.png)
Investment Manager Liability in UAE: AED 2.75m Repaid, Chairman Liable
Introduction: When the Exit Door Will Not Open
Every investor in a private fund eventually tests one clause: the one that lets them leave. In this case the investor sent a liquidation request, the manager confirmed receipt, and then nothing happened. The agreed fourteen business days came and went, and the AED 2.75 million that the investor was still owed stayed exactly where it was.
On 8 October 2026 the Abu Dhabi Court of Cassation brought that story to an end. In joined Commercial Appeals 876 and 979 of 2026, it upheld judgments ordering a licensed investment company to repay the money with the agreed return, interest and compensation. More striking still, it confirmed that the chairman of the group behind the company is personally liable alongside it.
What the Court Decided: Principal, Return, Interest and a Personal Bill
The investor signed investment management agreements with the company in April 2019 and February 2024. Between April 2019 and July 2024 he made 19 transfers totalling AED 3.15 million, and received a share certificate for each one. The agreements promised a fixed return of 12%. In December 2020 the company announced a 3% cut, citing the pandemic, but never gave the seven days' written notice the agreement required for any change. Payments stopped after July 2024, and the liquidation request of 16 September 2024 went unanswered.
The court of first instance ordered the company and two joined parties, an affiliated entity and the chairman, to pay AED 2,750,000 with 5% annual interest from the date the claim was filed. The company alone was ordered to pay AED 68,466.67 in unpaid return for the period up to the liquidation request, also with interest. Each of the three was ordered to pay AED 50,000 in compensation. The Court of Appeal upheld everything, and the Court of Cassation rejected both further appeals. The full Arabic text of the judgment is attached below.
What the Law Says: A Professional Standard, Not an Ordinary One
The company's main argument was procedural in appearance but substantive in effect. It said the investor sued in contract, yet the lower courts had decided the case on regulatory breaches, which belong to a different relationship and cannot by themselves create a duty to repay capital. It described itself as a manager with limited powers, an agent simply carrying out the client's orders.
The Court of Cassation rejected this. A contract binds a party not only to its written terms but to whatever law, custom and the nature of the dealing require, and it must be performed in good faith. A licensed financial institution that runs investment accounts must act as a professional with a level of care that goes beyond what is expected of an ordinary person. In the court's words, it bears the harm its services cause clients "without the need to prove its fault", because that risk comes with the profession it practises.
On that footing the breaches identified by the court's securities experts were not side issues. They were breaches of the investment management agreement itself.
The Breaches That Changed the Character of the Relationship
The expert panel's findings read like a catalogue of what a non-discretionary mandate is not supposed to look like. Fifteen of the nineteen investments were made without prior written instructions, the company treating the bank transfers as consent. Ten certificates were issued in the name of an entity that had already been dissolved in July 2019, while the money was in fact routed elsewhere. A professional-investor fund was sold to a retail investor for whom it was unsuitable, without a promotion licence. The company acted as custodian without a licence, and later replaced the custodian with another unlicensed entity without telling the investor.
Two findings stand out. The company fixed monthly returns of 12% to 15% and topped up shortfalls from its own funds, which the experts said turned it into a guarantor of performance and created a false sense that the investment was safe. And it earned about 19.2% a year from the fund while paying clients 10% to 12%, keeping the spread. Having profited as a principal, it could not retreat to the label of a mere intermediary once the fund failed.
No Double Recovery: Why Each Award Stood on Its Own
The company also argued that ordering principal, return, interest and compensation together meant paying several times for one harm. The court disagreed and explained why each head is different. The AED 68,466.67 was not damages at all. It was profit the contract promised, and because the reduction had never been validly notified, the 12% rate still applied. Delay interest compensates for late payment of a sum that is known and due. The compensation answered a separate harm: the investor's money was held and used without bringing him the agreed benefit. Article 87(1) of the Commercial Transactions Law allows a creditor to recover loss beyond delay interest where the debtor acted with fraud or gross error, and the trial court's findings supported that.
The contrast with cases where extra compensation is refused is instructive. In the Dh5.5 million unpayable cheque ruling, a claim for compensation on top of interest failed for want of proof. Here the proof was in the expert report.
The Chairman's Personal Liability: When the Veil Lifts
The chairman argued that he had signed nothing with the investor, received nothing and had no standing in the dispute. The court began from the rule in Article 257 of the Commercial Companies Law that a shareholder's liability is limited to their shares. But that protection falls away, the court said, when a board member of a private joint stock company uses the company's separate finances as a screen to hide fraud, abuse of power or gross error. Article 162(1) of the same law then makes directors answerable to third parties for fraud, abuse of power and breaches of the law.
The experts found that the chairman was a partner in the fund, chairman of the affiliated entity, a manager of the company named as the fund's investment manager, and chairman of the wider group. The court concluded that he held the real power across all of them and had mixed their finances with his own, while presenting each entity as financially separate. That was enough to make him answerable for returning money that had moved through his companies. As we saw with travel bans for company managers who obstruct execution, UAE courts are increasingly willing to look past the entity to the individual who controls it.
Practical Significance: What the Ruling Signals
Three themes emerge. First, regulatory conduct and contractual liability are not separate worlds. Where a licensed manager ignores the rules on instructions, suitability, custody and conflicts, a court may treat that conduct as a breach of the client contract and of good faith, not just as a matter for the regulator.
Second, guaranteed or smoothed returns carry a long tail. A manager that promises a fixed rate and pays it from its own pocket may later find the court holding it to that rate, and to any formal conditions it attached to changing it.
Third, the limited liability shield is conditional. The judgment does not say that every chairman answers for every company debt. It turns on findings of real control, mixing of finances and conduct amounting to fraud, abuse of power or gross error. Where those lines fall in a less extreme case remains an open question that future rulings will refine.
How Juris Maestro Can Help
Juris Maestro advises investors, fund promoters, family offices and their boards on investment management, subscription and custody arrangements. We review and draft investment agreements, notices of variation, liquidation and redemption requests, board resolutions and settlement terms, and explain the options and timetables available under UAE law when an exit stalls.
If you're unsure, let's talk. Before it turns into a case.
info@jurismaestro.com | +971 56 116 3390 | www.jurismaestro.com
This article interprets a court judgment for general information only. It is not legal advice.
