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  • Writer's pictureIbrahim Salaheldin

Piercing the Corporate Veil in a Landmark Case

The Facts

Our client, a reputable hotel chain, encountered financial discrepancies arising from its dealings with an online portal specialising in renting hotel apartment units. This portal, managed by an individual residing in the UAE, registered a foreign company as the guest for all units, issuing all invoices in the name of this foreign entity.

After a year of regular transactions, the shareholder of the foreign entity ceased payments while continuing to sublease the units, accruing a significant amount of outstanding invoices. The situation was exacerbated by the fact that the foreign entity had no assets within the UAE, rendering traditional enforcement and collection efforts futile.

How We Pierced the Corporate Veil

Faced with a seemingly insurmountable challenge, we embarked on a meticulous legal strategy aimed at piercing the corporate veil. Our approach was twofold, as we initiated a new claim against both the company and the individual debtor, on the basis of UAE Companies Law 32/2021 (“UAE Companies Law”).

Articles 335-337 of the UAE Companies Law provided the legal foundation for our argument, stating that actions taken on behalf of an unlicensed foreign company within the UAE do not protect individuals from personal liability for the company's actions.

By distinguishing the roles of the debtor in both the original and new proceedings, we were able to demonstrate that he acted on behalf of the company, thereby making him personally liable. Our team meticulously analysed every plea made by the debtor, using these as leverage to reinforce our legal position. Through strategic legal drafting and research, we successfully exposed the elusive nature of the debtor's operations and underscored the lack of a corporate veil protecting him from personal liability.

In a significant victory, the court ruled in our favour, holding the manager personally liable for the debts of the foreign company. This outcome not only affirmed the effectiveness of our legal strategy but also set a precedent for future cases involving foreign entities operating without proper licensing in the UAE.

This case not only showcases our law firm's commitment to securing justice through innovative legal strategies and meticulous research but also emphasises the critical role of mastering legal nuances in safeguarding our clients' interests. Our expertise and calculated approach enabled us to navigate through complex legal frameworks, leading to a significant triumph by piercing the corporate veil. This victory further cements our reputation as an adept and trustworthy partner for businesses facing challenging legal issues, demonstrating our unparalleled ability to turn legal challenges into successful outcomes.

Ibrahim Salaheldin




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