Legal corner: Liquidation of commercial companies Thursday, 30 June 2011 00:38

The Qatari Commercial Companies Law No. 5 / 2002 points out that a commercial company is a contract by which two or more natural or juristic persons contribute in a project aimed at profit by providing a share of the money or the work and sharing the profit or loss arising from the project.

We previously talked about the reasons for dissolution of companies and in this article we will review the expiry or closure of commercial companies through liquidation.

The law points out that a company shall be under liquidation as soon as it is dissolved and during the period of liquidation it shall be preserved by legally to the extent necessary for the liquidation. The word (under liquidation), written in a clear manner, must be added to the name of the company during this period.

The authority of managers or board of directors shall end with the dissolution of the company and they shall remain in charge of company’s management and shall be considered in relation to others as liquidators until the liquidator is appointed. Their powers shall be limited to the liquidation and these powers shall not interfere with the power of the liquidators. The liquidation of the company shall take place in accordance with the terms and conditions set out in the Memorandum of Association or statute or as per the agreement of the partners at the time of dissolution of the company. If there is no provision or agreement in this regard the following rules shall be followed:

First: One or more liquidators appointed by the partners or the General Assembly by simple majority, which issue the resolutions of the company, shall conduct the liquidation. If the liquidation is based on a court ruling, the court shall determine the method of liquidation and appoint a liquidator. The liquidator shall get the remuneration which is specified in the appointment document; otherwise the same shall be specified by the court.

The company is committed to liquidator’s actions required by the liquidation as long as the liquidation comes within the limits of his powers. No responsibility shall result in liquidator’s obligation because of conducting the said activity.

The liquidator shall declare the decision of his appointment, agreement of the partners or resolution of General Assembly on the method of liquidation or the rule issued in this regard in a method of declaration specified for the Amendment of Memorandum of Association or its statute. It is not allowed to argue in front of others by appointing the liquidator or by the method of liquidation, but from the date of declaration.

Second: The liquidator shall perform all the work required by the liquidation, especially to execute the company’s rights with third parties, pay the company’s debts, sell company’s movables or property by public auction or in any other way to ensure getting the highest price, perform whatever is necessary to preserve the company’s funds and its rights, represent the company in courts and accept the reconciliation and arbitration.

Third: The term of all debts on the company shall drop with the dissolution only. The liquidator shall notify all creditors with registered letters about the opening of the liquidation with an invitation to submit their claims. The notification can be published in two local newspapers published in Arabic if the creditors are unknown or if their address is not known. In all cases the notification to submit the claims for liquidation must include a deadline for creditors, not less than 75 days from the date of notification to submit their claims; however, they shall be re-notified by publication during this period after a month from the start of the period. If some creditors didn’t submit their claims, their debts must be deposited in the treasury of the court until the appearance of their owners or obsolescence.

Fourth: The liquidator shall settle the debts of the company after deducting the liquidation expenses, including fees of the liquidator. The priority shall be given to the payment of the due amounts of the employees in the company, the amounts owed ​​to the state and the rent owed ​​to the owner of any real estate leased to the company. The other due amounts shall be paid according to the order of privilege in accordance with the applicable laws.

Fifth: The liquidator within three months from the date of commencement of his work with the company’s auditor, if any, shall prepare an inventory of all assets and liabilities of the company. The directors or members of the board of directors have to submit to the liquidator the registers of the company, its documents, notes and data which they require. The liquidator has to make the notes or statements on the state of liquidation, which are required by the partners.

If the liquidation continued for more than one year the liquidator has to prepare a budget, an account of profits and losses and report on the work of the liquidation. These documents shall be presented to the partners or the General Assembly or the court as per the cases for the approval, according to the memorandum of association or statute. In all cases the period of liquidation of the company shall not exceed three years unless a decision of the Court or the Minister requires otherwise.

Sixth: The liquidator after the payment of debts of the company has to return to the partners the cash value of their shares in the capital and distribute among them the surplus as per their share in the profit. The corporal property of the company shall be divided among the partners as partition in kind and the prescribed rules shall be followed in the division of common money unless the memorandum of association provides otherwise. If the net assets of the company are not enough to meet all shares of the partners, the loss shall be distributed among them at the rate specified for the distribution of losses.

Finally, the liquidator has to submit at the end of the liquidation a final account to the partners or the General Assembly or the court on the work of the liquidation. The liquidation shall complete with the ratification of the final account by the partners or the General Assembly or the court. The liquidator has to declare the end of the liquidation and no one is allowed to object to third parties for the end of the liquidation only from the date of declaration. The liquidator after the end of the liquidation of the company shall ask to write off the company’s record from the commercial register.

The case against the liquidator because of the liquidation shall drop and the same shall not be heard after three years of the declaration at the end of liquidation. The case shall not be heard after the expiration of the given period against the partners because of the company’s business or against the managers or members of board of directors or auditors because of their jobs.

The Peninsula