Liquidation of company could be voluntary or by compulsion due to failure to accomplish
Liquidation of company could be voluntary or by compulsion due to failure to accomplish the obligations/court order or on expiry of period mentioned in the Articles of Association.
In case of accumulated losses of the Company exceeds 50% of the share capital, the Board of Directors of the Company may call for the Extraordinary general Assembly to discuss the continuity or dissolution of the Company before its term set in the Articles of Association. If the meeting is not so convened or no decision has been reached among the members then any of the stakeholders may request the competent court to dissolve the Company.
Further the law provides for the following grounds as basis of applying for the liquidation of the Company or dissolution of partnership (not a complete list);
- Failure to maintain minimum number of shareholders in a Limited Liability Company
- Death, withdrawal, insolvency, bankruptcy of Partners resulting in dissolution of Partnership, unless provided otherwise in the Articles of Association
- Transfer of all shares to one person/partner, resulting in end of partnership limited by shares
- Death of Owner in case of One shareholder LLC unless his shares are assigned to one heir or certain heirs who agreed to continue the Company in another legal form, within a period of six months
Any such decision for dissolution (by a written resolution sighting collective approval) should be filed with MOCI and the dissolution should be published in 2 newspapers (at least one of it should be Arabic language). The decision will be effective against the third parties only from the date of publishing the decision. The Company will enter into the Liquidation by that date.
The Company under the liquidation has following rights and responsibilities;
- Perform activities only to the level required for the liquidation and add “in Liquidation” to the name of the Company
- Management of the Company will continue until a liquidator is appointed and will also continue to act on all areas not assigned to the Liquidator
- Memorandum or Articles of Association may detail the liquidation process. Otherwise, Section 304 to 321 of the Qatar Commercial Companies Law 2015will be applied.
- One or more liquidator may be appointed by the Company by majority of decision of its members or, in cases of liquidation due to judicial decision, the court may appoint the liquidator
- Liquidator may make a declaration of his appointment and his limitation of authority
- Liquidator can collect the assets, settle the debts, dispose the assets (in an authorised way), protect the assets legally, representing the Company in front of the judiciary authorities for reconciliation and arbitration.
- Liquidator are prohibited from commencing any new activities for the Company unless it is required to complete on going activities of the Company
- Due date of debts of the Company will lapse on dissolution. Liquidator is expected to notify the creditors by letter and by advertisement in at least 2 daily local newspapers (one must be Arabic newspaper). Period to submit the demand is 75 days and there is a need to issue reminder advertisement after 30 days of original notification. Unclaimed debts should be deposited with the treasury of the competent court.
Distribution and settlement
Liquidator can pay the debts of the Company, after setting aside his remuneration, in the following order;
- Amount payable to the employees
- Amount payable to the State of Qatar
- Any rent payable to the rented premises
- Other amounts in the order of priority as per applicable law
Liquidator can also set aside the amount for paying any disputed debts
Within 3 months of his appointment, the Liquidator together with the auditor should prepare the list of assets and liabilities of the Company in liquidation. Should the liquidation lasts more than one year, the liquidator should prepare a balance sheet, a profit & loss account and a report of liquidators works for submission to the partners, general assembly or the competent court for the approval as per the Company’s contract or its Articles of Association. Liquidation process is not expected to exceed more than 3 years without due approval of the Minister or the competent court.
Any amount left (or the losses) after the payment of debts is distributed to the partner based on share in profits as per the law or the Company’s contract/Articles of Association. At the end of liquidation process, the liquidator will submit his final statement to the partners, the general assembly or the court for the approval. On approval, the liquidator declares the liquidation of the Company and cancel the registration of the Company from the Commercial Registry.
No claims are admissible against the liquidator, the partner, the managers, the members of Board of Directors or the auditors after 3 years from completion of liquidation.
There are certain detailed additional requirements for joint stock companies.
We emphasis that the above narrative is not any opinion or advice on the law and not a substitute to read the relevant law (in Arabic) to form your own opinion or action plan. Kindly get in touch with our experts to understand the requirements in better way and we are glad to help you in every