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After discussing the provisions of Compulsory Liquidation stipulated in the Qatari Commercial Companies Law (CCL) in our former article, it is of a great importance to introduce the reader to the concept of Voluntary Liquidation of Commercial Companies. Going through the Qatari (CCL), a brief overview of the Voluntary Liquidation process provisions will be delivered in this article.
What is Voluntary Liquidation?
Liquidation is the process of shutting down a company and distributing its assets to claimants. It usually occurs when a company is insolvent or is unable to pay its debts. When a company’s operations halt, its leftover assets are used to pay creditors and shareholders in a certain order stipulated by the governing laws. Voluntary liquidation takes place when the shareholders of a firm decide to terminate operations due to lack of profitable business or due to the failure of the company to complete its projects or achieve the objectives of its establishment.
Article (291/5) of the CCL states that a company will be dissolved for the following reasons: “5) The partners unanimously agree to dissolve the company before the end of its term, unless the Company’s Contract states its dissolution by a certain majority”. The legislator explicitly provided the right of Company’s shareholders to dissolve the company, which leads to the process of voluntary liquidation as article (304) of the CCL states that: “The company shall enter liquidation as soon as it is dissolved.”.
During the Liquidation process, the company shall keep its legal identity to the extent essential for the liquidation during the liquidation phase. The phrase “under liquidation” shall be clearly displayed next to the company’s name throughout this phase. Although the Law stipulates that managers lose their authority after the dissolution of the company, they shall remain in charge and be considered as liquidators before third parties until a liquidator is appointed. The provisions mentioned in articles (307-321) of the CCL shall apply on the liquidation process unless it was mentioned otherwise in the company’s memorandum of association, or upon the shareholders’ agreement upon dissolution. The appointment of liquidator/liquidators shall be upon a decision by the partners or a general assembly ordinary majority. It is important to note that the liquidator’s job does not end with the death, bankruptcy, or insolvency of the shareholders, even if appointed by them.
The liquidator shall be dismissed in the same method as he was assigned. Dismissal of the liquidator should involve the appointment of a successor liquidator. The liquidator’s dismissal must be declared in writing and will take effect solely against third parties from the date of the declaration.
The Liquidator is obliged to submit the following to the shareholders/general assembly of the company:
- During three months after starting his work, the liquidator must reply to the shareholders/general assembly enquiries (clarifications) regarding the liquidation process.
- If the liquidation process takes more than one year, the liquidator must provide the shareholders/general assembly with a balance sheet, a profit and loss account summary and a report of the liquidation works.
- The liquidator shall provide a final statement to the shareholders/general assembly at the stage of completing the liquidation procedure.
The period of the company’s liquidation shall not exceed three (3) years unless approved by the competent court or the Minister.
We will always be glad to provide you with further information and details relevant to Liquidation Processes and developments in the State of Qatar at Alhababi Law Firm!