Your Managing Director Used Company Funds Personally: Did the Power of Attorney Allow It?

If your managing director used company funds personally, distinguish authority to operate an account from permission to benefit personally. A broad power of attorney does not answer whether the company approved the particular payment or transfer. The DIFC case examined here shows why the transactions and the claimed approval matter more than a general accusation that every payment made by the departing director was improper.

Use one row for each transfer or asset. The schedule should make both the company's allegation and the director's explanation visible.

What did the power of attorney actually permit?

A power to sign documents or manage funds must be read alongside the purpose for which it was given and the duties governing the relationship. A bank may process an instruction from an authorised signatory without resolving a later dispute between the company and that signatory about personal benefit. This guide concerns the company's claim against the director, not a conclusion about liability of the bank.

In As World Group Holding Limited v Sajid Barkat Al Barkat [2021] DIFC CFI 087, decided on 11 May 2023, a managing director had wide powers and sole control of company bank accounts. The Court examined whether payments and an asset transfer benefiting him were actually authorised. It entered judgment for the company for AED 4,104,278 plus the interest specified in the order.

The vehicle transaction illustrates the distinction. There was authority to trade in an existing company vehicle for a newer model. The Court found no approval for registering the replacement in the director's personal name. Authority to carry out the acquisition did not establish the alleged gift, and the director was required to account for the vehicle's value.

For your file, place the relevant power of attorney, board resolution and instructions beside the disputed transaction. Identify any limit or required approval. Do not assume that general wording about transferring ownership proves beneficial entitlement to the property transferred.

Does the owner's silence prove approval of personal payments?

Silence needs context. In As World, the director argued that the owner could have seen the company bank statements and should have objected earlier. The Court rejected the suggestion that this established approval. The bank entries showed transfers, not the underlying authority for the director to retain the company's money.

The 5 July 2023 permission decision addressed that point again. It explained that the existence of statements did not demonstrate knowledge, consent or authorisation of the debits. The director's obligation to explain the receipt and retention of funds was not answered by saying that the shareholder should have noticed them.

That does not mean that approval can never be established through communications or conduct. It means the evidence must address the actual transaction. Locate the message said to request approval, its attachments and the response. Check whether the owner knew the amount, recipient, personal benefit and funding source. A general expression of appreciation may not answer those questions.

Preserve evidence that supports the director as well as evidence supporting the company. If a contemporaneous message clearly authorises an expense, show it to the adviser before repeating an allegation of unauthorised payment. An accurate claim can become narrower as records are recovered.

How do you test a business-expense explanation fairly?

A transfer into a personal account may be explained as reimbursement or an advance to pay company expenses. That explanation should be tested against actual invoices, payments, business use and any unspent balance. Avoid assuming that either the account destination or the word reimbursement settles the issue by itself.

As World examined the explanation transaction by transaction. The Court found inconsistencies between the claimed expenditure, the invoices, the bank accounts used and the assets said to have been purchased for a business project. Some invoices were addressed personally, and the evidence did not establish the asserted connection with company business. The conclusion rested on the combined record, not a universal rule that a misaddressed invoice can never be corrected.

Prepare a reconciliation showing the company advance, the director's claimed expenditure, the source of each payment and the remaining balance. Check whether the same supplier was also paid directly by the company. Identify where the goods were delivered and who retained them after the project. Ask for the supporting document rather than simply rejecting an expense description because it is inconvenient.

Where the director says a corrected invoice exists but is held by the company, investigate that assertion. Search the relevant lawful records and record the result. If documents are genuinely missing, mark the gap and seek advice on obtaining them. Do not describe missing evidence as proof of dishonesty without assessing the rest of the file.

Keep credits visible. An authorised business payment, a returned sum or property genuinely restored to the company can affect the recovery calculation. The schedule should identify the gross amount disputed and the basis of each adjustment. A demand that ignores known credits is less reliable than a smaller, traceable figure.

Can the director repay the owner's personal loan from company money?

First identify the alleged borrower. A debt said to be owed by the shareholder personally is not automatically a debt of the company. In As World, the director's explanation treated the company and its owner as effectively the same person. The Court rejected that approach when considering company funds used for an alleged personal repayment.

The judgment emphasised the company's separate identity and the absence of a proper basis for that use of its funds. It also rejected an inference of approval built from the owner's supposed receipt of statements and lack of objection. The existence of a close working relationship did not fill the evidential gap.

For your review, separate the owner's personal ledger from the company's ledger. Identify any genuine loan, company reimbursement obligation or documented arrangement between the owner and company. If the director claims that the company was instructed to settle the owner's liability, the authority and legal effect of that arrangement need assessment. Do not treat sole ownership as a substitute for that work.

Equally, define who suffered the alleged loss. A company claim should identify the company money or property and the duty relied on. A separate personal claim by the owner may involve different payments and evidence. Keep them distinct before deciding who should send a demand or commence proceedings.

Common mistake. Combining company funds, the owner's personal money and the director's expense account into one running balance. Identify the legal owner and purpose of each payment before calculating what is recoverable.

Does poor record keeping defeat the company's claim?

Not on its own. In As World, the director relied on an informal small-company environment in which decisions were said to have been made orally. The Court found that his managerial responsibilities included maintaining proper financial records. It did not accept the lack of a formal recording system as a sufficient explanation for the disputed personal benefits.

The owner had also entrusted day-to-day control to the director. The Court rejected the argument that the owner should have discovered the transactions sooner as a defence to the established misuse. That finding should not be read as a recommendation to operate without oversight. It explains why weak oversight did not establish consent on these facts.

Once a concern arises, preserve records lawfully before changing systems. Ask the authorised company decision-maker and relevant advisers to address current account access, continuing payment authority and preservation. Do not delete mailboxes, overwrite accounting entries or seize personal devices while trying to secure evidence. Keep an audit trail of any administrative changes made.

Separate a witness's direct knowledge from reconstruction. Someone who attended an approval discussion can describe it. Someone who later discovered a bank entry should identify the record and the discovery, not claim to know what everyone intended at the earlier meeting. Make room for uncertainty and conflicting evidence in the chronology.

Why did the company still face costs for some allegations?

The result in As World was not a finding that every original allegation was established. The company discontinued five initial claims. The operative judgment required it to pay the director's costs of defending those claims up to discontinuance, while awarding the company its costs of the remaining proceedings on the stated basis.

That qualification matters when assessing a large transaction review. Do not turn a suspicious-payment list into an indiscriminate claim. For each item, identify the duty, lack of authority, personal benefit and loss said to be established. Mark authorised or genuinely business-related items for removal or further analysis rather than retaining them to make the demand larger.

The defendant's renewed request for permission to appeal was dismissed on 4 September 2023. The decision stressed the factual nature of the case and found no real prospect of success or other compelling reason for permission. This was a permission decision, not a fresh full trial.

The July permission decision also distinguished the civil claim from separate criminal proceedings. This guide concerns the company's civil recovery case. It does not report a criminal conviction or advise on using a criminal complaint as a collection tactic. Any parallel proceeding and its practical implications require separate advice.

What should the company prepare before demanding repayment?

Present a transaction-specific file that another reader can verify. The aim is to identify supported allegations and a defensible amount, not to repeat the director's title as proof of liability. The power of attorney is one part of that file, alongside the instructions, approvals and use of the funds.

1. Collect the relevant powers, resolutions, contract and account mandates.
2. List each disputed payment or asset with its source and recipient.
3. Record the director's explanation and the evidence supporting or contradicting it.
4. Reconcile genuine business expenditure, repayments and recoveries without double counting.
5. Separate company loss from any personal-owner claim.
6. Obtain advice on authority to act, the legal basis of recovery and the wording of the demand.

If a settlement is proposed, identify the payer, recipient and transactions covered. Address property return, cash repayment and any agreed release separately. A promise to return an asset should specify which asset and the agreed condition, rather than leaving value and ownership unresolved. Keep any employment entitlement outside the settlement unless it is deliberately and properly addressed.

Key takeaway. The director's ability to move company money is not the same as a right to keep it. The practical case turns on the specific authority, informed approval, use of funds and evidence for each transaction.

Selected official sources were checked on 1 October 2026. The later-history search located both 2023 permission decisions and did not identify a later merits reversal. It was not an exhaustive docket certification. Current statutory provisions and the duties applicable to a different company or office-holder should be checked before a claim is issued.

Frequently Asked Questions

Does a broad power of attorney permit personal use of funds? Do not assume it does. In As World, authority to manage accounts and acquire an asset did not establish approval of the particular personal benefits.

Does a bank statement prove the owner consented? It records the transaction. The reviewed permission decision rejected the argument that its existence established knowledge, approval or consent.

Is every payment to a personal account recoverable? No automatic conclusion follows. Test any reimbursement or authorised-payment explanation against the actual records and applicable duties.

Can an owner and company be treated as one for repayment? That reasoning was rejected in As World. Identify the borrower, the owner of the funds and the basis on which the company was said to be liable.

Does an invoice in the director's name prove misuse? Not by itself in every case. In As World it formed part of a wider record that failed to establish the claimed business expenditure.

Did the company win all its original claims? No. Five initial claims were discontinued, and the company faced a separate costs order for their defence up to discontinuance.

Was the September 2023 decision a new merits trial? No. It dismissed renewed permission to appeal, focusing on the factual findings and the absence of a sufficient basis for permission.

Does this judgment establish a criminal conviction? No. The cited decisions concern civil recovery and permission to appeal. The July decision distinguished separate criminal proceedings.

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

Related Guides

See the Dubai and DIFC commercial-contracts section and these related guides.

• A shareholder denied access to company records
• Personal debt and company-owned assets
• The risk of an opposing legal costs claim

Related Guides

Our business and governance page covers entity choice, directors' duties, shareholder arrangements and corporate records.

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