Each month we will be putting a legal problem to consultant Ali Al Jabal to answer.
Problem: In the event a financial debt occurred on my behalf due to a company’s undertaking. Could I claim the debt in question by only bringing an action against the company, or could I legally make a claim for the debt against the partners, company director or members of the board in order to ensure that they are personally obliged to compensate this debt out of their own money.
AJ Answer: It was customarily held in Bahrain, that a company enjoyed financial autonomy for its owners or managers and that the debt owed to them would be in isolation from the private partner’s financial disclosure. This was stipulated by the Bahraini Companies Act, whereby you could only make a limited claim by reference to the company’s capital and assets without being able to bring an action to the rest of the partners, members of the board of directors and managers.
However, amendments were made to the Companies Act by the Bahraini legislators, thus opening the door to questioning and obliging the partners, managers and board members to pay any debt that falls on the disposal of the company in the face of others in exclusive cases. Whereby, the Bahraini legislature has set out a limited number of exclusive breaches in order to establish a claim:
1. The company’s partner, board member or company director provided confidential information or incorrect data relating to the company’s capital.
2. The company’s partner, board member or company director used the company for illegal or fraudulent purposes.
3. If the partner, board member or company director used the company’s finances for his or her own personal use.
4. If a partner, board member or company director does not separate between personal interest, gain and the interests of the company and if the partner, board member or company director accumulates a financial debt on the company that they are aware that the company will not be able to pay back.
5. If the proxy fails or neglects to pay the governmental taxes owed to the state and finally in the event of breach of the Companies Act or the Memorandum of Association and its internal regulations.
Therefore, in the event any of the foregoing criteria are satisfied and any other limitations are imposed by the Legislator, you are legally entitled to make a claim for your debt and hold the director, partner or a member of the board of directors liable and oblige them to pay from their personal funds if they satisfy the exclusive situations in the above-mentioned.
To contact Ali Al Jabal at
Al Jabal Consultancy
Attorneys and Legal Consultants
Tel: +973 17 530 400