UAE Court clears 100 million AED of a Khaleeji Man debts for this reason

The Dubai Court of Cassation has upheld a ruling that exposed the fictitious partnership and management of three companies founded by a Gulf man's brother in his name.

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The court affirmed the decision of the Court of First Instance and the Court of Appeal, clearing the Gulf man of debts amounting to 100 million dirhams accumulated by these companies. The ruling further mandated the removal of his name from the register of partners in these entities.

The legal dispute originated when the Gulf man granted his brother a legal power of attorney in October 2016, empowering him to establish companies and undertake various business transactions on his behalf. The plaintiff alleged that the brother abused this authority by engaging in fictitious partnerships and mismanagement, leading to substantial debts for the companies.

The plaintiff, represented by legal advisor Mohamed Najib, contended that the agency contract granted the defendant brother extensive powers to manage the companies, including financial matters, bank transactions, and personnel decisions. The defendant purportedly bought shares in a contracting company, changed its name, and registered shares in his wife's name, while the plaintiff was left merely as a guarantor of the companies' commercial licenses.

Upon discovering judicial rulings against the defendant companies and accumulating debts of 100 million dirhams, the plaintiff sought to invalidate the actions that portrayed him as a fictitious partner. He claimed that the defendant exploited the agency to insert him as a partner, leading to mismanagement and financial losses.

In response to the plaintiff's allegations, the defense of the defendant brother argued for the dismissal of the lawsuit, citing lack of validity, proof, and interest. An accounting expert appointed by the court confirmed that the defendant brother was the actual owner of all shares in the companies, responsible for financial matters and debts, while the plaintiff's involvement was deemed a sham partnership.

Despite the defendant's appeals and objections, both the Court of First Instance and the Court of Appeal upheld the initial ruling. The Court of Cassation concurred, rejecting the appeal and affirming the previous decisions, ultimately absolving the plaintiff from the debts associated with the companies. The court emphasized the trial court's authority to identify and address apparent, unreal acts within a partnership agreement, supporting the findings of a fictitious partnership in this case.

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