Fraud is no longer the only basis for liability. Mismanagement that obstructs the enforcement of a judgment may expose a company's legal representative to imprisonment or a travel ban.

In a landmark ruling, the General Assembly of the Abu Dhabi Court of Cassation resolved conflicting judicial approaches regarding the liability of a legal representative of a juridical person for obstructing the enforcement of judgments. The Court established a binding legal principle that strengthens the effectiveness of judicial enforcement and prevents companies from being used as a vehicle to evade court judgments.

First: Background of the Case

A final judgment was issued in favor of a creditor against a private company. However, enforcement proceedings encountered repeated obstacles due to the conduct of the company's director and legal representative.

The issue was not the existence of the debt itself, but rather the inability to reach the company's assets because the director refused to provide financial information, manipulated corporate records, and failed to disclose assets available for enforcement.

This gave rise to the following legal question:

May the enforcement judge order the imprisonment of the company director or impose a travel ban, even though the director is not personally liable for the debt and no enforceable title has been issued against them?

Second: The Legal Issue

The Court of Cassation's case law had developed into two conflicting lines of authority.

The First Approach

Under the first approach, enforcement measures against a company director required proof that the director had:

• committed fraud or deceit;
• abused their authority;
• violated the Companies Law; or
• been held personally liable by a separate judicial decision.

According to this view, the mere refusal to provide financial records or supporting documents was insufficient to justify enforcement measures against the director.

Third: The General Assembly's Ruling — Unifying the Legal Principle

The General Assembly of the Court of Cassation settled the issue by holding that:

The decisive factor is not whether an enforceable title exists against the director personally, but whether the director's own conduct caused the enforcement of the judgment to be obstructed.

The Court further explained that Article (322) of the Civil Procedure Law is intended to safeguard the effectiveness of enforcement proceedings—not to protect those who misuse the separate legal personality of a company to conceal assets or frustrate the enforcement process.

The Legal Principle

The General Assembly held that enforcement measures including an order of imprisonment or a travel ban may be issued against the representative of a private juridical person or even against a third party, even where the creditor holds no enforceable title against that individual, provided it is established that such person engaged in abnormal or improper conduct.

Such conduct may involve fraud or deceit, or may consist merely of poor management or misadministration, provided that it directly or indirectly prevented or obstructed enforcement. Examples include concealing or transferring the debtor's assets, manipulating financial statements or corporate records that reveal assets subject to enforcement, or otherwise impeding the identification of executable assets. This principle applies whether the obstructive conduct occurred during enforcement proceedings or before the enforceable title was issued.

The enforcement judge has the discretion to determine whether these circumstances exist based on the documentary evidence supporting the application or through the summary investigation conducted by the court, provided that the judge's findings are supported by sound and reasonable grounds. Such discretion must be exercised in compliance with the statutory safeguards governing travel ban orders under Articles (324) to (326) of the Civil Procedure Law.

This principle confirms that the enforcement liability of a company's legal representative does not arise merely by virtue of holding the position of director or legal representative. Rather, it arises where the failure or obstruction of enforcement is attributable to that individual's own conduct, which has materially impaired the creditor's ability to recover the adjudicated debt.

Furthermore, establishing this liability does not require proof of fraud or criminal deception. It is sufficient that the representative engaged in abnormal conduct that obstructed enforcement, including mismanagement or the refusal to provide financial information and documentation necessary to identify the debtor's assets available for enforcement.

By this decision, the General Assembly conclusively resolved the inconsistency in previous case law. It affirmed that the legal personality of a company must not be used as a shield to frustrate judicial enforcement or conceal assets, and that the enforcement judge is empowered to adopt the necessary measures to ensure the effective execution of judgments whenever it is established that the company's legal representative was responsible for obstructing the enforcement process, while fully observing the legal safeguards governing imprisonment and travel ban orders.