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Bankruptcy of Companies in Qatar - Assignment Example

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Bankruptcy of Companies in Qatar Course Instructor: Bankruptcy of Companies in Qatar The federal rules of Qatar provide a clear legal framework that governs the liquidation, reorganization and the bankruptcy of any insolvent individuals or companies…
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Bankruptcy of Companies in Qatar
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Despite this, there is a well laid-down framework that governs the insolvency and subsequent liquidation of companies in Qatar. These rules and regulations mainly anchor on Chapter 10 of the Qatar Commercial Companies Law, Law No.5 of 2002. This legal regime in Qatar resembles the one that governs bankruptcy and insolvency in the United Arab Emirates. The only difference is that the Qatar regime lacks the provision that gives shareholders, with more than 25 per cent of the company’s shares, the right to declare the company bankrupt.

This is usually a provision when a company suffers capital losses amounting to more than 75 per cent of its capital turnover. Instead, the provisions of Article 290 of the Qatari Code stipulate that if a limited liability company suffers losses amounting to equivalent of 50 per cent of the company’s capital, the directors of the company are expected to consider dissolving the company. Failure to institute a dissolution procedure makes the directors solely responsible for any further losses that may accrue from the company’s failure, to meet its legal obligations.

According to (Latham & Watkins 2011), the legal framework that governs the application for dissolution of a company in Qatar still resembles that of the United Arab Emirates. . There may be other circumstances such as the expiry of the term of the company as noted in the constitution of the company. A merger between two companies may also require the liquidation of the companies as per the constitutional terms. Dissolution due to bankruptcy materializes when a company incurs losses amounting to more than 50 per cent of the company’s financial capital.

In such circumstances, the company directors are required to convene an extraordinary general meeting in order for the shareholders to make a determination on whether to dissolve the company. In cases where the board fails to convene the general meeting or where the general assembly fails to reach a general resolution pertaining to the dissolution of the company, any interested shareholder may initiate legal proceedings for the dissolution of the company as stipulated in Article 285 of the Company’s Law.

The meeting of the general assembly is at liberty to dissolve the company if a majority of the shareholders support the resolution to dissolve the company. Similarly, dissolution may be initiated by any shareholder with more than 25 per cent of the company’s shareholding. However, this only applies when the company returns a loss amounting to more than 75 per cent of its total financial capital for any given financial year. This framework is anchored on Article 289 of the Companies Law. When the liquidation of a company gets approved by the required majority, the dissolution process commences immediately and the term ‘liquidation’ is incorporated to the company’s name.

It is worth noting that the Companies Law only stipulates the general guidelines that should govern the liquidation process. It does not lay out a formal dissolution

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