Having discussed the compulsory liquidation provisions stipulated in the Qatari Commercial Companies Law (CCL) in our previous article, it is of great importance to introduce the reader to the concept of voluntary liquidation of commercial companies. Going through Qatari (CCL), a brief overview of the provisions of the voluntary liquidation process will be delivered in this article.
What is voluntary liquidation?
Liquidation is the process of closing a business and distributing its assets to claimants. This usually happens when a business is insolvent or unable to pay its debts. When a company’s operations stop, its remaining assets are used to pay creditors and shareholders in a certain order stipulated by applicable laws. Voluntary liquidation takes place when the shareholders of a company decide to end its activities for lack of profitable activity or due to the inability of the company to carry out its projects or achieve the objectives of its creation.
Article (291/5) of the CCL stipulates that a company shall be dissolved on the following grounds: “5) The partners unanimously agree to dissolve the company before the end of its term, unless the partnership agreement does not stipulate its dissolution by a certain majority.” The legislator has explicitly provided for the right of the shareholders of the company to dissolve the company, which leads to the process of voluntary liquidation as Article (304) of the CCL stipulates that: “The company enters into liquidation as soon as it is dissolved.
During the liquidation process, the company will retain its legal identity to the extent necessary for liquidation during the liquidation phase. The mention “in liquidation” must be clearly displayed next to the name of the company throughout this phase. Although the law stipulates that the managers lose their powers after the dissolution of the company, they remain in charge and are considered as liquidators before third parties until the appointment of a liquidator. The provisions mentioned in articles (307-321) of the CCL apply to the liquidation procedure unless otherwise stated in the company’s articles of association or in the shareholders’ agreement in the event of dissolution. The appointment of the liquidator(s) is made by decision of the partners or of a general meeting by ordinary majority. It is important to note that the work of the liquidator does not end with the death, bankruptcy or insolvency of the shareholders, even if they are appointed by them.
The liquidator is dismissed in the same manner as he was appointed. The dismissal of the liquidator should involve the appointment of a successor liquidator. The dismissal of the liquidator must be pronounced in writing and will only be enforceable against third parties from the date of the declaration.
The liquidator is required to submit the following items to the general meeting of shareholders of the company:
- For three months after the start of his duties, the liquidator must respond to requests for information (clarifications) from shareholders/general meetings concerning the liquidation process.
- If the liquidation process takes more than a year, the liquidator must provide the general meeting of shareholders with a balance sheet, a summary of the profit and loss account and a report of the liquidation work.
- The liquidator will provide a final statement to the general meeting of shareholders at the stage of completion of the liquidation procedure.
The duration of the company’s liquidation may not exceed three (3) years unless authorized by the competent court or the Minister.