Legal consultation Thursday, 14 July 2011 00:52

By Abdelaal A Khalil

Commercial Companies Law No. 5 of 2002 states that the limited liability company shall be established under a contract binding two or more natural persons or corporates. Each one of them shall contribute in a project for profitability through presenting a share of money or business and sharing the outputs of the project, including profits and losses.

Partners should not be more than fifty and less than two. The company with limited liability shall have a name derived from its purpose or a name of one or more partners. The company name shall be annexed with the “WLL” expression. The limited liability company’s objective shall not include the business of banks, insurance or investment of money for third parties personally or through agency.

The company manager shall apply for registering the company with the commercial register. The application shall be accompanied by the company contract and the documents indicating the distribution of shares among partners and deposit of their total value with any bank accredited by the State in addition to the documents indicating that the company has received the in kind shares, if any.

The company may start any business only after registration with the commercial register. The company capital should be enough for achieving its objectives, at least two hundred thousand riyals distributed on shares of equal value, at least ten riyals of each. Profits and losses shall be distributed on shares on equal basis unless the company contract provides otherwise.

Article 54 of Labour Law No. 14/2004 states that the employer shall pay the end of service gratuity to the employee who spends one year and more. The employee’s service is considered as it is continuous if it is ended by cases other than provided for by Article 61 of the Law and the employee is being appointed within two months of the end of service. Therefore, the inquirer’s service is considered as continuous due to the elapse of one month only.

The end of service gratuity is determined in accordance with the agreement between the employer and employee, provided that it should not be less three weeks of each service year and the basic salary is the basis of calculating the end of service gratuity.

In addition to the end of service gratuity, Article 79 of the said Labour Law states that the employer, who spent one continuous year of service with the employer, shall be entitled to an annual leave on the basis of his basic salary at the due date. The employer shall pay to the employee the latter’s total wage for the notice period, which shall be at least one month if the service is less than five years and two months if the service is five years or more, which applies to this case.

Question: An employee’s service has been terminated after ten years and his employment contract was of unlimited duration. After one month of ending his service, the employer re-appointed him and with the same allowances as before. This employee is asking if his joining the work one month after ending his service is considered an extension to his first service. How is the end of service gratuity calculated and what are his entitlements?