{"id":29430,"date":"2026-08-10T05:42:26","date_gmt":"2026-08-10T05:42:26","guid":{"rendered":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/?p=29430"},"modified":"2026-08-10T05:53:38","modified_gmt":"2026-08-10T05:53:38","slug":"director-and-manager-liability-in-uae-when-can-personal-liability-arise","status":"publish","type":"post","link":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/","title":{"rendered":"Director and Manager Liability in UAE: When Can Personal Liability Arise?"},"content":{"rendered":"\n<h1 id=\"h-director-and-manager-liability-in-the-uae-when-can-personal-liability-arise\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Director_and_Manager_Liability_in_the_UAE_When_Can_Personal_Liability_Arise\"><\/span>Director and Manager Liability in the UAE: When Can Personal Liability Arise?<span class=\"ez-toc-section-end\"><\/span><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Running a company in the UAE involves much more than managing finances, signing contracts, and pursuing business growth. Directors, managers, CEOs, and authorized signatories are entrusted with significant powers, but those powers come with corresponding legal responsibilities.<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_86 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0c0c0c;color:#0c0c0c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0c0c0c;color:#0c0c0c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Director_and_Manager_Liability_in_the_UAE_When_Can_Personal_Liability_Arise\" >Director and Manager Liability in the UAE: When Can Personal Liability Arise?<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#When_Can_a_Director_or_Manager_Be_Personally_Liable\" >When Can a Director or Manager Be Personally Liable?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Acting_Beyond_the_Authority_Granted\" >Acting Beyond the Authority Granted<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Fraud_Dishonesty_and_False_Representations\" >Fraud, Dishonesty, and False Representations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Conflicts_of_Interest_and_Personal_Benefits\" >Conflicts of Interest and Personal Benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Can_a_Manager_Compete_With_the_Company\" >Can a Manager Compete With the Company?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Directors_Should_Record_Their_Objections\" >Directors Should Record Their Objections<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Why_Proper_Documentation_Matters\" >Why Proper Documentation Matters<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Practical_Steps_Directors_and_Managers_Can_Take\" >Practical Steps Directors and Managers Can Take<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/director-and-manager-liability-in-uae-when-can-personal-liability-arise\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<p class=\"wp-block-paragraph\">A common misconception is that because a company has a separate legal personality, its directors and managers are automatically protected from personal liability. While the corporate structure generally separates the company\u2019s obligations from the personal obligations of its management, that protection is not absolute.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Individuals involved in the management of a company may face personal liability where their own conduct involves fraud, misuse of authority, gross negligence, conflicts of interest, breaches of statutory duties or other unlawful acts.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For business owners and senior executives, understanding where this line is drawn is essential for sound corporate governance.<\/p>\n\n\n\n<h2 id=\"h-when-can-a-director-or-manager-be-personally-liable\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"When_Can_a_Director_or_Manager_Be_Personally_Liable\"><\/span>When Can a Director or Manager Be Personally Liable?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The principal legislation governing companies in the UAE is Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The precise rules can differ depending on the legal form of the company, but the fundamental principle remains the same: those entrusted with managing a company must exercise their powers lawfully, responsibly and within the authority given to them.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For a Limited Liability Company (LLC), Article 84 addresses the liability of managers. A manager may be held responsible towards the company, its partners or third parties for matters including fraudulent conduct, misuse of powers, violations of applicable law, breaches of the company\u2019s memorandum of association, breaches of the manager\u2019s appointment conditions or gross error.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Therefore, simply being appointed as a manager does not automatically make an individual personally liable whenever the company suffers a loss. The focus is generally on the manager\u2019s actions or omissions and whether they amounted to legally actionable misconduct.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For joint stock companies, Article 162 similarly provides for liability of directors and members of executive management in circumstances involving fraud, abuse of authority and violations of the Companies Law or the company\u2019s articles of association.<\/p>\n\n\n\n<h2 id=\"h-acting-beyond-the-authority-granted\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Acting_Beyond_the_Authority_Granted\"><\/span>Acting Beyond the Authority Granted<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">One of the practical areas where directors and managers can encounter difficulty is acting outside the authority granted to them.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A company&#8217;s constitutional documents, shareholder resolutions, board resolutions, powers of attorney and internal approval procedures may place specific limits on what an individual can do on behalf of the company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, a manager might sign a significant commercial agreement, provide a guarantee, dispose of company property or authorise a substantial financial transaction without obtaining the approvals required under the company\u2019s internal framework.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even if the individual believes the transaction is commercially beneficial to the company, acting outside the authority granted to them may expose them to legal scrutiny.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A job title or trade license should therefore never be treated as a blanket authority to make every business decision.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Before entering into significant transactions, management should verify the relevant provisions of the memorandum of association, shareholder or board resolutions, powers of attorney, and banking mandates.<\/p>\n\n\n\n<h2 id=\"h-fraud-dishonesty-and-false-representations\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Fraud_Dishonesty_and_False_Representations\"><\/span>Fraud, Dishonesty, and False Representations<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Fraudulent or dishonest conduct can expose a director or manager to personal liability despite the company&#8217;s separate legal personality.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Examples may include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Preparing false invoices;<\/li>\n\n\n\n<li>Concealing company funds;<\/li>\n\n\n\n<li>Improperly transferring assets;<\/li>\n\n\n\n<li>Manipulating financial information; or<\/li>\n\n\n\n<li>Entering into transactions primarily for personal benefit.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Personal exposure can also arise when a director or manager knowingly provides false or misleading information to customers, suppliers, lenders, investors, or other business partners.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For instance, deliberately making false statements about a company\u2019s financial condition or ability to meet its obligations can create consequences for the individual responsible for those representations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The principle is straightforward: the corporate structure is intended to facilitate legitimate business activity, not to protect individuals from the consequences of their own fraudulent conduct.<\/p>\n\n\n\n<h2 id=\"h-conflicts-of-interest-and-personal-benefits\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conflicts_of_Interest_and_Personal_Benefits\"><\/span>Conflicts of Interest and Personal Benefits<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Conflicts of interest are another important area of concern for directors and senior executives.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Article 150 of the Companies Law requires a director of a joint stock company to disclose a direct or indirect interest in a transaction placed before the board. The director is also required to refrain from voting on the relevant transaction.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The purpose of these requirements is to ensure that corporate decisions are made transparently and in the company&#8217;s interests rather than for the personal benefit of an individual director.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A conflict may arise where a director has a financial or personal connection with a supplier, customer, contractor, competitor, or another business involved in a proposed transaction.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even when a transaction appears commercially sensible, failing to disclose the relationship can create unnecessary legal and governance risks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Article 152 also addresses related-party transactions, competition, and the misuse of company information. Directors should therefore be particularly careful about using confidential corporate information or business opportunities for their own benefit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Where a potential conflict exists, the safest approach is usually to disclose it at an early stage, ensure that the disclosure is properly documented and avoid participating in the decision-making process where the law requires recusal.<\/p>\n\n\n\n<h2 id=\"h-can-a-manager-compete-with-the-company\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Can_a_Manager_Compete_With_the_Company\"><\/span>Can a Manager Compete With the Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A manager cannot simply use their position, knowledge, or access to company resources to establish or support a competing business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Article 86 places restrictions on an LLC manager managing a competing company or conducting a competing business for their own benefit or for the benefit of another person without the required approval of the general assembly.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The issue may arise in situations where a manager:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Diverts company customers to another business;<\/li>\n\n\n\n<li>Uses confidential customer or supplier information;<\/li>\n\n\n\n<li>Transfers business opportunities to another entity;<\/li>\n\n\n\n<li>Copies the company&#8217;s commercial strategies for personal use;<\/li>\n\n\n\n<li>Uses company relationships to benefit a competing enterprise; or<\/li>\n\n\n\n<li>Establishes a competing business while continuing to manage the original company.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Such conduct can lead to serious disputes between shareholders and partners and may result in claims for damages or other legal remedies.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The risk is particularly significant in smaller businesses, where companies often depend heavily on the relationships and knowledge of a small group of managers or shareholders.<\/p>\n\n\n\n<h2 id=\"h-directors-should-record-their-objections\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Directors_Should_Record_Their_Objections\"><\/span>Directors Should Record Their Objections<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Board members should also understand the importance of properly documenting disagreements with decisions that may expose the company to significant risk.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Under Article 162, a director who genuinely disagrees with a board decision may be able to avoid liability where the objection is properly recorded in the minutes of the meeting.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This makes accurate board minutes more than an administrative formality.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If a director believes that a proposed decision is unlawful, excessively risky or contrary to the company&#8217;s interests, the concern should be clearly expressed and recorded.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A director should not assume that simply staying silent or missing the meeting will necessarily eliminate potential liability. The circumstances surrounding the decision, the director&#8217;s knowledge, and the opportunity to raise an objection may all become relevant.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For this reason, directors should take board documentation seriously and ensure that significant concerns are accurately reflected in the official records.<\/p>\n\n\n\n<h2 id=\"h-why-proper-documentation-matters\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Proper_Documentation_Matters\"><\/span>Why Proper Documentation Matters<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Many corporate disputes do not begin with an obvious intention to commit wrongdoing. They may start with something that appears relatively harmless\u2014a verbal instruction, an undocumented approval, a transaction carried out as a favour or a decision made without following the company&#8217;s normal procedures.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Problems often emerge much later, when relationships between shareholders deteriorate or a commercial transaction becomes disputed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">At that stage, the absence of written approvals, board minutes, disclosure records, or clear evidence of authority can make it difficult to establish what actually happened.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is why good corporate governance should not be viewed as unnecessary paperwork. Proper documentation can provide important evidence of who approved a transaction, what information was disclosed, what authority was granted, and whether a director raised an objection.<\/p>\n\n\n\n<h2 id=\"h-practical-steps-directors-and-managers-can-take\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Practical_Steps_Directors_and_Managers_Can_Take\"><\/span>Practical Steps Directors and Managers Can Take<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Directors and managers can significantly reduce their exposure by adopting a few basic governance practices.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Before approving an important transaction, they should confirm that they have the necessary authority. Potential conflicts should be disclosed rather than ignored. Significant decisions should be supported by appropriate documentation, and board objections should be formally recorded where necessary.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Management should also maintain proper financial controls and ensure that company assets, confidential information, and business opportunities are not used for personal purposes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These precautions are particularly valuable for SMEs, where formal governance systems may be less developed but individual managers often exercise considerable control over the business.<\/p>\n\n\n\n<h2 id=\"h-conclusion\" class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Director and manager liability in the UAE does not mean that every unsuccessful business decision automatically results in personal liability.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Business inevitably involves commercial risks, and a company may suffer losses even when its management has acted honestly and within its authority. The more important question is whether the individual director or manager engaged in conduct that breached a legal duty, exceeded their authority, involved fraud, created an undisclosed conflict or otherwise amounted to actionable misconduct.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The safest approach is to treat corporate authority as a responsibility rather than simply a source of power.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Clear approvals, accurate records, proper disclosure of conflicts, careful financial oversight and compliance with the company&#8217;s constitutional documents can significantly reduce the risk of personal liability and future disputes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ultimately, effective corporate governance is not limited to large corporations. For small and medium-sized businesses as well, transparency, accountability and clearly defined decision-making procedures can strengthen investor confidence, protect business relationships and contribute to sustainable long-term growth.<\/p>\n\n\n\n<ul class=\"wp-block-yoast-seo-related-links yoast-seo-related-links\">\n<li><a href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/consent-managers-under-indias-dpdp-regime-gatekeepers-of-data-autonomy-or-instruments-of-big-fiduciary-control\/\">Consent Managers under India\u2019s DPDP Regime: Gatekeepers of Data Autonomy or Instruments of Big-Fiduciary Control?<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/digital-personal-data-protection-act-2023\/\">Digital Personal Data Protection Act, 2023<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/related-party-transactions-under-companies-act-2013-and-sebi-lodr-regulations-2015\/\">Related Party Transactions under companies act, 2013 and SEBI (LODR) Regulations, 2015<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/handcuffs-for-corporations-the-debate-on-corporate-criminal-liability\/\">Handcuffs for Corporations: The Debate on Corporate Criminal Liability<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/critical-interests-to-be-protected-in-technology-contracts\/\">Critical Interests to Be Protected in Technology Contracts<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Director and Manager Liability in the UAE: When Can Personal Liability Arise? Running a company in the UAE involves much more than managing finances, signing contracts, and pursuing business growth. Directors, managers, CEOs, and authorized signatories are entrusted with significant powers, but those powers come with corresponding legal responsibilities. A common misconception is that because<\/p>\n","protected":false},"author":1195,"featured_media":29429,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"two_page_speed":[],"_jetpack_memberships_contains_paid_content":false,"_joinchat":[],"footnotes":""},"categories":[394],"tags":[28,3717],"class_list":["post-29430","post","type-post","status-publish","format-standard","has-post-thumbnail","category-uae-laws","tag-top-news","tag-uae-laws"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.2 (Yoast SEO v28.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Director and Manager Liability in UAE: When Can Personal Liability Arise? 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