(summary)
Sometimes your may obtain the post of manager in your company or employee with powers to sign commercial checks to dispatch the company works, your may leave the company or continue working with it, and get surprised that some checks you signed were returned without enough balance for the check withdrawer. This case explains to you what is established according to the provisions of court cassations about contradiction between the liability of the limited liability company and the personal liability of check signatory whether he is an employee or attorney-in-fact and what is the exception from the personal liability in this case. The court of cassation in the below case is an example which shows the answer to these inquiries:
Summary of the Case :
Sometimes your may obtain the post of manager in your company or employee with powers to sign commercial checks to dispatch the company works, your may leave the company or continue working with it, and get surprised that some checks you signed were returned without enough balance for the check withdrawer. This case explains to you what is established according to the provisions of court cassations about contradiction between the liability of the limited liability company and the personal liability of check signatory whether he is an employee or attorney-in-fact and what is the exception from the personal liability in this case. The court of cassation in the below case is an example which shows the answer to these inquiries:
Summary of the Case :
- Manager (A) has, during his work for the limited liability company (B), signed 7 checks at the value of AED1.577.000/00 in the interest of eth company (G) according to commercial transactions between the parties. The company ((G) has submitted the checks to eth bank and it was found that there is no balance for the said checks.
- — The company (C ) has entered protective custody- Abu Dhabi—for preventing the company (B) from disposing the company stocks or movables or shares, and filed a commercial case—Abu Dhabi—requesting obliging the manager (A) and the company ((B) with payment of the amount of AED 1.577.000 and the legal interest from the date of case filing up to full payment. The first instance court judgment was issued obliging the manager ((A) and the company (B) with jointly payment the amount of AED 1.577.000 along with the delay interest at 5% from the date of filing the case up to full payment and correctness of preventive custody, provided what proves criminal indictment of the manager in criminal case of a dud check.
- — Manger (A) and the limited liability company (B) challenged the court judgment at higher court—court of appeal-Abu Dhabi—which judged with affirming the judgment of the first instance court.
Challenges:
— Manager ((A) and the company ((B) challenged the court judgment at higher court which is the court of cassation on the grounds of some challenges namely :-
1—The limited liability company is not accountable except within the limit of the company capital provided by its partners determined in the articles of association.
2- The manager\’s responsibility is personal in a number of conditions as determined in the commercial companies law, which are:-
- A- Not mentioning the phrase ((limited liability company) in contracting and/or companies official papers and/or not mentioning the company capital on its official papers and the result of this is the manager\’s personal responsibility for the company\’s obligations
- B- Violating the rules of publicity, incorporation according to the provisions of the commercial companies law and the result of this is the partners\’ personal responsibility for the company\’s obligations
Results :
Court of cassation decided the following prior to issuing its decision:
- 1—Law prescribes originally that the attorney-in-fact (Manager A) is not personally accountable for the obligations arising from the act he makes within his power of attorney in the name of the principal ((Company B)—the manager is the attorney-in-fact disposing over the limited liability company.
- 2- the legislator caring for adding special protection to the check as payment instrument which is considered as money went beyond this established rule by prescribing in article 559/2 of the commercial transactions law that the attorney—in—fact shall be personally responsible for payment of the value of the check he issues in the name of the principal.
- 3—Such responsibility shall not be removed off him unless he proves that the principal had existing balance drawable at the time of issuing the check, if he is unable to prove this, he shall be liable towards those entitled to the check value.
- The company judged that according to what was mentioned above, that the judgment issued obliging the manager ((A) and the limited liability company (B) jointly to pay the value of the check AED 1.577.000 is correct as the manager signed the checks which show absence of balance for them, which are reasons enough for correctness of the judgment issued by the first instance and appeal courts.
Our Comment:
Your have always during your work and issuing checks for the interest of third parties to obtain what proves existence of enough balance in the company account at the time of issuing the check, you have to keep this evidence with you as it may be inapplicable to obtain it later, in this regard an electronic message or electronic account statement of the company account should be enough.
Lawyer & Legal Consultant
Mr. Mohamed Nouredin
