Subject to a few limited exceptions, the most common vehicle available to foreigners (personal or corporate) wishing to conduct business in Qatar is through the incorporation of a Qatari Limited Liability Company ("LLC"). Whilst Qatar has not been significantly affected by the global meltdown, some entities have opted for solvent liquidations over the past 12 months.
The steps which the LLC's shareholders should follow to dissolve the company are briefly set out below. The primary source of legislation is Law No 5 of 2002 as amended (the "Commercial Companies Law").
Steps
An LLC may be dissolved in accordance with its Articles of Association by way of a unanimous General Assembly Resolution approving the dissolution of the company and appointing a liquidator (the "Liquidator") to execute the liquidation process.
A letter (in Arabic) explaining the situation and a tax clearance from the Income Tax Department (if the company has non Qatari shareholders) are required for the winding up process and are lodged with the Commercial Registry at the Ministry of Business and Trade.
Once the General Assembly Resolution is lodged with the Commercial Registry, the company is ‘officially’ in liquidation, and all debts will become due. The company’s Commercial Registration (CR) should be re-issued with the wording “in liquidation” appearing after the company’s name. From this stage, the Liquidator will be able to act for the Company.
Liquidator's Role and Obligations
Once appointed, the Liquidator should:
1) inform the creditors of the status of the company by way of:
- registered letters with proof of delivery; and
- publication in two daily Arabic newspapers.
The notice and/or the adverts should provide for a 75 day period for claims against the company to be made. Company creditors are required to prove their claims within this period. The Liquidator is required to repeat the publishing of adverts after one month.
2) carry out the following activities:
- recover and/or sell the company’s rights; and
- settle the company’s debts.
Prior to settling the company’s debts, the Liquidator should first deduct any expenses incurred by the liquidation process including his own remuneration, and then settle the company’s debts in the following order:
- amounts due to the company’s employees;
- amounts due to the State of Qatar (if any);
- the rent to any leased property; and
- all other amounts by order of preference (if any).
The Liquidator has an obligation to preserve the company’s rights and assets (in any way he thinks fit) and may represent the company in courts and accept reconciliation payments and arbitration awards.
In the event the liquidation persists for more than one year, the Liquidator should prepare a balance sheet, profit and loss account and a report on the activities of the liquidation. These should be submitted to the shareholders or the General Assembly for approval.
The Liquidator should respond to any shareholders' questions in relation to the status of the liquidation.
The managers/directors of the company should present to the Liquidator the company's books, and any documents or information he may require.
The Liquidator should, after settling company’s debts, return to the shareholders the value of their monetary shares in the share capital of the company and distribute the excess among them in accordance with the Articles of Association and the Shareholders Agreement (if any).
If the net assets of the company fall short of settling all the shareholders’ share capital, the losses shall be distributed among the shareholders in accordance with the provisions relating to the distribution of losses as set out in the Articles of Association and/ or the Shareholders Agreement (if any).
At the end of the liquidation process, the Liquidator should present a final statement of accounts to the shareholders for approval by the General Assembly, and the liquidation will only be deemed closed when the General Assembly approves the final statement of accounts or statement of affairs.
After the completion of the liquidation process, the Liquidator shall apply to de-register the company from the Commercial Register, i.e. to dissolve it.
List of Liquidators
There is no list of approved liquidators in Qatar and the Commercial Registry usually directs companies inquiring about liquidators to authorised accountants and accounting firms operating in Qatar.
Limitation
No claim against the Liquidator, the managers/directors, or the auditors based on the liquidation and the company’s activities could be heard after the expiry of the 3 years from the dissolution/de-registration of the company
Voluntary liquidation without appointing a liquidator
For completeness, it should be mentioned, that a company, if solvent, may arrange its own affairs and produce a statement of affairs for submission to the Commercial Registry together with the unanimous General Assembly Resolution approving the dissolution of the company without appointing a liquidator. The Commercial Registry would likely register such a General Assembly Resolution without reference to, and irrespective of, any company creditors' rights. In other words, a company may be dissolved whether or not a liquidator has been appointed, or whether any newspaper adverts have been published, etc.
However, the benefit of complying with the process, as set out in the Commercial Companies Law, is that it affords some degree of protection from future actions against managers/ directors and/ or shareholders where challenges to the procedure are made.