Case studiesCompanies & partners2024
Partner not personally liable for his company's bounced cheques, upheld on appeal
Al Faisal came in at the appeal for a partner whom a supplier was suing personally, alongside his company, over the company's bounced cheques. The appeal court upheld the rejection of the claim against him, and the same judgment raised the award against the company itself.
Handled by Faysel Al-Mohannadi
The judgment
- Result
- Rejection of the claim against our client upheld on appeal: nothing awarded against him personally. The same judgment raised the award against the company, with the costs of both levels.
- Court
- Investment and Trade Court (appeal circuit). The first instance was decided before we were instructed.
- Time
- Under a month, from our instruction to the appeal judgment
- What was at stake
- Personal liability, jointly with the company, for a six-figure claim
- Our client
- A partner, with no management role, in a small trading company
The case
In 2023 a small trading company bought goods from a supplier and paid with cheques signed by its manager. All were returned for lack of funds.
In 2024 the supplier sued the company and, personally and jointly, both its partners: the manager and our client, a partner with no management role. It said the cheques did not carry the words "limited liability company" (W.L.L.) after the company's name, so the partners should answer personally for its debts.
At first instance, before we were instructed, the court found the debt proved against the company and rejected the claim against both partners. The supplier appealed. The firm was instructed for our client at the appeal stage.
What was at stake
The debt itself was not in doubt: the supplier had produced the original cheques. The question was whether a partner shares the company's debt.
The supplier relied on Art. 229 of the Commercial Companies Law, which makes managers who leave out the limited-liability wording personally and jointly liable for the company's debts. It asked for that rule to be applied to both partners. Had the appeal succeeded, the partner would have answered personally for the whole claim, jointly with the company and the manager.
What we did
Stepped into the appeal within days.We linked the firm to the appeal file on the court's e-services, attended the hearing and asked for time to reply. The court reserved the case for judgment and allowed memos within a week.
Filed a defence memo built on the company's own records.It asked the court to affirm. The company has its own legal personality and assets, and it alone is the debtor. Our client was a partner of record with no management powers; the manager held full powers under the commercial registration and signed the cheques. The memo enclosed the commercial registration and the establishment record. It relied on Court of Cassation ruling No. 25 of 2006, which applied the former Commercial Companies Law (Law No. 5 of 2002, since replaced by Law No. 11 of 2015).
Tied each cheque to the person who signed it.A cheque is a payment instrument, outside the rule on how the company must be described. It binds the person who signs it: here the manager, acting for the company, not our client (Court of Cassation ruling No. 183 of 2010).
Showed that a partner who does not manage is liable only up to his share of the capital.Joint liability for leaving out the limited-liability wording falls on managers alone (Court of Cassation ruling No. 374 of 2022).
What the court held
On the debt, the appeal court agreed with the supplier: the first-instance judgment had awarded less than its own reasons found due. It raised the award against the company to the full value of the cheques, with higher compensation for late payment.
On the partners, it upheld the rejection. The company had contracted in its own name, and its legal personality is separate from its partners', so the claim against them had been brought against parties without capacity.
Nor did Art. 229 apply. The manager had signed the supply contract under the company stamp, which showed the limited-liability wording from the start of the dealings. Joint liability is not presumed: it needs an agreement or a legal rule (Civil Code Arts. 302 and 307), and without a breach of Art. 229 there was none. The costs of both levels were put on the company.
Why this result matters
A partner who does not manage a limited liability company does not answer for its debts merely because he is a partner. The court asked whether the company's form was disclosed when the deal was made, not whether each cheque showed it. That ended the claim against the partner.
If you are in a similar position
- Sued as a partner? Gather what shows the company's form when the deal was made: the contract, the company stamp and the commercial registration.
- If you manage a company, check now that its contracts, invoices and letterheads carry the limited-liability wording.
- If the other side appeals, answer the whole appeal, not only the part aimed at you.
Who handled it
Faysel Al-Mohannadilawyer admitted before the Court of Cassation
Sued personally over your company's debts? Bring the claim or the judgment, the company's commercial registration and the contract with the creditor.