Joint liability company in Qatari law

Joint liability company in Qatari law May 15, 2013 - 12:00:00 am By Abdelaal A Khalil Legal Consultant Please send your queries to: plus@pen.com.qa The Commercial Companies Law No.5 of 2002 says a commercial company is a contract by which two or more persons contribute in a project designed for profit by providing a share of the money or the work and divide the profit or loss arising from the project. The law says every company in Qatar shall be established by a Qatari national and its headquarters shall be in Qatar. A company incorporated in the state must take one of the forms provided by law. A company that does not conform to any of those forms is considered invalid and persons contracted on its behalf will be personally responsible and jointly liable for obligations arising from the contract. A joint liability company consists of two or more persons who are responsible jointly for the obligations of the company. The name of the joint liability company consists of the names of all partners. The name can be limited to the name of a partner or more with the addition of the words “and partners”. It is permissible for the company to have a commercial name provided it is made clear that it is a joint liability company. All the partners in a joint liability company must be individuals. The contract of the joint liability company must be written and signed and include the following information: The company’s name, its objective, head office and branches, if any; the name of each partner, his occupation, nationality, date of birth and place of residence. It should also mention the capital of company, the share of each partner, whether it is in cash or any other form, the estimated value of these shares, the mode of payment and the maturity date, the date of incorporation of the company and its duration, the manner of management of the company, with the names of those who may sign on behalf of the company and the extent of their powers, the dates of start and end of the fiscal year of the company, and the way profit and loss will be distributed. The partners may prepare a written document about the company that includes the detailed provisions agreed by them to manage the company, and a copy of it will be attached with the contract of the company. The contract and all amendments will be mentioned in the commercial register and the summary of the memorandum of association and all amendments made in it will be published in a local Arabic newspaper at the cost of the company. The company cannot transact any business until it has completed all the procedures for the formation of the company. A partner in a joint liability company will perform transactions in the name of the company and the bankruptcy of the company will result in the bankruptcy of all partners. The partners’ shares in a joint liability company will not be represented in the negotiable instruments. It’s not permissible to divest shares in the joint liability company without approval from all partners. The creditors of the company have the right of recourse to its funds, and they also have the right of recourse against any partner in his own funds. All partners are jointly liable to creditors of the company. A partner cannot be made to fulfil the company’s obligations from his own funds until there is a final judgment in this regard after the company has failed to meet its obligations. A partner cannot use his account or another account for any activity similar to the activity of the company, or become a partner in a rival company, without the approval of the other partners. If any of the partners violates this rule, the company can demand compensation from him and the activities that he carried out will be transferred to the company’s account. A partner who joins a company will be jointly liable with the other partners for the company’s debts, including those from the period before he joined the company, and any agreement between the partners contrary to this is void. If one of the partners waives his share in the company, this does not relieve him of his commitment as regards the company’s debts unless this is waived by his partners. A partner who is not a director cannot interfere in the administrative affairs of the company, but he has the right to know about the company’s business and check its documents. The company will be administered by all the partners, unless the administration is entrusted, under the memorandum of association, to one or more of the partners or to an individual (or several persons) who is not a partner. If the director is a partner, according to the memorandum of association, he cannot be dismissed without a consensus among the partners or a court decision to this effect. The dismissal of the director in accordance with one of the above conditions results in the dissolution of the company unless the company’s memorandum of association states otherwise, or if the director was a partner and had signed an independent contract. However, if the director is not a partner, regardless of whether he has been appointed according to the memorandum of association or under an independent contract, he can be dismissed by a majority vote of the partners, and this does not result in the company’s dissolution. The company’s director is accountable for any damage he causes to the company or its partners or others by violating the memorandum of association or by taking a wrong decision in the discharge of his duties. The profits and losses of the company, and each partner’s share, are determined by the end of the company’s financial year from the budget. A partner can ask for his share of the profits after the annual statement of accounts is approved. The Peninsula ========= Qatar mulls law that would make it easier to register businesses here By: Lesley Walker | 10 hours agoView as "Clean Read" | 6 Comments Qatar’s Cabinet has come up with a draft law to amend the commercial registration process, legislation that may make the road to launching a business here less arduous. The law was issued during the council’s weekly meeting, which was presided by Prime Minister Sheikh Abdullah bin Nasser bin Khalifa Al Thani. According to the Qatar News Agency, the legislation would amend some provisions of Law No.25 of 2005 on the commercial register. One change would include mandating a same-day decision for those who file complete applications with the Ministry of Economy and Commerce, building on recommendations previously issued by the Advisory Council. However, QNA makes no mention about any other potential changes, or of a timeline for the new legislation to be enacted. Hurdles abound Entrepreneurs have long complained about the difficulties of registering a business in Qatar. Requirements include having QR200,000 in a bank account, and all businesses must have signed a one-year lease on office space that has met Civil Defense approval, which could require a commitment of more than QR100,000 – discouraging home businesses. For expatriates, there is the additional requirement of also having to bring on board a Qatari sponsor who typically owns 51 percent of the company. Qatar’s relatively small customer base, long holdups at customs and the large amount of paperwork required can also discourage potential business owners. Also, small business owners say that there is a culture gap in Qatar in terms of raising funds. To set up a small or medium-sized enterprise (SME), entrepreneurs are reliant on getting funding from Qatari nationals. However, they say that many Qataris are not used to investing money in a hands-off way. American businessman Abraham Kamarck previously told Doha News: “The idea of giving your money away and trusting someone else with it is very foreign here.” Business support There are a number of organizations in Qatar focused on supporting small businesses. Enterprise Qatar, set up in 2011, provides a number of services for aspiring Qatari business people such as providing free office space, subsidies for consultancy services, professional legal services, financial consulting, performance advisory services and assistance with getting listed on the Qatar Exchange Venture Market. It also runs the annual Al Fikra national business plan competition for Qatari start-ups. However, while it offers prize money of up to QR140,000 and provide incubation support for two years, previous winners have said the support is not enough to fully get their businesses off the ground. The 2011 runner-up Layla Al-Dorani, founder of vegan food supplier Raw ME, won QR30,000 in prize money. But she said the financial burden of setting up and running a new business was much higher, and she has worked two jobs to earn enough to fund her venture. Silatech is another organization in Qatar which provides financial assistance as well as training and support to help young entrepreneurs make a success of their new business. Bedaya Center, a joint initiative between Qatar Development Bank and Silatech, also offers support to SMEs in Qatar, linking would-be business people with established experts. However, even they have faced problems during set up, as the Center’s entrepreneurship development manager Yasmeen Hassan, told Doha News it took them 10 months to get the necessary approvals. Even when they are set up, owners of SMEs say they continue to face ongoing bureaucracy and financial pressures. A businessman running a garage in the industrial area was quoted by The Peninsula earlier this year saying:

“The unending wait to get fire and safety licenses is killing our businesses.”

He added: “There are instances where entrepreneurs had to wait 10 months to get a fire safety license. Waiting for such a long time to start a business means that the entrepreneur is losing big money against his establishment cost.” ============