The doctrine of separate legal personality lies at the heart of modern company law. Once incorporated, a company acquires a legal identity distinct from its shareholders, directors and managers.
As a general rule, shareholders are not personally liable for the obligations of the company beyond their capital contribution. The protection afforded by separate legal personality, however, is not absolute. In limited circumstances, courts may look beyond the corporate structure and impose personal liability on those controlling a company where the corporate form has been used to facilitate fraud, deception, abuse or other unlawful conduct.
DIFC: A Common-Law Approach
The DIFC Courts operate within a common-law framework and recognise the possibility of piercing the corporate veil in exceptional circumstances.
The courts will not disregard separate legal personality merely because a company is closely controlled, inadequately capitalised or unable to satisfy a judgment. Rather, veil-piercing is generally confined to situations where a company has been interposed to evade or frustrate an existing legal obligation.
The DIFC Courts have consistently demonstrated caution in this area. In Tatiana Akhmedova v Farkhad Akhmedov & Straight Establishment (CA-003-2018), the Court of Appeal considered arguments that a corporate vehicle holding valuable assets was effectively the alter ego of the judgment debtor. While recognising allegations that the company had been used to shield assets from enforcement, the Court declined to extend enforcement jurisdiction against the company solely on that basis, emphasising that separate legal personality could not be disregarded merely to facilitate enforcement or asset recovery against a non-party.
ADGM
Although veil-piercing is recognised in principle, it remains an exceptional remedy.
As in the DIFC, claims founded on fraud, breach of fiduciary duty, conspiracy, or other recognised causes of action are the primary routes to liability, rather than reliance on veil-piercing.
A recent illustration of the ADGM Courts’ restrictive approach to piercing the corporate veil is Faysal Mohamad Awad v 3AM Property Investment Company LLC & Anor [2025] ADGMCFI 0003. The dispute arose from a failed real estate investment arrangement in which the claimant sought to recover funds he alleged were owed to him by the corporate defendant. In addition to pursuing claims against the company itself, the claimant sought to hold the company’s majority shareholder and director personally liable.
The claimant argued that the individual defendant had blurred the distinction between his personal affairs and those of the company, relying on matters such as the use of personal cheques to satisfy corporate liabilities and the use of a personal email address for company business. On that basis, he contended that the company’s separate legal personality should be disregarded.
The Court rejected the claim and emphasised that in accordance with Prest v Petrodel Resources Ltd [2013] UKSC 34, veil-piercing is generally limited to cases where a person deliberately evades or frustrates an existing legal obligation by interposing a company under his control. The Court found that the facts before it were “far removed” from circumstances that would justify such an intervention.
Importantly, the Court also considered the position under UAE law and referred to Abu Dhabi Court of Cassation Cases 335/2019, 863/2019 and 871/2019. Those decisions reaffirm the fundamental principle that shareholders of a limited liability company are not personally liable for the company’s debts beyond their contribution to the company’s capital. However, the Court noted the recognised exception whereby creditors may pursue a shareholder personally where it is established that the shareholder used the company’s separate legal personality as a means or shield to commit fraud or deceit, particularly in dealings with creditors or through the misappropriation of company assets.
Conclusion
The treatment of corporate personality across both the DIFC and ADGM reflects a consistent judicial reluctance to disregard the corporate form.
The DIFC and ADGM apply a common-law approach, under which veil-piercing remains narrowly confined to exceptional cases; the practical threshold for imposing personal liability is broadly aligned. Courts will intervene only where the corporate structure is being used as an instrument of fraud, evasion, or other serious abuse and not merely where it results in unfairness or enforcement difficulty. In this sense, the jurisprudence across both regimes reflects a shared functional outcome preserving corporate personality as the default position while reserving personal liability for cases of clear and demonstrable misuse or fraud.
Chris is a Chartered Accountant, member of the Institute of Chartered Accountants in England and Wales (ICAEW) and the Emirates Association for Accountants and Auditors (EAAA), his details are on the list of approved Insolvency Practitioners in DIFC and ADGM. He is also a UK, Cyprus and Romania licensed Insolvency Practitioner.
Marios is on the list of approved Insolvency Practitioners of the DIFC and ADGM and a licensed Insolvency Practitioner in Cyprus.
