Qatar: Legal Analysis, Business Structures and Forms
Islam is Qatar's official religion, and Islamic jurisprudence, the Shar'ia, is recognized as the basis of the country's legal system. Civil legislation is based upon codification. As stated in the provisional Constitution, Qatar is a monarchy with full powers vested in the Emir as the Head of State.
Several courts administrate Justice: the Higher Criminal Court, the Lower Criminal Court, the Commercial and Civil Court, the Labor Court and the Court of Appeal. In addition, the Shar'ia Courts determine matters regarding the personal status of Muslims and civil cases where the parties submit themselves to the jurisdiction of the Shar'ia Courts. The jurisdiction of the Civil Court covers all civil and commercial disputes. There are no monetary limitations regarding the referral of disputes to the Civil Court to be heard by a single justice. Judicial independence is guaranteed by the Provisional Constitution.
Business Structures and Forms
The Companies Law No. 11 of 1986 recognizes five types of business associations that may be formed and registered in Qatar. These are: (1) General Partnerships; (2) Limited Partnerships; (3) Limited Partnerships with Shares; (4) Limited Liability Companies; and (5) Joint Stock Companies.
Recently, the Qatari government began reviewing a legislative proposal concerning commercial law that would allow foreigners, both individuals and entities, to hold more than 50 percent of the equity of a Qatari joint venture in partnership with local partners. Currently, as discussed in the section on Foreign Investment, foreign investors are barred from holding more than 49 percent of a local entity. This legislative initiative is intended to further the goals of privatization, encouraging foreign investment and developing small-sized industries.
Limited Liability Companies
A limited liability company must have between 2 and 30 members. Its minimum capital cannot be below QR 200,000. The capital is divided into shares of not less than QR 1,000 each. The articles of association must provide details of the company's trade name, members, head office, objects, capital amount, number and classes of shares, transfer of shares conditions, the company's duration, managers, and methods of distribution of profits and losses. If the number of members exceeds ten, a control council of at least three members must be appointed. An auditor must be appointed if the capital is higher than QR 500,000. The company must keep a register of members. The liability of members is restricted to the nominal value of their shares in the registered capital. The management of the company is entrusted to one or more managers who may or may not be members. The articles of association, as restricted by law, determine their authority. Liability of managers is governed by the same rules determining liability of directors in a joint stock company.
Joint Stock Companies
A joint stock company is comprised of at least five members. The minimum capital required is QR 500,000, and QR 200,000 in a private joint stock company. The capital is divided into equal nominal shares of not less than QR 100 and not exceeding QR 1,000. The creation of a joint stock company requires the drafting of a memorandum and articles of associations to be presented to the Minister of Economy and Commerce, signed by at least five founders. The incorporation is subject to authorization by decree, which must be published in the official gazette. Founders must produce to the Companies Control Department in the Ministry of Economic and Commerce a bank certificate proving subscription to at least 10 percent of the capital and not more than 20 percent thereof prior to any invitation to public subscription. The corporation's documents must provide details regarding the company's trade name, head office, objects, details of members, capital value, number and classes of shares, duration and assessment of establishment expenses. The company must appoint at least one auditor. The liability of members is restricted to the nominal value of their shares in the registered capital.
The management of the company is entrusted to a board of directors comprising five to eleven directors, each appointed for a period of three years. The board's chairman represents the company vis a vis third parties and may transact business on their behalf. The chairman is responsible for the implementation of board resolutions. The articles of associations and operation of law restrict the authority of the board. The directors are liable to the company, the shareholders and third parties for any fraud, misuse of authority, non-compliance with the articles of association and with the law and any mismanagement. Non-Qataris may own shares in such a company only under certain circumstances, as discussed below in the section on Foreign Investment.
A general partnership is an association of two or more persons that carry on business under a specific name. A general partnership agreement must specify the partnership's trade name, head office, set objects, details of partners, name of manager, capital value, the share of each partner and methods of distribution of profits and losses. The partners are jointly and severally liable for the obligations of the partnership to the full extent of their assets. The management of the partnership is determined by the partnership agreement and devolves on the partners, unless management is specifically entrusted to one or more designated managers by an agreement filed with the Commercial Resister.
A limited partnership is comprised of two types of partners. The general partners handle the management of the business, and the limited partners contribute to the capital of the partnership. A limited partnership agreement must comply with the requirements of a general partnership agreement. Additionally, it must indicate who the general partners are and who the limited partners are. The general partners are jointly and severally liable for the obligations of the partnership to the full extent of their assets. The limited partners' liability is confined to the amount of their capital contribution, provided they do not participate in the management of the partnership or allow their names to be used in the partnership's trade name. The management of the partnership is determined by the partnership agreement and devolves on the partners, unless management is specifically entrusted to one or more designated managers by an agreement filed with the Commercial Resister.
Limited Partnerships with Shares
In a limited partnership with shares, the number of limited partners may not exceed ten and the number of general partners may not be less than three. The capital of a limited partnership with shares is divided into equal negotiable nominal shares and cannot be less than QR 200,000. A limited partnership with shares' agreement must comply with the requirements of a general partnership agreement. In addition, it must provide details of the control council composed of at least three members and must appoint an auditor if the capital exceeds QR 500,000. The management of the partnership is determined by the partnership agreement and devolves on the partners, unless management is specifically entrusted to one or more designated managers by an agreement filed with the Commercial Resister.
While the Law Regulating the Investment of Non-Qatari Capital specifically denies the right of non-Qataris to engage in commercial agencies and import businesses (see section on Commercial Agency), investment by non-Qataris in any project and field which aims at enhancing economic development in the countries, or to facilitate public services, or to realize a public benefit, may be made under an Emiri Decree. Such Emiri Decrees may also allow non-Qataris to import materials and equipment required for such projects if unavailable locally. Applications supported by documents for issuing Emiri Decrees are made to the Minister of Finance, Economy and Commerce. If the application is approved, the Emiri Decree will be issued within sixty days.
Dissolution of Business Associations
The business associations discussed above may be dissolved upon the occurrence of any of the following: (1) expiration of the entity's term; (2) accomplishment of the entity's stated objectives; (3) adoption of a resolution of the entity's members to dissolve the entity; or (4) issuance of a court judgment of dissolution.
There are several specific grounds for dissolution of partnerships, which include: (1) the incapacity or bankruptcy of a general partner; and (2) a substantial loss of the partnership's capital. In addition, there are specific grounds for the dissolution of limited liability companies and joint stock companies.
A limited liability company may be dissolved upon the recommendation of its managers, or of its members representing at least 75 percent of the limited liability company's capital, made in the event the limited liability company lost at least half of its capital. In the event more than 75 percent of the company's capital is lost, the recommendation of the company's members only requires a majority of 25 percent to pass. Additionally, if the company's capital falls below QR 200,000, any one shareholder may obtain dissolution of the company.
In a joint stock company, in the event the company loses at least 50 percent of its capital, the board of directors is required to call a general meeting of the shareholders that would vote to dissolve the company, to decrease the company's share capital or to take any other action deemed necessary. If the board of directors fails to call such a general meeting, any member of the company is entitled to petition the courts to issue a dissolution order for the company.
The Law 4/1986 Concerning the Regulation of Activities of Local Commercial Agencies and their Foreign Principals includes Guidelines for Execution, which were re-issued unaltered in 1994 by the Ministry of Finance, Economy and Commerce. This law provides that the commercial agent is permitted to distribute and sell the goods or to provide certain services in return for profit commission. The principal has no right to be supported by more than one agent for the same commercial business included in the agency. An agent is not allowed to practice the commercial agency on behalf of a principal who has another agent in the same area running the same business. Compensation for any damage that may be caused by isolation or termination in critical time without a justified reason is compulsory. An unlimited contract may not be terminated by any of the chartered parties, unless one of them commits a malpractice justifying termination. All commercial agency relationships must be registered, and the principal may withdraw at the end of a fixed period upon the execution of a new termination agreement or with the Ministry's approval.
© 2000 Mena Report (www.menareport.com)