Legal Corner: Structure of a shareholding company Thursday, 10 February 2011 00:12

By  Abdelaal A Khalil

The Commercial Companies Law No 5 / 2002 states that the trading company is a contract by which two or more natural or legal persons contribute in a project designed for profit by providing a share of the money or the work and division of profit or loss arising from the project. Every company which is incorporated in Qatar must have a Qatari national and be headquartered in Qatar.

The company which is incorporated in the State must take one of the forms provided by the law including “general partnership or limited partnership or joint venture or joint stock or limited by shares or limited liability or a single person or a holding company”. The company which does not comply with one of these forms is considered invalid and the persons who are contracted on its behalf will be personally responsible and jointly liable for the obligations arising from this contract.

The Board of Directors will enjoy the necessary powers to do the work required for the purpose of the company taking into account the established terms of reference of the general assembly in this Act or the statute of the company.

The general assembly of the shareholders in the joint stock companies, companies limited by shares and holding companies will elect the members of the board of directors and it is also allowed that the first board of directors be appointed by the founders provided that its duration should not exceed five years.

The Statute of the company defines the method of composition of the Board of Directors, which manages the company, number of its members and the duration of membership, provided that the number of members is not less than five and not more than 11 (eleven) as well as the membership period doesn’t exceed three years.

At the end of term of the Board, the existing Board of Directors of the company will announce to open the door of candidature for the membership of the Board of Directors. The general assembly of the shareholders will elect the members for the new Board of Directors and it is mandatory for the member of the board that his age should not be below 21 years and should not have been convicted of a felony or a crime against the moral turpitude or dishonesty or a crime referred to in Articles (324) and (325) of the Companies Act unless he has been rehabilitated as he is required to be the owner of a number of the shares allocated to ensure the rights of the company, its shareholders, creditors and third parties for the responsibility that lies on the members of the board of directors.

As it is required by the law that the candidate should not be a member of the Board of Directors in more than three joint stock companies if they are headquartered in the State and he should not be a Chairman of the Board of Directors or deputy chairman in more than two companies which have their main office in the State as well as he should not be the managing director in more than one company headquartered in the State. It is not allowed to have the membership in the Board of Directors of two companies that are involved in the same activity. The members of the Board of Directors will elect a chairman of the board or his deputy for a period of one year or maximum three years. It will also elect one or more managing directors and they will have the right to sign on behalf of the company collectively or individually as per the resolution of the council. Each company must provide annually to the Ministry a detailed list of the names of chairman and the Members of Board of Directors along with their attributes and their nationalities and the same must have the approval of the chairman of the Board of Directors.

The Chairman of the Board of Directors is the head of the company and he will represent it before the third party and the judiciary and he has to implement the resolutions of the board and abide by its recommendations. The Chairman of the Board of Directors may delegate some powers to other members of the council and the vice president may replace the president during his absence.

The Board of Directors will meet at the invitation of the president or the meeting will be called by two members at least. The meeting shall not be valid unless it is attended by half of the members at least provided that the number of attendees is not less than three members. The Board of Directors must meet at least six times during the fiscal year of the company. It is allowed for the absent member to be represented in writing by any other member of the Council to represent him to attend and vote on his behalf. The resolution of the council will be issued by a majority of votes of those who are present and the representatives and in case of tie, the chairman’s favour will be considered to reach a decision. The minutes of a meeting of the Board of Directors will be recorded in a special register and signed by the chairman of the board and managing director, if any, as well as the member or employee who takes care of secretarial work of the council. If a member of the Board of Directors didn’t attend the three consecutive meetings of the board or five non-consecutive meetings without an excuse acceptable to the board that he has resigned.

The company is committed to the works undertaken by the Board of Directors within the limits of its competence and it will ask for compensation that arises from damages due to wrongful acts performed by the members of the Board of Directors. As the chairman and members of the Board of Directors are collectively responsible for compensating the company, shareholders and the third parties for the damage arising from mismanagement and the general assembly of the shareholders can dismiss the Chairman of the Board of Directors or one of its members on the proposal of the majority of the Board of Directors or at the application signed by a number of shareholders who are holding not less than a quarter of the subscribed capital.

The Board of Directors in each financial year will prepare a balance sheet of the company, profit and loss statement, compared with the previous fiscal year, all duly certified by auditors of the company as well as a report on the activity of the company, its financial position during the last fiscal year and the future plans for the coming year. The council shall prepare this data and papers within three months from the end of the fiscal year of the company in order to submit the same in the meeting of the general assembly of shareholders which will be held within four months from the end of the fiscal year of the company. The remuneration of the members of the Board of Directors will be determined in accordance with the articles of association.