April 23, 2026
Many entrepreneurs believe that establishing a Limited Liability Company (LLC) guarantees complete protection for their personal funds against any losses. However, the legal reality revealed by the new Companies Law tells a different story in certain cases; negligence in management can lead to personal financial liability.
1. When does liability become personal and joint?
Under Article 28, the liability of the director or board members is not limited to the company's assets. They are jointly liable to compensate the company, partners, or even third parties for damages resulting from:
Violating the provisions of the company's articles of association or memorandum.
Errors, negligence, or dereliction of duty on their part.
Note: Any clause in the contract that attempts to exempt the director from this liability is null and void.
2. How to avoid the pitfalls of collective decisions?
If the board of directors makes a wrong decision, everyone is responsible. However, the regulations offer a lifeline in Article 28:
Explicit Objection: You are not held accountable for a decision if you explicitly record your objection in the meeting minutes.
Excused Absence: Your absence from the meeting does not exempt you from liability unless you can prove that you were unaware of the decision or unable to object to it after becoming aware of it.
3. Who Has the Right to Sue the Manager?
The regulations do not leave room for interpretation. Article 29 specifies who has the right to file a lawsuit:
The Company Itself: The company has the right to file a liability lawsuit against the manager for errors that have harmed the entity as a whole.
Partners or Shareholders: A partner or shareholder (representing 5% or more of the capital) has the right to file a lawsuit if the company does not, provided that the objective is to achieve the company's interests and that the plaintiff is acting in good faith.
Personal Damage Claim: If the manager's error causes direct and specific harm to a particular partner, that partner has the right to file a personal claim to obtain redress.
4. Smart Legal Protection (Liability Insurance)
As a strategic option for entrepreneurs, Article 28 of the company's articles of association allows companies to provide insurance coverage for their directors against any liability or claim arising from their professional position. This protects directors from unintentional professional risks.
In short for entrepreneurs: Management is not just a position; it's a legal responsibility. Documenting objections in the minutes and strictly adhering to the articles of association are the first line of defense for your personal funds, even before the company's funds.
