Not all companies are the same. Some derive their value from physical assets, inventory, machinery, or real estate. Others depend on know-how, technology, commercial relationships, regulatory position, or market reputation. That distinction matters when shareholders fall into dispute. In a going concern, the dispute is not over a static asset, but within a living business that depends on continuity, confidence, and operational stability. In such cases, shareholders may believe they are attacking each other, while in reality they may be harming the company itself.
That is why shareholder disputes in a going concern require particular care. When relations deteriorate, parties often move quickly to challenge authority, block decisions, restrict access, or apply pressure through legal action. Yet in a going concern, those steps may produce damage far beyond the immediate dispute. A delayed signature, a frozen account, a challenge to management authority, or uncertainty over control may disrupt ordinary operations and affect employees, customers, suppliers, and financiers. What begins as a dispute between shareholders can therefore become a threat to the business itself.
There are many legal routes through which shareholders may attack each other, the management, or even the company. The conflict may take the form of precautionary measures, urgent proceedings, substantive commercial claims, or criminal complaints, depending on the allegations and the strategy pursued. In practice, disputes may concern exclusion from management, denial of access to information, misuse of company funds, abuse of signing powers, conflicts of interest, diversion of opportunities, or attempts to use the company’s structure as leverage against another shareholder. The issue is therefore not only who is right, but how far the dispute is allowed to escalate.
It is in this context that management and shareholder liability take on particular significance. UAE company law does not allow the corporate form to be used as a shield for misconduct. Those responsible for managing a company may incur liability for fraud, abuse of authority, breach of the law, breach of the company’s constitutional documents, or gross error. Likewise, misuse of power or conduct causing harm to the company, its shareholders, or third parties may give rise to liability. In shareholder disputes, that distinction matters. Once the conflict moves beyond disagreement and into abuse of corporate powers, concealment, self-dealing, or misuse of the company’s structure or machinery, it may become more than an internal corporate struggle and instead give rise to a distinct basis for legal liability.
Judicial custodianship may be available in shareholder disputes as a temporary protective measure where there is a serious dispute over an asset or right and an urgent risk to its preservation if left with the current holder. However, UAE courts, including the Dubai Court of Cassation, have made clear that it is not granted merely because shareholders are in conflict; the applicant must show a serious dispute and urgent danger that ordinary litigation cannot adequately address.
Even so, in the context of a going concern, this remedy can sometimes take the dispute in the wrong direction. Most companies are not suitable for judicial custodianship, and its practical effect depends heavily on the nature of the business. A company whose value lies in speed, management judgment, commercial relationships, technology, or confidential know-how may suffer serious disruption if placed under a custodial structure. In such cases, the remedy may preserve the disputed position on paper while weakening the business in reality. Judicial custodianship should therefore be approached with caution and should generally be avoided in the case of a going concern.
There is no doubt that corporate governance may play a vital role in preserving the company. Good governance does not eliminate disputes, but it can stop them from becoming destructive. Clear constitutional documents, defined powers, reserved matters, transparent approval mechanisms, information rights, conflict-management procedures, and proper record-keeping create a framework within which disagreement can be contained. They help distinguish lawful decision-making from abuse, and commercial disagreement from corporate paralysis. In times of shareholder conflict, governance is not a formality. It is a protective structure.
In the end, the real danger in shareholder disputes is often not one aggressive act, but a chain reaction. One aggressive move leads to another. A precautionary order delays operations. Delay affects cash flow. Cash flow affects confidence. Confidence affects value. The result may resemble a domino effect, or even a butterfly effect, where a small act triggers consequences far beyond what either side intended. That is why shareholders in a going concern should resist scorched-earth tactics. The objective cannot simply be to defeat the other side. The legal strategy must be shaped with a proper understanding of the business itself, its operations, its value, and the damage that disruption may cause. Before adopting the dispute strategy, it is essential to ensure that the lawyer understands the company as a going concern, not merely as a legal dispute. The company itself must survive: No Checkmate.
Seek Legal Counsel
For further information or advice in relation to any of the matters addressed above, please feel free to contact our Head of Commercial Disputes, Alia AlMulla and Associate, Mostafa Dawoud.
Disclaimer
The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.