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The Economy of Qatar is considered one of the most powerful and competitive economies in the Middle East and specifically in the gulf region; therefore, robust commercial legislations and rulings are classified as an essential contributor in sustaining the country’s economic growth. On the 6th of August 2015, Commercial Companies Law (CCL, hereinafter) Number 11 took effect, the CCL organizes the formation, administration and dissolution of business affairs. However, this article shall only focus on the LLC manager’s liabilities considering that the LLC is the most common form of company in the state of Qatar. In addition to the importance of the updated provisions governing the liability of managers.
In order to properly address the issue, a clarification of the fact – that the LLC manager’s liability is derived from different and non-consolidated legislative sources – must be introduced. The aforementioned sources include:
- Civil Law, Law number 22 of 2004.
- Trade Law, Law number 27 of 2006.
- Commercial Companies Law, Law number 2 of 2015.
Liabilities of the manager:
A. General liability
To start with, article 244 of the CCL is of great importance in regard to the manager’s liability since it affirms that the liability of members of the board of directors of the shareholding
(I.e. Joint-Stock) companies shall apply mutatis mutandis to LLC managers. The Qatari Court of Cassation in its judgement number 154/2019 interpreted the aforementioned article stating that the provisions- concerning liability- pertaining to the shareholding (I.e. Joint-Stock) board of directors apply on the LLC manager, hence, and according to article 113 of the CCL, the manager is liable to compensate the company, the partners and others (I.e. third parties) for each and every act of fraud, abuse of authority, violation of mandatory provisions of law or the establishment document articles and any managerial mistakes that result in a financial damage; moreover, the court explained that the beforementioned provisions were set by the Qatari legislator in order to achieve the following:
- Establishing a more secure medium for commercial transactions.
- Protection of shareholder funds.
- Preventing managers from achieving personal interests or committing an act of unfair competition.
- Preventing any financial damage caused by the managers towards the shareholders.
- Encouraging individual investments in local companies.
It is critical to mention that the Court of Cassation judgement involved an explicit statement – in accordance with the law – of considering the manager’s liability as a liability of mandatory nature (I.e. jus cogens) prohibiting any opposing agreement and reckoning it as a void agreement.
B. Liability in solidum with the company
The Qatari legislator didn’t confine the domain of a manager liability on the basis of lawless acts done, but also on the omission and failure of fulfilling acts or obligations required by the CCL, such as:
- The failure of adding the term “limited liability company” to the name of the company in any occasion. -article (229) of the CCL.
- Inadequacy in the company’s registration. -article (236) of the CCL.
- The total or partial failure in calling for the annual general meeting. -article (250) of the CCL.
- The failure of inviting partners due to the losses reaching half of the company’s capital. -article (298) of the CCL.
C. Criminal liability
The manager of an LLC is not immune towards criminal liability, according to the Qatar trade law and article (837) in particular, managers can be considered criminally liable if a final judgement declared their company bankrupt and the manager was proven to commit any of the following actions:
- The failure of keeping and/or providing the company’s financial books and records preventing the evaluation of the true financial position of the company.
- The failure of providing required data to the court or the bankruptcy adjudicator.
- Any act of deception or giving false information to the court or the bankruptcy adjudicator.
- Granting creditor/creditors a special advantage.
- Delaying or trying to delay the suspension of payments of debts or declaration of bankruptcy by selling the company’s assets at a less value than its usual price.
- Squandering the company’s assets in non-commercial activities.
- Participating in lawless actions or actions that violate the company’s establishment document.
Author: Mr. Mohammad Mufid Ratib Qurashi