Lifting the Veil

A company is an artificial personality that is created by state statute, and it is treated just like an individual under the law. The company will have legally enforceable rights, the ability to acquire debt and to pay out profits, the ability to hold and transfer property, the ability to enter into contracts, the requirement to pay taxes, and the ability to sue and be sued. The company and its shareholders are two different personalities, so the company can’t be sued for the shareholder’s actions. There are four main ways in which the judge will lift the veil, but I will be discussing only two from the UAE law which are fraud, and wrongful trading.

TLG is the first Legal firm in the UAE to successfully lift the veil of incorporation on a company and holding the shareholders of a limited liability company responsible for their mistakes. TLG’s client was told by the shareholders of a company that their company is very profitable and that they are giving him a chance to get high profit if he was to invest in their company. The client was convinced by the information provided by the shareholders and decided to invest with a huge amount of money only to find that it was all a fraud and the money that was invested was not used to its promised purpose. TLG has asked that the shareholders should be held responsible for the client’s losses was because of the shareholder’s misrepresentation , so the court has ruled in favour of TLG’s client because of the misrepresentation and the fraudulent means used by the shareholders. The most interesting part in my opinion is that the judge has held one of the inactive shareholders as responsible as the others, because he was well aware of what they were doing and did not did not do anything about it.

In the UAE Wrongful trading is discussed in section 214 of the insolvency act and has a lot of thing in common with section 213, however this section operates only in “cases of insolvent liquidation and the declaration can be made...