inner column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/6″ tablet_width_inherit=”default” bg_image_animation=”none”][\/vc_column_inner][\/vc_row_inner][\/vc_column][\/vc_row][vc_row type=”full_width_content” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” bg_image_animation=”none”][nectar_global_section id=”887″][\/vc_column][\/vc_row]\n