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Draft law number ( ) for year 2013 on Issuing the Commercial Companies Law

We, Hamad Bin Khalifa Al Thani, Emir of the State of Qatar, Having reviewed the Constitution and Law number (13) of 2000 on regulating the foreign capital investment in economic activity and the relevant amending laws, Law number (5) of 2002 on Commercial Companies and the relevant amending laws, Civil law number (22) of 2004, Law number (25) of 2005 on the Commercial Register, Commercial Law issued under Law number (27) of 2006 and amended by Law number (7) of 2010 and Law number of 2012 on the Qatar Financial Markets Authority, Law on Qatar Central Bank and the regulation of Financial Institutions issued under Law number (13) of 2012, Emiri Order No. (38) of 2009, on the Organizational Charter of the Ministry of Economy and Commerce; The proposal of the Minister of Economy and Commerce; and The Draft Law submitted by the Council of Ministers; and After consulting with the Shura Council,

of Ministers; and After consulting with the Shura Council, have decided the following: Article (1) The

have decided the following:

Article (1) The provisions of the Commercial Companies Law attached hereto shall come into force.

Article (2) The Commercial Companies Law issued under Law number (5) of 2002 shall be abolished as well any provision contrary to the provisions of the Law herein attached.

Law number (5) of 2002 shall be abolished as well any provision contrary to the provisions

Article (3) All Companies subject to the provisions of the present law and the law hereto attached shall align their statute with the provisions of the same within a period not exceeding 6 months as of their entry into force. The timeframe may be renewed subject to the decision of the Minister of Trade and Commerce upon the suggestion of the competent Administrative Unit at the Ministry.

Article (4) The Minister of Trade and Commerce shall issue the decisions necessary to execute the Law hereto attached. In the mean time, the existing decisions shall remain enforced provided they do not conflict with the provisions of the Law hereto attached.

Article (5) All relevant authorities, shall, each within its scope of expertise, implement the present Law that shall be issued in the official gazette.

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Hamad Bin Khalifa Al Thani, Emir of the State of Qatar

Issued by the Emiri Diwan on :

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/1434 H

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2013 A.D

Emiri Diwan on : / / /1434 H / / 2013 A.D .1013 رياني – ةيراجتلا

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Draft Commercial Companies Law

Title One General Provisions

Article (1) In implementing the provisions of present Law, the following words and expressions shall carry the meaning adjacent thereto unless otherwise specified in the context. Ministry: Ministry of Economy and Commerce Minister: Minister of Economy and Commerce Department: Competent Administrative Unit at the Ministry Authority: Qatar Financial Markets Authority Financial Market: The market authorized by the Authority to deal with securities. Company Contract: Company’s Articles of Association Public action: Criminal action

Articles of Association Public action: Criminal action Article (2) A out a profit making project, by

Article (2)

A

out a profit making project, by offering in cash or in kind contributions and dividing the

commercial company is a contract by which two natural or legal persons or more carry

profit or loss resulting from the same among them.

A

Law.

company may be composed of one person as per the provisions of Title 8 of the present

Article (3) Every company that is established in Qatar shall be Qatari and have its headquarters in Qatar. However, it shall not necessarily and solely be entitled to the rights that are strictly assigned to Qataris in the law, unless it is fully owned by Qatari nationals.

Joint Liability Company Joint Venture Company Limited Liability Company
Joint Liability Company
Joint Venture Company
Limited Liability Company

Public Shareholding Company

Private Shareholding Company

Equities Partnership Company

Article (4) Any company established in Qatar should take any of the forms below:

1-

2-

3-

4-

5-

6-

7-

Limited Partnership Company

Article (5) Any company that does not take one of the forms above shall be deemed null. The persons having contracted the same shall be jointly and separately responsible for the liabilities resulting from the contract.

Article (6) Excluding the Joint Venture Company, the Company’s Articles of Association and any amendment thereto should be made in Arabic and validated by the competent department, otherwise, the contract and amendment thereto shall be deemed null. The company’s

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Articles of Association and any amendment thereto may be accompanied by a certified translation in a foreign language; in the event of a dispute, priority shall be given to the Arabic text.

Article (7) Partners may invoke nullity against each other as a result of the failure in writing the contract or validating the same. However, they may not invoke the contract against a third party who may invoke nullity against them.

Article (8) Excluding the Joint Venture Company, the Company shall only claim legal capacity after its publication as per the provisions of the present law. The company officers or board members shall, as the case may be, be held jointly liable for the damages incurred by others as a result of the failure to publish the company.

by others as a result of the failure to publish the company. Article (9) The partner

Article (9) The partner may become a shareholder by offering in cash (cash amount) or in kind contributions that serves the purposes of the company, or even an effort that he/she produces. However, he/she shall not be entitled to partnership as a result of his/her reputation or influence. The company’s capital shall be made of in cash or in kind contribution or by either.

Article (10) Where the partner offers a property right or any in kind contribution in return of his/her share, he/she shall be held liable, as per the rules applicable, in the event of a sales contract, to guaranteeing the share in case of decay, maturity, flaw or defect of the same. If the share is made on a strictly usufruct basis, the rules pertaining to the tenancy contract shall be applicable to the above. If the partner’s shares involve a third party right, he/she shall not be discharged of liability before the Company until these rights are fulfilled on maturity date, unless otherwise specified. If the partner’s share involves his/her effort, the Company shall be entitled to all earnings resulting from the same unless the partnerearning result from a patent right, save for a different agreement. The partner who offers his work as a share guarantee shall refrain from exercising the same activity for his own account.

from exercising the same activity for his own account. Article (11) Every partner shall be liable

Article (11) Every partner shall be liable for the share he undertook. Any delay beyond the due date shall hold him/her liable for the damages incurred by the Company as a result of such delay.

Article (12) The personal creditor of a partner may not to pursue his/her right from the debtor’s share in the Company’s capital. However he/she may pursue the same from the debtor’s share in the Company’s profits as established in the balance sheet.

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Where the Company is dissolved, the creditor may claim his/her right from the debtor’s share in the Company’s balance surplus after settlement of the Company’s debts.

If the partner is a shareholder, his/her creditor, save from the rights above, may file a case before the competent court requesting the selloff of the relevant shares to collect his/her entitlements or the seizure of the same as a guarantee of his/her right.

Article (13) The Company’s Articles of Association may not stipulate that a partner is denied his right to profit or exempted from loss, otherwise, they are deemed null. However, it may be stipulated that the partner who contributed in the partnership to the extent of his work, may be exempt from loss.

to the extent of his work, may be exempt from loss. Article (14) In the event

Article (14) In the event that the Articles of Association do not specify the partner’s share of profit or loss, the latter shall be proportionate to his/her share in the Company’s capital.

In the event that the Articles of Association are restricted to specifying the partner’s profit share, the latter’s share in loss shall be equivalent to his/her profit share, the contrary shall as well be true if the Articles of Association specify the partner’s share in loss.

In the event of an effort based partnership, and where the Articles of Association do not specify the partner’s share in profit or loss, the Company shall proceed with assessing the activity of the partner which shall constitute a basis for specifying his/her share in profit or loss as per the regulations above.

In the event that the Company is composed of many partners and does not specify the share entitled to each, these shares are believed to be equivalent, unless proven otherwise.

are believed to be equivalent, unless proven otherwise. In the event that the partner, besides his

In the event that the partner, besides his activity, has offered an in kind or in cash contribution, he/she shall be entitled to profit or loss proportionately to his/her activity and proportionately to his/her in cash or in kind contribution.

Article (15) Fringe benefits may not be distributed among partners; otherwise the Company creditors may demand every partner to reimburse the profit amount, without excluding a bona fide partnership. Partners shall not be required to reimburse the amount arising from a one year profit, even if the Company incurs losses in the following years.

Article (16) All contracts, correspondences, clearances, advertisements and other documents issued by the Company should carry the name of the Company, specify its type, headquarters and C/R No.

Save for the Joint Liability Company and the Limited Partnership Company, the Company’s real and paid capital shall moreover be specified.

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Where a Company is subject to liquidation, the papers issued thereby shall specify the same.

Article (17) The provisions of the present law shall apply to foreign companies operating in the State, save for the provisions pertaining to the establishment of companies.

Article (18) Save for the Companies subject to the control of Qatar’s Central Bank, the Minister shall decide the main framework that regulates the governance of Private Shareholding Companies and the Public Shareholding Companies; the chairman of the board at the Authority shall take the governance decisions relevant thereto. In all cases, the Company’s board shall undertake to implement the aforementioned governance rules and regulations, provided the Company’s’ Articles of Association do not contain provisions that conflict with these rules and regulations.

Title Two Joint Liability Company
Title Two
Joint Liability Company

Article (19) The Minister shall decide the incorporation procedures and the issuing of the relevant licenses in a way to guarantee simplicity and easiness by providing the representation of all relevant bodies in a one stop shop system.

Article (20) Without prejudice to the provisions relevant to every company, the provisions of the present Title shall apply to all the companies established in the present law.

Article (21) A Joint Liability Company is a company established of two natural persons or more, who are collectively liable to the extent of their assets for the Company’s undertakings.

two natural persons or more, who are collectively liable to the extent of their assets for

Article (22) The company’s corporate name shall be made of the names of all partners. It may be limited to the name of one partner or more provided the wording “and partners” is added. The corporate name shall match the reality. Where it contains the name of a person who is not a partner, with the latter’s knowledge, this person shall be jointly liable for the company’s debt. The Company’s corporate name may however contain the name of a partner who withdrew or deceased provided the withdrawing partner or the heirs to the deceased give their consent. The company may as well have a trade name provided the corporate name is accompanied with evidence showing that the company is a Joint Liability Company.

Article (23) The Articles of Association of the Joint Liability Company shall be put in writing and signed and shall specifically contain the following:

1. Name, purposes, headquarters and branches (if any) of the Company.

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2. Name, occupation, title, last name (if any), nationality, date of birth and country of

origin of every partner.

3. Company’s capital and the share that every partner subscribes to in cash, in kind or as

third party rights as well as the estimated value of such shares, method of settlement and maturity dates of the same.

4. Date of incorporation and duration.

5. Company management along with the name of the authorized signatories and the

extent of their authority.

6. The beginning and ending of the fiscal year.

7. Profit and loss distribution method.

of the fiscal year. 7. Profit and loss distribution method. Article (24) Partners must draft the

Article (24) Partners must draft the Company’s Statutes in writing specifying detailed management provisions. A copy thereof shall be appended to the Articles of Association.

Article (25) The Company’s Articles of Association and any amendment thereto shall be registered in the Commercial Register as per the rules thereof. A briefing of the Articles of Association and any amendment thereto shall as well be issued in a local daily newspaper published in Arabic, at the expense of the Company. The Company may not initiate legal proceedings against a third party but after the registration and publication procedures are fulfilled. Lack of fulfilment may result in rejecting the case lodged by the Company against third parties. Nevertheless, third parties may invoke the Company’s presence, though the latter did not fulfil the necessary registration and publication procedures.

Article (26) The partner in a Joint Liability Company shall be assigned the capacity of trader and shall be deemed in exercise of a trade activity under the name of the Company. The Company’s bankruptcy shall result in the bankruptcy of all its partners.

activity under the name of the Company. The Company’s bankruptcy shall result in the bankruptcy of

Article (27) The partners’ shares in a Joint Liability Company may not be assimilated to tradable securities.

Article (28) The shares of partners at a Joint Liability Company may only be waived as a result of the approval of all partners and without prejudice to the company’s Articles of Association. In this case, the Articles of Association shall be amended and the waiver published as per Article (25) of the present Law. Any agreement that authorizes the waiver of shares without due publication shall be deemed null. Nevertheless, partners may waive to third parties the rights arising from this partnership. This agreement shall only carry an effect in between the parties to the agreement.

Article (29) The Company’s creditors may claim their dues from the Company’s capital and from the personal belongings of every partner.

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The Company’s partners shall be jointly liable before the Company’s creditors. No execution shall be made against a partner’s assets as a result of the Company’s undertakings except after a final judgement is issued warning the Company to honour its obligations and as a result of a failure to deliver in due to time. The judgement given against the Company shall be invoked against the partner. If one of the Company’s partners proceeds with settling the Company’s debt, he/she may claim the amount from the Company and he/she may claim the same from the remaining partners proportionately to the debt share of each. If one of the partners is insolvent, the partner who settled the debt and the other solvent partners shall carry the consequence of the insolvency of this partner, each proportionately to his/her share.

of this partner, each proportionately to his/her share. Article (30) The partner may not, without the

Article (30) The partner may not, without the approval of the partners, carry out for his account, or the account of a third party, a type of activity that is similar to the activity undertaken by the Company or be a partner in a rival company if the latter is a Joint Liability Company, a Limited Partnership Company, an Equities Partnership Company, a Limited Liability Company, or a Private Shareholding Company. Where a partner breaches this obligation, the Company may claim indemnity and consider the activities he/she undertook for his own account as activities undertaken for the account of the Company.

Article (31) Where a partner joins the Company, he/she shall be jointly liable to the extent of his personal assets for the debts incurred prior or subsequent to his partnership. Any agreement to the contrary made between partners shall not be invoked against third parties.

Article (32) Where a partner withdraws from the Company, he/she shall not be held liable for the debts incurred by the latter subsequent to his withdrawal.

from the Company, he/she shall not be held liable for the debts incurred by the latter

Article (33) Where a partner waives his/her share, he/she shall not be acquitted from the Company’s debts prior to the Company creditors, unless the creditors acknowledge this waiver.

Article (34) No partner excluding the chairman is allowed to interfere with administrative matters. However, he/she may by himself/herself, at the Company’s headquarters, review the trade activity, examine the books and documents, and construe by himself or through his agent a summary regarding the Company’s financial position and give advice to the chairman. Any agreement to the contrary shall be deemed null.

Article (35) The decisions of the Joint liability Company shall be taken unanimously among its partners unless the Articles of Association specify otherwise. Nevertheless, the decisions relevant to amending the Articles of Association shall only be valid when they are made unanimously.

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Article (36) The Company shall be managed by all partners, unless the management is entrusted, as per the Articles of Association or an independent contract, to one partner or more.

Article (37) Where several chairmen are found, each entrusted with a specific domain, every chairman shall only be held accountable for the tasks assigned thereto. Where several chairmen are found and are jointly assigned to management, their decisions may only be valid when they are made unanimously or as per the majority specified in the Articles of Association. Nevertheless, every chairman may separately undertake the urgent matters that, in case of failure thereto, might arise in serious losses, or might cost the Company the loss of a major profit. Where several chairmen are found and the Articles of Association do not specify the mandate of each, or oblige them to work collectively, they each may be authorized to pursue management operations, provided others are entitled to object to the operation prior to its completion. In this case, the majority of votes is applicable. In the event of a tie, the issue is raised before the partners.

the event of a tie, the issue is raised before the partners. Article (38) Where the

Article (38) Where the chairman is a partner and is designated in the Articles of Association, the decision to dismiss him/her must be unanimous or subsequent to a ruling issued by the competent court upon the request of the majority of partners.

In any case, the chairman’s dismissal shall result in dissolving the Company unless the Articles of Association specify otherwise. Where the chairman is a partner and is appointed by a separate contract, or where he/she is not a partner and he/she is appointed in the Articles of Association or in any independent Article, the decision to dismiss him/her may be taken by the majority of votes and does not entail the Company’s dissolution.

the decision to dismiss him/her may be taken by the majority of votes and does not

Article (39) Where the chairman is a partner and is appointed in the Articles of Association, he/she may not step down unless for acceptable reasons otherwise he/she shall be liable for compensation and his/her stepping down shall result in appointing a new replacement partner with the approval of all other partners, unless the Articles of Association specify otherwise. Where the chairman is a partner and is designated in a separate contract, he/she may step down provided he/she chooses the convenient time and notifies the partners with his/her decision within no less than thirty day, unless the Articles of Association specify otherwise, if not he/she shall be liable for compensation.

Article (40) The chairman may undertake all regular management operations that align with the Company’s purposes, unless the Articles of Association specify that his/her mandate shall be restricted. He/she may compound the Company’s rights and call for arbitration where this is in the Company’s best interest.

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The Company shall commit to any operation conducted by the Chairman in its name within the limits of his/her mandate, even if such entails using the Company’s signature for his/her account, unless the contracted party is moved by bad intentions.

Article (41) The chairman may not behave beyond the limits of ordinary management but with the partners’ consent or as specified explicitly in a contract. This prohibition shall specifically apply to the behaviors below:

1. Donations, except for the usual small donations;

2. Selling the Company’s real estate, unless the Company’s purposes put them at his/her disposal;

the Company’s purposes put them at his/her disposal; 3. Mortgaging the Company’s real estate even if

3. Mortgaging the Company’s real estate even if the Company’s Articles of Association authorize him to sell the real estate;

4. Selling the Company’s store or mortgaging the same;

5. Securing the debts of third parties.

Article (42) The Chairman may not conclude a contract for his own account with the Company except with the authorization of all partners, on a case by case basis. He/she may not exercise a type of activity similar to that of the Company except with the approval of all partners.

Article (43) The chairman shall be held liable for the damages incurred by the Company, the partners or third parties as a result of a violation he/she committed of the Articles of Association or as a result of a mistake he/she committed in the course of his/her duty. Any condition to the contrary shall be deemed null and void.

condition to the contrary shall be deemed null and void . Article (44) The profit, loss

Article (44) The profit, loss and share of every partner shall be determined at the end of the Company’s fiscal year from the balance sheet, and profit and loss statement. Every partner shall be considered indebted to the Company proportionately to his/her share of profits, by merely setting this share when adopting the budget. Any shortage in the Company’s capital resulting from the losses incurred shall be filled by the profit generated in the following years, unless an agreement to the contrary is made. The partner may not otherwise be bound to completing the shortage incurred in his share of capital as a result of the losses, except with his/her approval.

Chapter 3 Limited Partnership Company

Article (45) Limited Partnership Company shall consist of two categories of partners, namely:

1. Joint liability partners who manage the company and are jointly responsible for its undertaking to the extent of their private property;

2. Silent partners who contribute to the Company’s capital without being liable for

its undertakings except to the extent of their contribution or undertaking.

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Article (46) All partners, be they joint liability partners or silent partners, shall be natural persons.

Article (47) The Company’s Articles of Association shall determine the name of both the joint liability and the silent partners.

Article (48) The corporate name of a Limited Partnership Company shall only produce the name of joint liability partners with a small addition pointing to the presence of partners. The Company many have a private corporate name provided it is followed with an addition showing that it is a Limited Partnership Company. The name of the silent partner may not be included in the name of the Company, otherwise if the name is mentioned, with the knowledge of the said partner, he/she shall be jointly liable for the Company’s undertakings in front of bona fide parties.

the Company’s un dertakings in front of bona fide parties. Article (49) The silent partner may

Article (49) The silent partner may not be involved in the management of the Company even by means of an agent otherwise he/she shall become jointly liable for the undertakings incurred as a result of his/her management. He/she may commit to the Company’s undertaking, in part or in full depending on the seriousness and redundancy of the activities and on how much third parties trust him with these activities. Shall not be considered an act of interference, any control exercised over the behavior of the Company’s management, the advice provided to the same and the authority granted thereto to act beyond the scope of their authority.

Article (50) The silent partner may be authorized to request a copy of the balance sheet and profit and loss statement. He/she may verify the validity of their content and may, for these purposes, examine the Company’s books and records by himself or by an agent he/she might appoint amid or outside the partners provided this does not result in any damage.

by himself or by an agent he/she might appoint amid or outside the partners provided this

Article (51) The decisions of a Limited Partnership Company shall be made unanimously among joint liability partners, unless the Articles of Association specify otherwise. The decisions relevant to amending the Articles of Associations shall only be deemed valid when they are made unanimously among joint liability and silent partners.

Article (52) Except for the provisions provided for in the present Chapter, the Limited Partnership Company shall be subject to the provisions of a Joint Liability Company.

Titles 4 Joint Venture Company

Article (53) A Joint Venture Company is a Company composed of two persons or more.

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It

is a concealed company that does not affect the right of others or enjoy legal capacity.

It

is not subject to the publication requirements.

The contract of a Joint Venture Company may be proven by all means of proof including evidence and presumption.

Article (54) The Articles of Association of a Joint-Venture Company shall determine the purposes thereof, the rights and obligations of the partners, the distribution of profit and loss among them, the Company’s management in addition to other fundamental elements.

Article (55)

A

in addition to other fundamental elements. Article (55) A Joint- Venture Company may not issue tradable

Joint- Venture Company may not issue tradable securities.

Article (56) Every partner shall remain owner of the share he committed to, unless the Articles of Association specify otherwise.

In

the event of an in kind contribution, and where the partner declares bankruptcy, the

owner shall be authorized to recover the property from bankruptcy after paying his share of the company’s losses.

In

in

deduction of his/her share of the company losses.

the event of a cash contribution or non-plotted property, the owner will not be involved

the bankruptcy, as he/she stands as a Company creditor to the extent of his share after

Article (57) The third party may only have remedy over the partner (s) with whom he contracted a deal. However, where the partners act in a manner that unveils the presence of a Company, third parties may consider the company a real company where partners are jointly liable before them.

real company where partners are jointly liable before them. Article (58) A conducts the trading activities.

Article (58)

A

conducts the trading activities.

partner in a joint venture shall not be considered a trader unless he/she personally

Article (59) Every partner may request that he/she examines the Company’s books and documents by himself or by means of a representative agent, provided the latter case does not prejudice the Company. Any agreement to the contrary, shall be declared null.

Article (60) The decision at a Joint Venture Company shall be made unanimously among partners unless the Articles of Association specify otherwise. The decisions relevant to amending the Articles of Association shall only be considered valid when they are made unanimously among partners.

Article (61) Where a non Qatari national is partner to the Company, the Joint Venture may not exercise the activities that are prohibited to non Qataris.

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Title 5 Public Shareholding Company Chapter one General Provisions

Article (62)

A Public Shareholding Company is every company whereby the capital is divided over

tradable shares of the same value and whereby a shareholder is only liable to the extent of his share in the capital.

is only liable to the extent of his share in the capital. Article (63) A thereof.

Article (63)

A

thereof. It may not be the name of a natural person unless the purpose of the Company is

to

commercial enterprise and took the latter’s name as its own. In all cases, the corporate name shall as well carry the sentence (Qatari Public Shareholding Company).

invest in the patent registered in the name of this person, or the Company owns a

Public Shareholding Company shall have a corporate name indicating the purpose

Article (64)

A

Articles of Association and Statutes.

If

with the completion of the activity. The company’s duration may be extended upon the decision of an extraordinary General Assembly.

the Company’s purpose is to undertake in a specific activity, the Company shall end

joint stock company shall have a specified duration established in the Company’s

Article (65) The Company’s capital shall be sufficient to accomplishing the purpose behind its establishment. In all cases, the capital of a Public Shareholding Company that submits its shares to public subscription shall not be inferior to ten million Riyals.

a Public Shareholding Company that submits its shares to public subscription shall not be inferior to

Article (66) The Company’s Articles of Association and Statutes shall be in line with the legal provisions and the relevant prototypes issued upon the Minister’s decision. They must each produce the data established in Article (69) of the present law.

Chapter two Company’s Incorporation

Article (67)

A Public Shareholding Company is incorporated by no less than five incorporators and

the incorporation decision shall be made by the Minister. The number of incorporators may be less than five provided the Company submits the shares thereof to public subscription within a period of sixty days as of its incorporation. Where the Company fails within that deadline to submit its shares, it is automatically transformed to a Limited Liability Company and the incorporator will have to

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accordingly amend the Company’s Articles of Association and Statutes. The incorporator shall carry the burden of this change including the fees and fines imposed by the Ministry.

Article (68) Shall be excluded from the minimum requirement for the number of incorporators, established in the article above, a Public Shareholding Company established by the government and any other public body or institution or any Company where the State owns 51% of the shares or a lesser percentage as approved by the Cabinet, separately or with one incorporator or more, be it national or foreigner, natural or legal, private or public.

national or foreigner, natural or legal, private or public. Article (69) Without prejudice to the provisions

Article (69) Without prejudice to the provisions of Article (66) of the present law, the incorporators shall make the Articles of Associations and the Company’s Statutes in between themselves.

Each of the documents above shall contain the data below:

1. The corporate name and the company’s headquarters;

2. The Company’s purposes;

3. The name, nationality, place or residency, profession of the incorporators, as well as the number of shares to which each has subscribed;

4. The Company’s capital, number of shares to which it is divided, the type, value and paid amount of the value of every share;

5. Company’s duration;

6. A statement producing in cash contributions, the name of the holder thereof, the conditions pertaining to offering the same, the in kind rights arising from the share;

A estimate statement producing the amount of the expenses, salaries and costs incurred by the Company or that it undertakes to pay as a result of its establishment;

7. 8.
7.
8.

The provisions pertaining to the Company’s Board and General Assembly.

Article (70) The incorporators shall chose among themselves a committee of no less than three members and no more than five members and entrust the same with the incorporation measures at the Department.

Article (71) An application form shall be filed at the Department accompanied by a copy of the draft Articles of Association and Statutes.

The Department may claim any additional data is believes appropriate as well as the documents that provide evidence to this data. It may as well request to be informed with the project’s economic feasibility study.

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The Department may request that the project Articles of Association and Statutes are amended to be in line with the provisions of the law and the prototypes referred to in Article (66) of the present Law.

In all cases, the application shall be settled within a period that does not exceed ten days as of the filing thereof, provided the necessary documentation is fulfilled.

Article (72) Where the Department approves the Company’s application for incorporation, the incorporators shall sign the Articles of Association and the Statutes as legally approved by the Department, shall document the same at the competent validation department and submit them before the Department, hence enabling the Minister take the decision of incorporating the Company within a period of no more than thirty days.

the Company within a period of no more than thirty days. Article (73) Where the application

Article (73) Where the application is rejected or the period established in the Article above expires without any reply, the incorporators may, as per the case, lodge a complaint before the Council of Ministers within a period of thirty days as of the date of rejection or the expiry of the aforementioned period. The decision made by the Council of Ministers on that matter shall be deemed final.

Where a period of sixty day lapses and the Council of Minister does not issue a decision on that matter, the complaint is deemed rejected.

Article (74) Where the application is rejected irreversibly, the incorporators may file a new application for incorporating the same company ninety days after the rejection is declared final.

company ninety days after the rejection is declared final. Article (75) The decision to incorporate the

Article (75) The decision to incorporate the company shall be published in the official gazette. Attached thereto shall be the Company’s Articles of Association and Statutes. The Company shall only have legal capacity after the publication thereof. Publication shall be made by means of registration in the Commercial Register together with the publication in the official gazette.

Article (76) Incorporators shall subscribe to no less than (20%) of the shares and no more than (60%) of the Company’s capital. No incorporator may subscribe to the shares subject to subscription in the stage of incorporation. The incorporators shall submit to the Department, prior to calling for public subscription, a bank certificate that proves they have deposited in the Company’s account a amount that is equal to the shares they have subscribed as incorporators and the draft call for subscription. The incorporators shall draft the latter as per the provisions of the Article below. Once the above requirements are fulfilled, the Department shall authorize the publication of the invitation in two daily newspapers and on the Company’s website if any.

Article (77)

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The call for public subscription shall be made in at least two daily local newspapers

published in Arabic, one week before the subscription starts. The subscription statement shall include the data below:

1-

Name and nationality of the incorporators;

2-

The corporate name, purpose of the Company and headquarters;

3- The amount of the capital, the paid capital, type, amount and number of shares

and the amount of shares subject to public subscription as well as the subscribed share of the incorporators as well as the restrictions imposed on trading with shares.

In kind shares, the data thereof as well as the rights they are entitled to, if any.

The benefits granted to incorporators or to other parties, if any.

6-

5-

4-

to incorporators or to other parties, if any. 6- 5- 4- The dividends distribution method. 7-

The dividends distribution method.

7-

8-

9-

An estimated statement of the Company’s fees of incorporation.

The incorporatorspartial payment of the amount of shares they subscribed.

The minimum and maximum number of shares one may subscribe to, within the

limits specified for the incorporator. 10- The timeframe, deadline, place and conditions relevant to the subscription. 11- Date of the decision authorizing the company’s incorporation. 12- A statement showing how shares are allocated to subscribers in the event that the subscription exceeds the number of shares registered for public subscription. 13- Any other issues that might affect the rights and obligations of the Company’s shareholders. The incorporators, or whoever represents them, shall sign the call for underwriting. They shall be jointly liable for the validity of the information herein and for satisfying the data

above.

The call shall be accompanied by a report signed by an account auditor stating that he/she was informed of the call, examined its content and approves the soundness thereof.

examined its content and approves the soundness thereof. Where the Company has a website, the data

Where the Company has a website, the data on underwriting shall be published on the website and the website address shall be mentioned in the call specified in the present Article.

Article (78) Subscription shall be made in one of the authorized banks operating in Qatar by means of the companies that were established for these purposes or the companies authorized to deal with securities subject to the Authority’s consent. The due payments shall be made upon underwriting and the amounts paid shall be noted down in a private account opened in the name of the Company.

Article (79) The shareholder shall consent to the subscription by appending his/her signature on the relevant application that produces the number of shares subject to the subscription, as well as his/her approval of the Company’s Articles of Association and Statutes as well as the place of residence, provided it is in the State of Qatar, and any other statement deemed necessary.

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The subscription shall be final and unconditional. Any condition required by the subscriber shall be deemed null.

The subscriber shall submit the request to the relevant authority, be it a Bank or an authorized body. Payments shall be made against a receipt signed by the Bank or the body at the receiving end and producing the name of the subscriber, the place of residence, the date of the subscription, the number of shares subject to the subscription and the payments that were made.

The subscription shall be considered final upon receiving the relevant receipt.

be considered final upon receiving the relevant receipt. Article (80) A printed copy of the Company’s

Article (80) A printed copy of the Company’s Articles of Association shall be delivered to every subscriber, which shall be proven in the receipt delivered by the relevant authority. Every stakeholder shall receive during the period of subscription a printed copy of the Company’s Articles of Association for free or against a reasonable fee specified in the statement. Where the Company has a website, a copy of the Company’s Articles of Association and Statutes shall be published on the said website.

Article (81) The bank of the body authorized with the subscription shall keep the funds paid by the shareholders in the Company’s account during incorporation and may only deliver the amount to the board after incorporation of the Company and registration of the same in the Commercial Register.

Article (82) Subscription shall remain open for a period of no less than two weeks and no more than four weeks. Where the offered shares are not exhausted within the specified timeframe, the incorporators may, upon the Department’s approval, extend the deadline to a period of no more two weeks. If the offered shares are not exhausted upon expiry of the extended timeframe, the incorporators shall either reconsider the incorporation of the company or reduce the capital proportionately to the amount that remains off subscription, without prejudice to the provisions of Article (65) of the present Law.

to the provisions of Article (65) of the present Law. Article (83) If the Company is

Article (83) If the Company is not incorporated, the incorporators will have to entirely reimburse the subscribers and pay any arising interest within a period of no more than one week after expiry of the deadline specified in the Article above. They shall be jointly liable for the amounts and expenses incurred in incorporating the Company and they shall be held jointly liable before other parties for their actions and behaviours during incorporation.

Article (84) Where the capital is reduced, the subscribers shall have the right to reconsider their subscription within a period that is equal to the duration of the first subscription and that starts running as of the date of notification. If they do not reconsider their subscription within the specified timeframe, the subscription is considered final.

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Article (85) Where the subscription ends and the number of subscribed shares has exceeded the number of offered shares, the shares shall be distributed among subscribers proportionately to the subscribed amount. In all cases, the extra funds as well as any revenues generated as a result of the subscription shall be paid off within a period that does not exceed two weeks.

Article (86) Any stakeholder may require that a subscription that is contrary to the provisions above is declared null within a period of thirty days as of closing the door to subscription.

of thirty days as of closing the door to subscription. Article (87) The incorporators shall inform

Article (87) The incorporators shall inform the Department with the result of the subscription, thirty days after it is closed. It shall provide as well information regarding the amount of the shares that were paid by the subscribers as well as the number of shares subscribed by each.

Article (88) The incorporators shall within the deadline specified in the Article above, call the subscribers to a constituent general assembly, thirty days after the invitation is sent. A copy of the invitation shall be sent to the Department. The Assembly shall be held in presence of the shareholders who represent at least half the capital; the meeting shall be chaired by an incorporator designated to the task by the Assembly.

Article (89) Every subscriber, irrespective his proportion of shares, shall be entitled to attend the constituent general assembly.

1.
1.

Article (90) The incorporators shall submit to the constituent general assembly a report that includes sufficient details regarding the incorporation procedures, along with the supporting documents. The general assembly shall particularly examine the following:

The report submitted by the incorporators regarding the incorporation operations and the expenses arising from the same.

2.

3. The election of the members of the first board, the nomination of account auditors and the fees entitled thereto.

4. The validation of the assessment relevant to in kind shares, if any.

5. The Company’s incorporation at last.

The adoption of the Company’s Statutes.

The decisions of the constituent general assembly shall be made by the absolute majority of the shares duly represented as per the provisions of the present law.

Article (91)

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The first board shall take the measures necessary to publish the company as per the provisions of the present Law. The members of the first board shall be jointly liable for the damages arising from the failure to undertake the aforementioned publication measures. Upon publication of the Company, all the consequences of measures taken by the incorporators prior to its publication shall be borne by the same. The company shall be liable for all expenses made by the incorporators in this regard.

Article (92) Where a Public Shareholding Company is illegally incorporated, any stakeholder may within a period of a six months, submit a written warning requesting that a remedy is found within one month. Should the company fail to remedy the problem within that period, the shareholder may within the next six months request a judgment to invalidate the Company and dissolve the same. The shareholders may not invoke the Company’s invalidation against third parties.

Chapter three Management Section one The Board
Chapter three
Management
Section one
The Board

Article (93) Where the Company is illegally incorporated, the shareholders and every stakeholder may during the period specified above, file a joint liability case against the incorporators, members of the boards and auditors.

Article (94) Where the shares of the Public Shareholding Company are not open for trade within a period of one year as of its incorporation or conversion into a Public Shareholding Company, the Company shall de facto become a Private Shareholding Company and the incorporators shall be jointly liable before the Department for all the fees resulting from its transformation into a Private Shareholding Company.

from its transformation into a Private Shareholding Company. Article (95) The management of a Public Shareholding

Article (95) The management of a Public Shareholding Company shall be entrusted with an elected board. The Company’s Statutes shall specify the election mode, number of members and membership mandate provided the number of member is not inferior to five or superior to ten and the mandate does not exceed three years. Any board member may be re-elected unless the Articles of Association specify otherwise. The board member may withdraw from the Board provided this is made in due time or else he/she shall be held liable before the Company.

Article (96) 1- The period that lapses between the general assembly meeting to elect the board members and the subsequent decision to elect them shall be considered a full session. 2- Where the board’s mandate shall end, for any reason, prior to holding the Company’s general assembly, the board will have to call for an ordinary general

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assembly to elect a new board. The outgoing board shall only be given clearance when the Company’s financial reports are adopted in the meeting subsequent to the general assembly.

Article (97) The general assembly shall elect the board members by secret ballot. On an exceptional basis, the first board may be appointed by the incorporators for a mandate that does not exceed three years.

Article (98) The board member shall fulfill the following requirements:

1-

2-

3-

member shall fulfill the following requirements: 1- 2- 3- Shall not be aged less than twenty

Shall not be aged less than twenty one.

Shall not have been previously convicted with a crime or a dishonoring felony or any of the crimes established in articles 334 and 335 of the present Law, and must not be declared bankrupt, unless rehabilitated.

Shall, upon his/her election or within a period of thirty days, be a shareholder and the owner of a number of shares specified by the Company’s Statutes as a guarantee for the Company, the shareholders, the creditors and the third party against any liability arising from the board’s membership. Sixty days as of starting the membership, these shares must be deposited in an accredited bank. They shall remain off trade, mortgage or seizure until the membership ends and the budget of the last fiscal year where the member has served is validated. Where the member does not provide the guarantee as specified above, the membership shall be invalidated. One third the board members may be independent and qualified members. They shall be exempt from the precondition of owning the shares established in paragraph 3 of the present Article.

shares established in paragraph 3 of the present Article. Article (99) Except for the State representative

Article (99) Except for the State representative in the Public Shareholding Company or the owners of at least (10%) of the capital shares in these companies, no one may, in his personal capacity or in his/her capacity as a representative of one of the legal persons, be a board member in more than three shareholding companies having their headquarters in the State or be a chairman of the board or a deputy chairman in more than two companies having their headquarters in the State. In any case, no one may, in his personal capacity or in his/her capacity as a representative of one of the legal persons be designated in the management of more than one company having its headquarters in the State or be member of the board in two companies that engage in similar activities. The board membership of whoever breaches this obligation shall be invalidated in the companies that exceed the quorum specified in the present Article with reference to the membership history. The member shall return to the company/companies where his/her membership was invalidated any payment that he obtained.

Article (100) Where the State, a public body or institution contribute in a Public Shareholding Company, every entity may instead of participating in the election of the Board members,

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appoint representatives in the board proportionately to the number of share it owns and the number of representatives shall be deducted from the total number of Board members. However, these representatives may not each be designated for two consecutive or even spaced out session, at the exclusion of the members who are designated for their own capacity. Every entity may alone have the right to dismiss them or appoint other members at any time. The representatives of the State, public body or institutions appointed to the board shall have the same rights and obligations granted to other elected members. Every entity shall be held responsible for the behavior of its representatives towards the Company, its creditors and stakeholders. The representatives of the State, the public institutions and bodies in the boards of Public Joint Stock Companies, alone, shall be exempt from providing shares as membership guarantee.

be exempt from providing shares as membership guarantee. Article (101) The board shall elected a chairman

Article (101) The board shall elected a chairman and a deputy chairman by means of secret ballot for a period of one year, unless otherwise specified by the Company’s Statues, provided the mandate does not exceed three years. The board shall elect by secret ballot one management designated member or more and he/she shall be jointly or separately authorised to sign on behalf of the Company as decided by the Board.

Article (102) Where a seat at the board becomes vacant, it shall be occupied by whoever obtained the highest number of votes among the shareholders who did not becomes board members. In the event of an impediment, the seat shall be occupied by the next person in terms of votes. The new member shall only complete the mandate of his/her predecessor. Where the number of vacant seats reaches 25% of the total number of seats, the board shall call for a meeting of the general assembly within two months as of the last vacancy in order to proceed with the elections and fill the vacant seats.

to proceed with the elections and fill the vacant seats. Article (103) Every Company shall submit

Article (103) Every Company shall submit to the Department on a yearly basis, a detailed list approved by the Chairman of the board with the names of the chairman and members of the Board, as well as the capacities and nationalities of the same. The Company shall notify the Department with any change as soon as it occurs.

Article (104) The Chairman of the board is the chairman of the Company and shall represent the same before third parties and before the judiciary. He/she shall implement the decisions of the board and abide by its recommendations. The chairman of the board may delegate some of his prerogatives to other board members. The deputy chairman shall replace the chairman during the absence of the latter.

Article (105) The board shall meet upon the invitation of the chairman as per the conditions established in the Company’s Statutes. The chairman must call a meeting of the board upon the request of at least two board members.

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The meeting shall only be valid when it is attended by at least half the board members provided the number of attendees is not inferior to three, unless the Statutes specify a higher figure or percentage. The board shall hold at least six meetings during a Company’s fiscal year unless the Statutes require the holding of more meetings. Attendance of the board meeting is authorized by means of any recognized modern technical method that would enable the participant to effectively listen and participate in the board’s activities. Two full months may not lapse without a board meeting. The absent member may designate, in writing, another member of the board who would represent him in both attendance and voting. A member may not be represented by more than one person. The board decisions shall be made with the majority of the votes of the present and represented members. In the event of a tie, the chairman’s side shall have the casting vote. Where a member disagrees with a board’s decision, his disagreement shall be made in writing in the minutes of the meeting. The board may, when necessary and urgent, issue some of its decisions by means of circulating the decision provided all board members provide their written consent to the decision and that the latter is submitted to the next meeting of the board for addition to the minutes.

the next meeting of the board for addition to the minutes. Article (106) Where a board

Article (106) Where a board member misses out three consecutive board meeting or four non consecutive meetings without submitting a valid excuse accepted by the board, he/she shall be deemed resigned.

Article (107) The minutes of the board meetings shall be put in a separate register and shall be signed by the chairman of the board, the designated member, if any, and the staff member entrusted with the board’s secretarial jobs. The minutes of the meeting shall be validated in the register at the end of every session and in successive pages without any erasure or interlineations. The minutes signatories shall be held liable for the truth of the facts therein and their compliance with the provisions of the law and the Company’s Statutes. The pages of the register shall have a serial number. Prior to using the register every page thereof shall be sealed by the Department and signed by the competent staff member. The competent staff member shall, prior to using the register, certify on the first page that he/she numbered the pages that carry his/her signature and seal. It is prohibited to append a seal on a new register unless the former register is submitted to the Department with the competent staff member having put a mark in proof of the closing thereof.

member having put a mark in proof of the closing thereof. Article (108) Without prejudice to

Article (108) Without prejudice to the prerogatives authorized by the present law or the Company Statues to the general assembly, the board shall have the widest required authority to undertake the jobs necessary to fulfil the Company’s purposes. It shall, within the scope of its competence, designate a member to accomplish one task or more or to supervise one aspect or more of the Company’s activity.

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Article (109) The chairman of the board or the board member may not undertake any activity that could compete with the Company and shall not exercise a trade activity for his account or for the account of a third party in a field of activity exercised by the Company or else, the Company may claim compensation and consider the operations he/she initiated as activities made for its own account.

Article (110) The chairman of the board, a board member or any manager shall not have a direct or indirect benefit from the contracts, projects or commitments made for the account of the Company. The contracting and public bids where all competitors may be equally involved shall constitute an exception. Where the best offer is made by one of the parties above, the ordinary general assembly shall provide its consent which shall be renewed annually when these contracts and obligations carry a period and recurrent nature. In any case, no stakeholder among the parties referred to, may attend a session held by the general assembly or the board to discuss the matter involving him/her. Whoever, among the persons referred to, breaches the provisions of the present Article, shall be dismissed from his/her position at the Company and the offender shall be required to reimburse the Company for the amounts earned.

be required to reimburse the Company for the amounts earned. Article (111) The company shall not

Article (111) The company shall not offer a cash loan, whatsoever, to any of its board members or guarantee any loan agreement with third parties. As an exemption banks and other credit companies may grant loans to board members, open credit accounts for them or guarantee the loan contract concluded with third parties as per the circumstances and terms specified by QCB. All the dealings contrary to the provisions of the present Article shall be invalid without prejudice to the right of the company to claim compensation from the offender if needed.

Article shall be invalid without prejudice to the right of the company to claim compensation from

Article (112) The chairman of the board, the board members or the company personnel may not use the information brought to his/her knowledge as a result of his/her membership or position to provide interest to himself or to his/her spouse or children, any of fourth degree relatives, directly or indirectly as a result of dealing with Company securities. Moreover, the persons above may not have a direct or indirect interest with any authority that undertakes the operations meant to change the price of the securities issued by the Company. This prohibition shall remain applicable for a period of two years after the mandate of the chairman or member of the board has ended or after his/her work ends at the Company.

Article (113) The Company shall commit to the activities undertaken by the board within its scope of activities. It shall claim compensation against any damage arising from an illegal act carried out by the Board members.

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Article (114) The chairman and members of the board shall be jointly liable to compensate the Company, the shareholders and third parties for any damage arising from fraud, misuse of power, or breach of the provisions of the law, the Company’s Statutes or any management error. Any clause to the contrary shall be deemed invalid.

Article (115) The liability above shall be borne by all board members where the error arises from a unanimous decision. Whoever objects to a decision taken by majority of votes shall not be held liable for the decision when he/she expresses his/her objection in writing in the minutes of the meeting. Nonattendance of the meeting shall not exempt the member from his/her responsibility unless it is proven that he/she was not informed of the decision or was unable to object thereto at a later stage.

decision or was unable to object thereto at a later stage. Article (116) The Company may

Article (116) The Company may initiate legal proceedings against the Board members held responsible for the mistakes that cause damage to the shareholders, five years after the mistake or shortage occurs. The ordinary general assembly shall decide to file the case and appoint a delegate to represent the Company. Where the Company is subject to liquidation, the liquidator shall initiate the proceedings upon the decision of the general assembly.

Article (117) Where a mistake causes damage to a shareholder, the latter may file the case separately provided he/she informs the Company of his/her intention. Any clause to the contrary shall be deemed null.

Article (118) Any decision made by the general assembly to clear the board from its responsibility shall not annul the case filed against the board members for the mistakes they committed in the pursuance of their duties. Where the act that resulted in liability has been submitted to the general assembly and ratified by the same, the case shall be terminated five years after the general assembly meeting. However, if the act imputed to the board members is a criminal act the claim shall only be terminated when the public case is terminated.

act imputed to the board members is a criminal act the claim shall only be terminated

Article (119) The general assembly may dismiss the chairman or an elected board member upon a board decision issued unanimously or upon a request signed by many shareholders who own at least 25% of the subscribed capital. In the last case, the chairman shall call for a meeting of the general assembly within a period of ten days as of the dismissal request; otherwise the management shall proceed with the invitation.

Article (120) The Company’s Statues shall determine the bonuses of the board members. The bonus may not exceed 10% the net profit after deduction of the statutory reserves and deductions and profit distribution of no less than (5%) the paid capital among the shareholders. The Statutes may specify that the board members will obtain a lump sum if

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the company failed to make profit. In the latter case, the general assembly shall give its consent and the Ministry will subject the amount to a ceiling. Where the Company makes profit, the management may subject the board member’s bonuses to a ceiling in line with the Minister’s decision.

Article (121) Every fiscal year, the board shall prepare the Company’s balance sheet, profit and loss statement, cash flow and a comparison report with the former fiscal year. All documents shall be certified by the Company’s account auditors and shall be accompanied by a report on the Company’s activity and financial position during the former fiscal year as well as its future plans for the coming year. The board shall prepare this data and documents within no more than three month as of the end of the Company’s fiscal year to submit the same before the shareholders general assembly which is scheduled within a period of no more than four months as of the end of the Company’s fiscal year.

four months as of the end of the Company’s fiscal year. Article (122) The board shall

Article (122) The board shall invite all shareholders to attend the general assembly meetings by means of publication in two daily local newspapers published in Arabic, on the financial market website and on the Company’s website if any. The invitation shall be sent at least fifteen days prior to the scheduled general assembly. It shall contain a detailed briefing of the assembly’s agenda, all the data and documentation specified above as well as the auditors’ report. When a copy of the invitation is submitted to the press, it shall in parallel be submitted to the Department.

Article (123) Every year, the board shall put at the disposal of the shareholders, for their review, at least three days before the general assembly convenes to examine the Company’s budget and the board’s report, a detailed statement with the following:

assembly convenes to examine the Company’s budget and the board’s report , a detailed statement with

1- The amounts obtained by the chairman of the board and every board member during the past year, namely the salaries, wages, allowances, fees for attending the board meetings and any incurred expenses, or compensation; 2- The in kind benefits enjoyed by the chairman and every board member during the fiscal year;

3-

The bonuses that the board suggests to be distributed among board members;

4- The amounts allotted to current and former board members as pension, reserve or end of service indemnity; 5- The operations where the board members or the managers have conflicting interests with the Company;

6-

The amounts spent on any type of advertisement with the details of every amount.

7-

The contributions, the benefiting party, as well as the reasons and details of the same.

As for the banks and other financial institutions, the statement should be accompanied by a report issued by the auditor whereby he/she reports that the cash loans, credits or guarantees made to the chairman or a board member during the fiscal year do not conflict with the provisions of Article (111) of the present law.

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The detailed statement shall be signed by the chairman of the board and one of the members, who shall be liable for implementing the provisions of the present Article, and the information in all the documents.

Section 2 The General Assembly

Article (124) The general assembly shall convene upon the invitation of the board, at least once a year, at the time and place specified by the board after the Department’s approval. The meeting shall be held within a period of four months as of the end of the Company’s fiscal year. The board may call for a general assembly meeting whenever necessary.

may call for a general assembly meeting whenever necessary. Article (125) The board shall call for

Article (125) The board shall call for a general assembly meeting upon the auditor’s request. Where the board did not submit an invitation within a period of fifteen days as of the date of the request, the auditor may send the invitation directly upon the management’s approval. The management’s decision shall be made within a period of fifteen days.

The board shall call for a general assembly meeting upon the request of one or more shareholders who own at least (10%) of the capital and for valid reasons, within a period of fifteen days of the request, otherwise the management shall approve the request made by the shareholders to address the invitation at the Company’s expense no later than fifteen days after receiving the request. In both cases, the agenda shall be limited to the object of the request.

Article (126) Without prejudice to Articles (88) and (125) of the present Law, the management shall call for a general assembly meeting in the cases below:

2-
2-

1- Where the deadline specified in Article (124) of the present Law is exceeded without calling for a general assembly meeting;

Where the number of board members is less than the minimum required in Article

(102) of the present law, without calling for a general assembly meeting; 3- Where breaches of the law and of the Company’s Statutes are found or where a severe management mistake is committed. In these cases, all the procedures necessary to hold a general assembly shall be followed

and the expenses shall be borne by the Company.

Article (127) The chairman of the board shall publish the balance sheet, profit and loss statement, a detailed summary of the board report, and the full text of the auditors’ report in two daily local newspapers published in Arabic, at least fifteen days before the general assembly is held. A copy of these documents shall be submitted to the management.

Article (128) The agenda of the general assembly’s annual meeting shall include the items below:

1.

Listening to the board’s report regarding the Company’s activity and financial status during the past year as well as the auditor’s report and validating the same;

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2.

Discussing the Company’s budget and profit and loss statement and validating the same;

3.

Electing the board members when necessary;

4.

Appointing the account auditors and determining their fees;

5.

Deciding whether or not to give clearance to the board members;

6.

Examining the board proposals on profit distribution and adopting the same.

Article (129) 1- Every shareholder may attend the general assembly’s meetings and shall be

entitled to a number of votes that is equivalent to the number of shares he/she owns. Decisions shall be made by the absolute majority of the shares represented in the meeting.

absolute majority of the shares represented in the meeting. 2- legal delegates; 3- It is authorized

2-

legal delegates; 3- It is authorized to designate someone by a power of attorney to attend the

Minors and persons whose civil rights are suspended, shall be represented by their

meetings of the general assembly, provided the designated person is a shareholder and the designation is specific and put in writing. The shareholder may not delegate a board member to attend the meetings of the general assembly on his/her behalf. In all cases, the authorized delegate may not be the owner of a number of shares exceeding 5% the Company’s shares.

4-

With the exception of legal person, no shareholder may, in his own capacity or in his capacity as a representative of another shareholder, be authorized to possess more than 25% of the shares authorized to vote and represented in the meeting.

Article (130) Without prejudice to the provisions of the law with regards to an extraordinary

general assembly, the general assembly shall be competent in the matters below:

1. 2. 3. 4.
1.
2.
3.
4.

Discussing the board report on the Company’s activity, financial status during the

year and future plan. The report shall carry ample explanation of the items on the income and expenses as well as a detailed statement showing how the board suggests to distribute the net profits for the year and sets a date for the disbursement thereof;

Discussing the auditors’ report on the Company’s balance sheet and closing as submitted by the board;

Discussing the annual balance sheet and profit and loss statement, provide validation thereof and determine the profit to be distributed; Discussing whether or not the board members shall be given clearance;

Electing the board members, appointing account auditors and determining their fees during the next fiscal year, unless specified in the Company’s Statutes;

6. Discussing any suggestion introduced by the board to the agenda and making a decision thereof. The general assembly may not discuss items that are not on the agenda. However, it may discuss any pressing matters facts that arise during the meeting;

7. Where a number of shareholders representing one tenth the Company’s capital at least request that specific items are placed on the agenda, the board shall honour the request otherwise the general assembly shall be entitled to discuss the outstanding issues.

5.

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Article (131) The general assembly shall be chaired by the chairman of the board, his deputy or whoever is designated by the board. Where the aforementioned persons fail to attend the meeting, the assembly shall appoint a chair among the board members or the shareholders. The assembly shall appoint as well a meeting rapporteur. Where the assembly is discussing a matter relevant to the chair of the meeting, it shall designate one of the shareholders to act as chair.

Article (132) The validity of general assembly’s meeting shall be conditional on the following:

1-

meeting shall be conditional on the following: 1- Inviting the Department to designate a representative at

Inviting the Department to designate a representative at this meeting, three days at least before it is held;

2- The presence of shareholders who represent at least half the Company’s capital unless a higher percentage is specified in the Company’s Statutes. Where the quorum is not met, the general assembly shall be convoked for another meeting held within fifteen days as per the provisions of Article (122) of the present Law;

The invitation shall be sent at least three days before the scheduled meeting. The second meeting shall be considered valid, irrespective the number of represented shares.

The decisions of the general assembly shall be made by the absolute majority of shares represented in the meeting, unless the Company’s Statutes specify a higher percentage.

Article (133) Every shareholder shall be entitled to discuss the issues on the general assembly’s agenda and shall address questions to the board members. The members shall undertake to answer those questions in a way that does not damage the Company’s interests.

in a way that does not damage the Company’s interests. Every shareholder shall refer back to

Every shareholder shall refer back to the general assembly where he/she believes the answer to the question was insufficient. The assembly’s decision shall be enforceable. Any clause to the contrary in the Company’s Statutes shall be invalidated.

Article (134) The voting in the general assembly shall be as specified in the Company’s Statutes. The voting shall be made by secret ballot when the decision is relevant to electing or electing the board members or filing liability charges against them, or upon the request of the chairman of the board or a number of shareholders who represent at least tenth the votes attending the meeting. The board members may not be vote on the general assembly’s decisions regarding their clearance from responsibility. The general assembly’s decisions, in line with the provisions of the law and the Statutes shall be binding to all shareholders, whether or not they attended the meeting where the decisions were made and whether they approved or disapproved the same. The board shall enforce those decisions upon their issuing and shall submit a copy thereof to the Department within no later than fifteen days.

Article (135)

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The minutes of the general assembly’s meeting shall be drafted and contain the names of the attending or represented shareholders, the number of shares they possess, in their own capacity or by representation, the number of votes entitled thereto, the decisions made, the number of votes cast in favour of these decisions or against the same and a briefing of the discussions made during the meeting. The chairman of the general assembly, the rapporteur, vote counters and auditors shall sign the minutes. The signatories shall be liable for the data therein.

Article (136) The minutes of the general assembly’s meetings shall be noted in a record kept for this purpose. The records and minutes of the general assembly shall be subject to the same provisions that apply to the records and minutes of the board meetings as established in Article (107)

of the board meetings as established in Article (107) Section 3 Extraordinary General Assembly of the

Section 3 Extraordinary General Assembly

of the present Law.

A copy of the minutes relevant to the general assembly’s meeting shall be submitted to

the Department within one month.

Article (137) Without prejudice to the rights of bona fide third parties, any decision contrary the provisions of the law or of the Company’s Statutes shall be deemed invalid. Any decision made in the interest of a specific category of shareholders or against the same, or that brings benefit to the board members or any other party without due notice to the Company’s interest, may be invalidated. Where a decision is invalidated it is considered inexistent for all shareholders. The board shall issue the decision in two daily local newspapers published in Arabic and shall post it on the Company’s website if any. An invalidation case shall not be heard where one year has elapsed since the challenged decision. The filing of the case shall not result in suspending the implementation of the decision unless the Court ruling orders otherwise. Invalidation may only be claimed by the shareholders who objected to the decision and made their objection in the minutes of the meeting or who did not attend for a valid reason.

1-
1-

Article (138) The matters below may only be decided in an extraordinary general assembly:

Amendment of the Company’s Articles of Association or Statutes;

2-

Increase or decrease of the Company’s capital;

3-

Extension of the Company’s duration;

4-

Company’s dissolution, liquidation, transformation, merger or acquisition.

5-

Sale of the whole project for which the Company was established or disposing of the same by any other means. Any decision in approval thereof must be noted in the Commercial Register. Nevertheless, the assembly may not amend the Company’s Statutes in a way to increase the burden on shareholders, amend the main purpose of the Company, change the nationality thereof or move the headquarters of the mother company to another country. Any text to the contrary shall be deemed null.

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Article (139) Without prejudice to the provisions of the articles below, the provisions applicable to an ordinary assembly shall apply to the extraordinary general assembly.

Article (140) The extraordinary general assembly may only convene subject to the invitation of the Board, which shall send the invitation upon the request of shareholders representing at least 25% of the Company’s capital. Where the board does not send the invitation within fifteen days of the request, the Department may be requested to submit the invitation at the expense of the Company.

Chapter 4 Auditors
Chapter 4
Auditors

Article (141) The extraordinary meeting of the general assembly shall only be valid when attended by shareholders who represent at least three quarters the Company’s capital. Where the quorum is not met, the assembly shall be asked to hold a second meeting thirty days after the first meeting. The second meeting shall be considered valid when attended by shareholders who represent half the Company’s capital. Where the quorum is not met in the second meeting, a third meeting shall be called for within thirty days. The third meeting shall be valid irrespective the number of attendees. Where the meeting is meant to discuss the Company’s dissolution, transformation, merger or acquisition, the meeting shall only be valid when attended by shareholders who represent at least 75% the Company’s capital. The board shall publish the decisions of the extraordinary general assembly where they include amending the Company’s Statutes.

where they include amending the Company’s Statutes. Article 142 Every shareholding company shall have one

Article 142 Every shareholding company shall have one auditor or more appointed by the ordinary general assembly for a period of one year. The general assembly shall as well provide an estimate with the fees thereof and may renew the auditor’s mandate provided the renewal is not made for three consecutive years. The board may not be authorized to act in that matter; nevertheless the Company’s incorporators may appoint an auditor who shall pursue his/her activities until the first general assembly is held.

Article (143) The auditor shall fulfil the requirement of having his/her name duly noted in the auditors’ register as per the enforced laws and regulations.

Article (144) The Company’s auditor may not, in any capacity, be involved in the incorporation thereof, the membership of its board, or entrusted with any technical, administration or consultative activity therein. He/she may not be partner, agent or employee of one of the Company’s incorporators or board members or a fourth degree relative.

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Any appointment for the contrary shall be declared null.

Article (145) Where several auditors are appointed, they shall be jointly liable for the auditing operations.

Article (146) The auditor shall be entrusted with the following:

1- Controlling the Company’s business

2- Auditing the Company’s account as per the auditing rules, job requirements and

scientific and technical bases;

rules, job requirements and scientific and technical bases; 3- 4- 5- Examining the Company’s financial and

3-

4-

5- Examining the Company’s financial and administrative rules and internal financial auditing the rules and ensuring that they correspond to the Company’s type of activity and help preserve the funds thereof; 6- Verifying the Company’s assets and ownership thereof and making sure the Company’s obligations are legal and valid;

7-

8- Any other duty entrusted with the auditor as per the present Law, the law regularizing the Accounts Auditing Profession as well as any other rules that are relevant to auditing. The auditor shall submit to the general assembly a written report with its activity. He/she or whoever he/she may designate shall read the report before the general

Examining the balance sheet and the profit and loss statement;

Ensuring the implementation of the law and the Company’s Statutes;

Taking note of the board’s decision and the Company’s instructions;

assembly. The auditor shall send a copy of the report to the Department.

Article (147) The aforementioned auditor’s report shall contain the following:

1-
1-

He/she shall obtain the information, data and clarification he/she finds necessary

to his/her activity; 2- The company keeps regular accounts and registers as per the internationally recognized rules of accounting which reveals the Company’s financial status and the outcome of its activity. The budget and profit and loss statement shall be in line with the vouchers and books; 3- The auditing activity pursued by the auditor of the Company’s accounts are deemed necessary and constitute a reasonable ground for giving his/her opinion on the Company’s financial position, activity outcome and cash flow as per the internationally recognized rules of auditing;

The financial data in the board’s report to the general assembly are in conformity with the Company’s books and vouchers;

5- The inventory was conducted as per the enforced principles;

6- Any violation to the provisions of the present law or the Company’s Statutes during the past year that have a fundamental impact on the outcome of the Company’s activity and financial status; whether or not these violations continue to exist, within the scope of the available information.

4-

Article (148)

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Where the Company’s auditor is unable to undertake the tasks and obligations entrusted thereto as per the provisions of the present Law for any reason whatsoever, he/she shall prior to reconsidering the auditing, submit a full written report to the Department, and a copy thereof to the board explaining the reasons that constitute an impediment to his/her activity and preventing the same. The Department shall have to remedy this situation with the board. Where this is impossible within thirty days of receiving the report of the Company’s auditor as mentioned in the present Article, the Company shall call the general assembly for a meeting to examine the situation. Where the Department is capable of remedying the reasons for which the auditor reconsidered his task, the Company shall establish in its annual report a detailed description of the reasons brought forward by the auditor when he asked to be excused from the task.

by the auditor when he asked to be excused from the task. Article (149) Where the

Article (149) Where the Company has two auditors or more, they shall submit one report together, the report shall be read by the auditors at the general assembly; the general assembly may not decide to validate the board’s report without listening to the auditor’s report, or else its decision is deemed null.

Article (150) The auditor, in his/her capacity as agent acting for all the shareholders, shall be liable for the validity of the information in his/her report. During the general assembly every shareholder may ask the auditor for clarifications on the report’s content.

Article (151) The auditor and his/her employees shall not speculate on the share of the Company subject to his/her auditing, whether they are dealing directly or indirectly with the shares, otherwise he/she shall be dismissed and held accountable and asked to compensate the Company for any damage resulting from breaching the provisions of the present article.

and asked to compensate the Company for any damage resulting from breaching the provisions of the

Article (152) The Company’s auditor should maintain the secrets thereof. He/she shall not inform the shareholders who are not present at the general assembly or to third parties with any information that has come to his/her knowledge during the course of his/her activity otherwise he/she shall be dismissed and held accountable. The auditor shall be required to compensate for the damage incurred by the Company, the shareholders or third parties as a result of the mistake he/she committed in the course of his/her duties. Where several auditors are found, they shall be jointly held liable for the committed mistake. The liability case established in the paragraph above shall not be heard if one year has elapsed after the general assembly has discussed the auditor’s report. Where the charges imputed to the auditor stand as criminal actions, the liability case shall not be terminated as long as the public action continues.

Chapter Five Company’s Capital

Section One

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Shares

Article (154) The Company’s capital shall be divided into equal shares where the nominal value of each shall not be inferior to one riyal or superior to a hundred riyals. The expenses incurred during the issuing shall not exceed (1%) the nominal value of the shares.

Article (154) The shares of the Company established in Qatar shall be nominal.

Article (155) The shares of a Public Shareholding Company shall be indivisible. Where many persons are the owners of the same share, they shall have to designate a representative who shall be authorised to use the rights arising from the share. These persons shall be jointly liable for the obligations arising from the property of the share. The shares shall not be issued against a value that is inferior to its nominal amount. However, they may be issued against a higher value where required by the Company’s Statutes and extraordinary general assembly. In this case, the difference in terms of value shall be added to the statutory reserve.

in terms of value shall be added to the statutory reserve. Article (156) The shares value

Article (156) The shares value shall be paid in cash, in one payment or on instalments. The value that should be paid upon subscription shall not be inferior to 25% of the shares value. In all cases, the full amount shall be paid within a period of three years as of publishing the incorporation decision in the official gazette.

Article (157) The Company shall produce temporary certificates upon subscription containing the name of the shareholder, the number of shares he subscribed, the amounts paid and the amounts due. These certificates shall stand as ordinary shares until they are exchanged for shares upon settlement of all instalments.

These certificates shall stand as ordinary shares until they are exchanged for shares upon settlement of

Article (158) Where a shareholder fails to pay the outstanding instalment in due date, the board may execute and notify the shareholder about paying the due instalment by means of a certified letter. Where the shareholder fails to pay within thirty day, the Company may put the share for auction, sell the same in the financial market and collect the amounts resulting from the selloff, deduct the outstanding instalments and expenses and give the rest to the shareholder. Nevertheless, the defaulting shareholder may, until the date of the sale, settle the outstanding amounts in addition to the expenses incurred by the Company. Where the sale outcome falls short from the outstanding amounts, the Company may collect the same from the shareholder’s private assets, cancel the share, subject to execution, and provide the buyer with a new share carrying the number of the cancelled share. The sale activity must be noted in the share register with the name of new owner.

Article (159)

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Where incorporators or other parties are found to have in kind contributions or fringe benefits, the Department shall, upon the request of the incorporators, appoint one or more authorized experts or technical and financial experts in matters of assessment established by the Ministry in order to verify whether the contribution or benefits were properly assessed. The expert shall submit the report to the Department within thirty days of assignment. The Department may, upon the expert’s request, renew the deadline for no more than thirty days. The Department shall submit a copy of the expert’s report to the incorporators who shall distribute the same among subscribers at least fifteen days before the constituent assembly is held. The relevant report shall be kept at the Company’s headquarters and made available to all stakeholders. The report shall be submitted to the constituent assembly for deliberation. Where the assembly decides to reduce the value of the in kind contribution or the resulting benefits, the donor of the in kind contributions or the beneficiaries of the fringe benefits must give their consent during the assembly. Where they object the reduction, they may withdraw from the Company. The in kind contribution shall strictly be represented by shares that have been fully paid. The shares that represent the in kind contribution shall only be delivered when the property of this contribution is transferred in total to the Company.

of this contribution is transferred in total to the Company. Article (160) The Company shall keep

Article (160) The Company shall keep a special register by the name of “Shareholder’s register” producing the name of the shareholders, nationality, place of residency, assets and amounts paid. The Department may be informed with this information and obtain a copy thereof. Every company shall deposit a copy of the register at any other party with the purpose of following up on the shareholder’s affairs. That party shall be entrusted with keeping the record and managing the same, if necessary. The register shall be made available to every shareholder for free. Any stakeholder may request that the information produced in the register is amended especially where a person is inexcusably added or deleted. A copy of the information therein, as well any change introduced thereto, shall be submitted to the Department, two weeks before the date specified to disburse the profit among the shareholders.

specified to disburse the profit among the shareholders. Article (161) If the shareholding company intends to

Article (161) If the shareholding company intends to enlist its share in the securities market, the procedures and principles stipulated by the laws, regulations and guidelines for organizing the dealing of securities in the country shall be followed especially those related to the handover of the register specified in the previous article to the body specified by these laws, regulations and guidelines.

Article (162) Ownership of the shares in the financial market shall be transferred as per the regulations established by the Authority and the financial market where they are enlisted. Ownership of the shares that are off the financial market shall be transferred upon their registration in the shareholdersregister and the share shall be referred to with this

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registration. No grievance may be filed against the company or third parties except from the date of its registration in the shareholders register. Nevertheless, the Company shall not dispose of the shares in the cases below:

1-

Where such a disposal is contrary to the provisions of this Law or the Statutes of the company.

2-

Where the shares were mortgaged or seized by a court order.

3-

Where the shares are lost and no duplicates were issued.

Article (163)

shares are lost and no duplicates were issued. Article (163) Shares may be mortgaged by submitting

Shares may be mortgaged by submitting them to the hypothecating creditor. The hypothecator may receive the profits and use the rights arising from the shares unless an agreement to the contrary is made in the mortgage contract. Where the Company’s shares are enlisted, the mortgage shall be produced on the registers kept with the relevant party.

Article (164) The company assets shall not be subject to seizure in order to settle the debts incurred by any shareholder; however the shares of the debtor and the profit generated by these shares can be seized. The seizure of the shares shall be referred to in the shareholdersregister as stipulated by article (160) of the present Law.

Article (165) All the decisions taken by the general assembly shall be applicable equally to the hypothecating creditor and the impounder on one hand and the shareholder whose shares were seized or mortgaged on the other hand. The impounder or the hypothecating creditor may not attend the general assembly, participate in the discussions thereof or validate its decisions. He/she may not benefit from any membership right at the company.

may not benefit from any membership right at the company. Article (166) The incorporators shall only

Article (166) The incorporators shall only be allowed to dispose of their shares two years after the Company’s incorporation. In the mean time, these shares may be mortgaged, their property changed by the selloff from one incorporator to another or to the government, from the heirs of one incorporator, in the event of his/her death to a third party, or after the bankruptcy of one incorporator to another, or by means of a final legal judgment.

Article (167) Any decision issued by the ordinary or extraordinary general assembly that holds prejudice to the rights of the shareholders as established in the present law, in the Company’s statutes or that increases the obligations thereof, shall be considered invalid.

Article (168) The Statutes of the company may impose restrictions on the dealings provided that no prohibitions are imposed thereto.

Article (169)

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The Company may purchase its shares with the intent of selling them as per the rules specified by the Authority.

Section Two

Bonds

Article (170) The Company, with the consent of the general assembly, may issue tradable bonds, whether or not they may be transformed into shares of equal value. The general assembly may authorize the board to specify the amount of the issuing and the conditions thereof.

the amount of the issuing and the conditions thereof. Bonds may become shares where specified in

Bonds may become shares where specified in the issue letter. In that case, the owner of the bond may alone accept the transfer or cash the nominal value of the bond.

The issuing of the bonds or any other credit tools shall comply with the Authority’s rules and regulations.

Article (171) The bonds shall be nominal and the bond shall remain nominal until its full amount is paid.

Article (172) Credit bonds may only be issued under the following conditions:

1. The issue is authorized in the Company’s Statutes;

2. The Company’s capital is paid in full;

3. The value of the bonds does not exceed the capital established in the last budget, unless the bonds are guaranteed by the State or any bank operating therein.

Article (173) The bonds issued subject to one credit shall grant the holders thereof equal right. Any provision to the contrary shall be considered invalid.

to one credit shall grant the holders thereof equal right. Any provision to the contrary shall

Article (174) Where credit bonds are open to public subscription, the latter shall be made by means of one bank operating in Qatar or more. The call for subscription shall be made public within at least fifteen days, shall be issued in two daily local newspapers published in Arabic, shall carry the signature of the board members and shall produce the information established by a board decision provided they contain the following:

1. The general assembly’s decision to issue the bonds and the date of the decision;

2. The number of bonds to be issued and the amount thereof;

3. The date of opening and closing the subscription;

4. The due date of the bonds as well as the payment conditions and guarantees;

5. The value of the previously published bonds, the guarantees thereof and the amounts that remain outstanding on the date the new bonds are issued;

6. The Company’s capital;

7. The Company’s headquarters, date of incorporation and duration;

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8. The amount of in kind contributions;

9. A briefing of the last budget validated by the account auditor.

Article (175) No new credit bonds may be issued, unless the subscribers to the old bonds have paid their full amount in order that the outstanding amounts in addition to the value of the new bonds do not exceed the Company’s capital as per the last adopted budget.

Article (176) The board shall within one month of closing the door to subscription, submit to the Department a statement with the operation, the name of subscribers, their nationality and the amount of the subscription made by each.

nationality and the amount of the subscription made by each. Article (177) The general assembly’s decisions

Article (177) The general assembly’s decisions on shareholders shall apply to bond owners. However, the general assembly may not amend the rights of the bond owners but with their consent during a general assembly held as per the provisions related to a shareholder’s extraordinary general assembly.

Article (178) Bonds may not be transformed into shares unless specified in the credit requirements and as per the conditions established in the former Article. Where transfer is decided, the owner of the bond may accept or reject the decision in which case he/she shall cash the nominal value of the bond.

Article (179) Where a bond or share certificate is lost or damaged, the owner may request a new certificate in lieu of the lost or damaged certificate. The owner shall publish the numbers of lost or damaged bond or share certificates in one local newspaper published in Arabic. Where no objection is filed before the Company within thirty days, the latter shall produce a new certificate that contains the mention in lieu of the lost or damaged certificate. The new certificate shall entitle the owner to all his/her rights and shall result in all the obligations arising from a perished or damaged certificate.

obligations arising from a perished or damaged certificate. Article (180) Whoever wishes to object to the

Article (180) Whoever wishes to object to the issuing of a new certificate in lieu of the lost or damaged certificate shall file a case before the competent court within fifteen days as of his/her objection or the latter shall be deemed inexistent.

Article (181) The competent authority shall provide the right owner with a certificate in lieu of the lost or damaged certificate once it is notified with the final judgment.

Article (182) The Company may, pending the consent of the general assembly, issue tradable deeds that abide with the requirements of the Islamic Sharia and that shall comply with the

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same conditions, requirements and provisions established in the present Section without prejudice to the nature thereof.

Chapter six Company’s Finance

Article 183 The Company shall have a fiscal year specified by its Statutes, provided it is not inferior

to twelve months, except for the first fiscal year.

Article 184 During every fiscal year, the board shall submit to the auditor the Company’s balance sheet, profit and loss account, activity report during the past fiscal year and financial position, at least two months before the general assembly is held. All these documents shall carry the signature of the chairman of the board or one of the board members.

of the chairman of the board or one of the board members. Article (185) The Company

Article (185) The Company shall make available to shareholders the semi annual financial report published in a daily Arabic local newspaper and on the Company’s website if any, provided these reports are examined by an account auditor. Publishing shall only be authorized upon the Department’s consent.

Article (186) (10%) of the Company’s net profit shall be deducted on a yearly basis to constitute the statutory reserve unless the Company’s Statutes specify a higher percentage. The general assembly may stop the deduction where the reserve amounts to half the paid capital. The statutory reserve shall not be distributed among shareholders; however any surplus

distribute this percentage.
distribute this percentage.

exceeding half the paid capital shall be used in distributing up to a 5% profit among shareholders up during the years where the Company does not make sufficient net profits

to

Article (187) The general assembly may, upon the proposal of the board, decide on a yearly basis to pay part of the net profit into the account of the optional reserve. The optional reserve shall be used in the means decided by the general assembly.

Article (188)

A given percentage, specified by the Statutes or the board, shall be deducted on a yearly

basis from the non net profit to compensate the depreciation of the Company’s assets or

their decreasing value. This money is used to repair the tools and equipment needed for the Company or to purchase the same. This amount may not be distributed among shareholders.

Article (189) The general assembly shall decide to deduct part of the profit to fulfill the Company’s obligations under the labour laws.

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The Company’s Statutes may specify that a private fund is established to assist the Company’s staff.

Article (190) The Company’s Statutes shall specify the minimum percentage of the net profit that should be distributed among shareholders after deduction of the statutory and optional reserves. The shareholder shall be entitled to his/her share of profit as per the rules and regulations established by the Authority and the financial market where the shares are enlisted.

Chapter Seven Amending the Company’s Capital Section One Increasing the Company’s Capital
Chapter Seven
Amending the Company’s Capital
Section One
Increasing the Company’s Capital

Article (191) The Company’s capital may only be increasing after payment of the shares value in full.

Article (192) The extraordinary general assembly, may, subject to the approval of the board, increase the Company’s capital. The decision shall specify the amount of the increase, and the issue price of the new shares The extraordinary general assembly may assign the board to determine when the decision shall be enforced provided it is implemented within one year.

Article (193) The capital increase may be made by one of the following means:

1. Issuing new shares; 2. 3. 4.
1.
Issuing new shares;
2.
3.
4.

Capitalizing the reserve, part of the same or the profits;

Transforming bonds to shares; Issuing new shares against in kind contributions or assessed rights.

Article (194) Rules of subscribing in original shares shall be applicable to the subscribing in new shares.

Article (195) The new shares shall be issued against a nominal value equivalent to that of the original shares. However, the extraordinary general assembly may decide to increase the value by adding an issue bonus with the approval of the Department. The additional amount shall be added to the statutory reserves and the Department shall make a decision within fifteen days of the request provided it fulfills the necessary data and documentation requirements.

Article (196) The shareholders shall have priority in subscribing to the new shares. The right to priority may be waived to third parties upon a decision made by the extraordinary general

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assembly with the majority of 75% of the Company’s capital, provided the waiver occurs with the Department’s consent.

Article (197) The board shall publish a statement in two local daily Arabic newspapers and on the Company’s website if any, specifying the right of shareholders to priority, the date of opening and closing the same as well as the price of the new shares.

Article (198) The distribution of the new shares shall be made among the shareholders having expressed their wish to subscribe proportionately to their portion of shares, provided the percentage does not exceed their request. The remaining shares shall be distributed among the shareholders have wished to obtain a number of shares that is greater than their owned shares. The shares that are left, will be submitted for public subscription and shall be disposed of with the Department’s consent. Where the increase in capital includes in kind contributions, the provisions on assessing the in kind contributions shall apply provided the extraordinary general assembly stands for the constituent assembly.

general assembly stands for the constituent assembly. Article (199) Where the new shares are open for

Article (199) Where the new shares are open for subscription, a subscription bulletin shall be made with the following data:

1. Reasons behind capital increase;

2. The decision of the extraordinary general assembly to increase the capital;

3. The company’s capital upon the release of new shares, the suggested increase, the number of new shares and the extra charges if any;

4. A statement with the in kind contributions or the assessed rights if any;

5. A statement with the profits distributed by the Company during the past three years as a result of the capital increase;

6.
6.

A report submitted by the auditor endorsing the bulletin’s data;

The bulletin shall be signed by the chairman of the board and the auditor who shall be

jointly liable for the information therein.

Article (200) Where the capital is increased by capitalizing the distributable reserves, free shares are issued and distributed among shareholders proportionately to the shares of each by increasing the nominal value of every share proportionately to the pressing capital increase. Shareholders shall not incur financial charges.

Article (201) Bonds may be transformed to shares by means of recovering bonds, canceling the same, providing the owners thereof with equivalent shares and adding their value to the capital.

Article (202)

Section Two Reducing the Capital

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The capital may be reduced subject to the decision of the extraordinary general assembly upon hearing the auditor’s report and with the Department’s consent in one of the cases below:

1. The capital exceeds the needs of the Company;

2. The Company incurred losses.

Article (203) The capital is reduced by one of the means below:

1.Reducing the number of shares to cancel a percentage equivalent to the amount of the increase; 2.Reducing the number of shares equally to the loss incurred by the Company; 3.Buying new shares equally to the amount of the decrease or cancellation.

Title Six Private Shareholding Company
Title Six
Private Shareholding Company

Article (204) The board shall publish the decision to reduce the capital in two local daily Arabic speaking newspapers. Creditors shall provide the Company with the documents that prove their debts within a period of sixty days. The Company shall settle the due debts and provide sufficient guarantees for the deferred debts.

Article (205) The Company’s capital is decreased by purchasing shares and cancelling the same, a public call shall be made to all shareholders to put their shares on sale. The invitation shall be published in two local daily and Arabic speaking newspapers. The shareholders may be notified with the Company’s wish to buy by means of certified letters. Where the number of shares on sale exceeds the shares that the Company wishes to purchase, the demand for sale shall be reduced proportionately to the increase. The price of the share shall comply with the provisions established in the Company’s Statutes. Where the Statutes fail to examine this situation, the Company shall have to pay the fair price established by the Company’s auditor as per the applicable assessment methods or the market price, whichever was higher.

methods or the market price, whichever was higher. Article (206) No less than five persons may

Article (206) No less than five persons may incorporate among themselves a Private Shareholding Company, the shares of which shall not be open to public subscription and shall be privately owned by the incorporators. The Company’s capital shall not be inferior to two million Riyals.

Article (207) Except for the provisions of public subscription and secret deliberations, the provisions applicable in the present Law to Public Shareholding Company shall apply to Private Shareholding Company.

Article (208)

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The government and any other public body or institution or any Company where the State owns 51% of the shares or a lesser percentage with the consent of the Council of Ministers, or the private institutions of a public utility established by an Emiri Order, may establish a Private Shareholding Company, separately or jointly with one incorporator or more, be it national or foreigner, natural or legal, private or public. These companies shall not be subject to the provisions of this Law but to the extent that does not conflict with the agreements made in their shadow or upon their establishment, or with the provisions established in the Articles of Association or the Statutes.

Article (209)

A

requirements below are fulfilled:

Private Shareholding Company may become a Public Shareholding Company when the

Title Seven Equities Partnership Company
Title Seven
Equities Partnership Company

1. The nominal value of the endorsed shares is paid in full;

2. Two fiscal years at least have elapsed;

3. The Company has achieved in pursuance of the purpose thereof extra profit that could be distributed among shareholders, on an average of ten percent of the capital within the two fiscal years that preceded the request for transformation;

4. A decision is made by a majority of 75% the Company’s capital to transform the Company from a private to a Public Shareholding Company;

5. A decision is made by the Minister to transform the Company to a Public Shareholding Company; the decision shall be published and accompanied by the Company’s Articles of Association and Statutes, at the expense of the Company.

Article (210) The Equities Partnership Company is a company composed of two parties, one party with one or more partners who are jointly liable to the extent of their full assets for the Company’s debts, and another party with one or more partners who are only liable for the Company’s debts to the extent of their share in the capital.

with one or more partners who are only liable for the Company’s debts to the extent

Article (211) With regards the joint partners, the Company is a Joint Liability Company. The joint partner shall be considered a trader even if he/she did not have a similar capacity upon entering the Company. All joint partners shall be natural persons.

Article (212) The company’s corporate name shall be made of the name of one or more partners. The name might carry an additional creative appellation or one that is derived from the purpose it pursues. The name of a company’s shareholder may not be mentioned in the corporate name. Where his/her name is mentioned with his/her knowledge he/she shall be considered jointly liable before bona fide third parties.

In all cases, the expression Equities Partnership Company shall be added to the corporate

name.

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Article (213) The Company’s capital shall be divided into tradable and indivisible shares of equal value.

Article (214) The Company’s capital shall not inferior to two million Qatari riyals paid in full upon incorporation.

Article (215) Subscription to the shares of an Equities Partnership Company shall be made according

to

the rules and provisions applicable to the subscription in the shares of a Public

applicable to the subscription in the shares of a Public Shareholding Company. Article (216) All founding

Shareholding Company.

Article (216) All founding partners shall append their signature on the Company’s Articles of Association and Statutes. The latter shall produce the names of the joint partners, their place of residence, nationality and the names of those among them who were appointed a Company manager.

Article (271)

A

even pursuant to an act of authorization. Nevertheless, he/she may be involved in the management of the Company’s internal affairs within the limits established in the

shareholder partner may not be involved in the management of third party activities

Company’s Statutes.

Article (218) Where the shareholder partner breaches the prohibition established in the Article above, he/she shall be held liable to the extent of all his assets for the obligations arising from the management activities. Where he/she conducts those activities upon the authorization of the joint partners, the authorizing partners shall be held jointly liable for the obligations arising from these activities.

joint partners, the authorizing partners shall be held jointly liable for the obligations arising from these

Article (219) The Equities Partnership Company shall have a general assembly composed of all joint partners and shareholders. The provisions applicable to the general assembly of a Public Shareholding Company shall be applicable to the Equities Partnership Company in terms of composition, meetings and voting. The manager of an Equities Partnership Company shall act on behalf of the board in calling for the general assembly. The general assembly shall act on behalf of the shareholders before the managers.

Article (220) The general assembly in an Equities Partnership Company may not engage in activities related to the Company’s relation with third parties and may not amend the Company’s Statutes but with the managers’ consent, unless the Company’s Statutes specify otherwise.

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Article (221) An Equities Partnership Company shall have an audit board composed of at least three members elected by the general assembly from within or outside the shareholders, as per the provisions established in the Company’s Statutes. The joint partners shall not have the right to vote in the election of the audit board members.

Article (222) The audit board shall complete the Company’s procedures of incorporation as per the provisions of the law, control the activities thereof, request from the managers a detailed report of their management activities, examine the Company’s books, record and documents and inventory the funds thereof. The board shall express an opinion on the issues submitted before him by the Company’s managers. It shall give permission in the pursuance of the activities that require authorization as per the Company’s Statutes.

require authorization as per the Company’s St atutes. Article (223) The audit board may call for

Article (223) The audit board may call for a meeting of the general assembly, where it may find severe violations in the management of the Company. The board shall submit to the shareholder’s general assembly by the end of every fiscal year, a financial report with the results of the audit. The board members shall not inquire about the managers’ activities or the outcome resulting therefrom except when they are informed that mistakes were committed without the assembly’s knowledge.

Article (224) An Equities Partnership Company shall be run by one joint partner or more. The provisions applicable to managers in a Joint Liability Company shall apply to their authority, responsibility and dismissal.

apply to their authority, responsibility and dismissal. Article (225) The extraordinary general assembly may not

Article (225) The extraordinary general assembly may not decide to introduce any amendment to the Company’s Statutes but with the consent of all joint liability partners, unless the Statutes specify otherwise.

Article (226) Every Equities Partnership Company may appoint one auditor or more. The provisions applicable to auditors in a Public Shareholding Company shall apply to them.

Article (227) Without prejudice to the provisions of the present Title, the provisions relevant to a Public Shareholding Company shall be applicable to an Equities Partnership Company in the matters below:

1. Provisions on the incorporation of the Company and the publication thereof;

2. Provisions relevant to the Company’s finance.

Article (228)

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Where the position of a Company’s manager becomes vacant, the Audit board shall appoint a temporary manager who shall be entrusted with the settlement of urgent matter pending the holding of the general assembly.

The provisional manager shall call for a meeting of the general assembly within a period

of fifteen days as of his/her appointing and in line with the procedures established in the

Company’s Statutes. Where this period shall lapse without calling the general assembly

to meet, the audit board shall send the invitation immediately.

The provisional manager shall only be liable for executing the activities entrusted to him.

Title Eight Limited Liability Company

Chapter One Incorporation
Chapter One
Incorporation

Article (229)

A

more than fifty partners. Every shareholder shall be held liable to the extent of his/her capital share. The partner’s

Limited Liability Company is a Company made of no more than one person and of no

contributions shall not be represented by tradable securities.

Article (230)

A

or

inventive appellation provided the Company’s name is not misleading of the purposes or identity thereof. The wording “Limited Liability Company” shall be added to the corporate name. Where the managers fail to abide by the provision above, they shall be held jointly liable to the extent of their private assets for the Company’s obligations and for any compensation.

Limited Liability Company shall have a corporate name based on the purpose thereof

on the name of one partner or more. The corporate name may in both cases contain an

bonds.
bonds.

Article (231) The Company may not have recourse to public subscription to establish its capital,

increase the same or obtain the loans necessary thereto. It may not issue tradable shares

or

Article (232) A Limited Liability Company is established by means of an incorporation document

signed by the partner or partners and including the data specified by a Minister’s decision provided they include the following:

1. Type, name, purpose and headquarters of the Company;

2. Name, nationality, place of residence and address of the partners;

3. Capital amount, the share of every partner and a statement with the in kind contributions, the value thereof and the names of donors if any;

4. Names and nationalities of the Company’s managers, be they partners or not provided their name is shown in the Company’s incorporation document;

5. The names of the audit board members if any;

6. The company’s duration;

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7. The profit and loss distribution;

8. The terms for waiving shares;

9. The prototype of the Company warnings addressed to partners.

The Company’s incorporation document may contain provisions on the right to recover the partner’s contributions, price assessment, establishment of an optional reserve, Company’s finance and accounts and the reasons behind the Company’s dissolution.

Article (233) A Limited Liability Company may only be established when all in kind and in cash contributions are divided among partners and have been entirely honoured. In cash contributions shall be deposited with an authorized bank, which may only disburse the same to the Company’s managers after submitting sufficient proof of the Company’s registration it the Commercial register.

of the Company’s registration it the Commercial register. Where the partner offers in kind contributions, he/she

Where the partner offers in kind contributions, he/she shall demonstrate in the incorporation document the type and value of the same, as well the estimated price approved by the remaining partners, the name of the partner and his/her share in the Company’s capital as a result of his/her contribution.

The owner of the in kind contribution shall be liable before third parties for the difference between the real value and the estimated value as established in the Company’s incorporation document. The other partners shall be jointly liable for the difference, unless they prove their lack of knowledge.

Nevertheless a liability case cannot be filed in this case when five years have elapsed since the Company was registered in the commercial register.

Article (234) The Company’s manager shall submit a request to register the Company in the Commercial register. The document shall be accompanied by the Company’s incorporation document showing how the shares are distributed among partners, the payment of their full amount and the deposit of the same at an authorized bank, in addition to all the documents proving the in kind contributions made to the Company, if any. The request shall be settled within fifteen days of submitting the request with the necessary documents. The Company may not start any activity but after its registration in the commercial register.

but after its registration in the commercial register. Chapter Two Equities and Capital Article (235) The

Chapter Two Equities and Capital

Article (235) The Company’s capital shall be sufficient for the pursuance of its purposes. Profit and loss shall be distributed equally among shares unless the incorporation document specified otherwise in accordance with Article (13) of the present Law.

Article (236)

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The Company’s capital shall be divided into equal shares, the amount of which shall be fully paid by shareholders upon incorporation. The share shall be indivisible. Where the share is acquired by several persons, the company may freeze the rights thereto as long as the owners have not chosen among themselves a single owner in the relation with the Company. The Company may set a deadline for making the selection, unless it is entitled after the deadline lapses to sell the share for the account of the owner thereof, in which case the share shall be submitted first to partners then to third parties.

Article (237) The Company may devise in its headquarters a special record for partners including the following:

The partners’ names, place of residence, nationalities and jobs; The number of shares owned by every partner and the value thereof; The operations made on the shares, the date thereof, the reason for transferring property, the name of the buyer, the seller and the signatures thereof;

name of the buyer, the seller and the signatures thereof; 1- 2- 3- 4- The total

1-

2-

3-

4-

The total number of shares owned by the partner pursuant to the operation;

The Company’s managers shall be jointly liable for the information contained in the register. The register shall be made available to partners and stakeholders.

Article (238) The partner may waive his/her share to a partner or a third party by means of an official document compliant with the terms of the Company’s incorporation document. The waiver shall not be invoked against the Company or third parties except from the date of its registration in the Company’s register and in the Commercial register. The Company may not refrain from noting the waiver in the register unless its content is contrary to the Company’s incorporation document or the provisions of the present Law.

do cument or the provisions of the present Law. Article (239) Unless the Company’s incorporation document

Article (239) Unless the Company’s incorporation document specifies otherwise, where a partner shall waive his share to a person other than the partners, he/she shall notify the remaining partners with the waiver’s condition through the Company’s manager. The manager shall notify the partner as soon as he/she shall receive the notification. All parties may demand to recover the share in return of its real value and subject to the same waiver condition. In case of a disagreement over the price, the Company’s account auditor shall provide a price estimate on the date of recovery. Where thirty days elapse without any of the partners using the right to recover the shares, the partner shall be considered free to dispose of his/her share.

Article (240) The share of every partner shall pass to his/her heirs or legatees. This provision shall not apply to the right to recover shares as established in the Article above.

Article (241) Where the right of recovery is used by more than one partner, the shares or the share sold amongst them shall be divided proportionately to the share of each in the capital, without prejudice to the provisions of Article (235) herein.

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Article (242) Where the creditor of one partner shall initiate the execution measures against the share of his/her debtor, he/she may agree with the manager and the Company on the procedures and terms of the sale, otherwise the share will be sold in an auction and the Company will be entitled to recover the sold share in favour of one partner or more as per the terms adjudicated in the auction within a period of fifteen days of the same. These provisions shall apply in the cases where the partner goes bankrupt.

Chapter Three

Management

where the partner goes bankrupt. Chapter Three Management Article (243) The Company’s manager shall have the

Article (243) The Company’s manager shall have the full management authority unless the Company’s incorporation document imposes restrictions thereupon. The manager’s activity shall be binding to the Company provided it is accompanied with a statement indicating his capacity. Every decision to change the managers or restrict the powers thereof, shall be applicable against third parties subject to its registration in the commercial register.

Article (244) Where several managers are found, the Company’s incorporation document may authorize the establishment of a board of directors, determine the functioning thereof and the majority on which decisions should be made.

Article (245) The liability of the managers shall be similar to the liability of the board members in shareholding companies.

Article (246) The manager may not, unless approved by the Company’s general assembly, be entrusted with the management of another company with competing or similar purposes. He/she shall not undertake for his own account or for the account of third parties commercial deals that are competing with the Company’s trade or similar thereto. Any violation shall result in the dismissal of the manager and the payment of compensation.

dismissal of the manager and the payment of compensation. Article (247) Where the number of partners

Article (247) Where the number of partners exceeds twenty, the Company’s incorporation document shall appoint an audit board composed of at least three members for a limited duration. The general assembly shall re-appoint them at the expiry of this period, or shall appoint other partners and may dismiss them. The managers, be they partners or not, may not have the right to vote in the elections of the audit board members or the dismissal thereof.

Article (248) The audit board shall examine the Company’s books and documents and shall inventory the funds, goods, securities and documents that prove the rights of the Company. It may request from the managers at any time to produce a management report. The board shall

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control the balance sheet, annual report and profit distribution and shall submit a report in that matter to the Company’s general assembly at least fifteen days prior its meeting.

Article (249) The audit board members shall only audit the manager’s activities where a mistake occurs and is not mentioned in the report they submitted to the partnersgeneral assembly.

Article (250) The non managerial partner, in the Companies where no audit board is established, may give advice to managers and may request at the Company’s headquarters to be informed with the Company’s operations and examine the books and documents thereof. Any provision to the contrary shall be deemed invalid.

Any provision to the contrary shall be deemed invalid. Article (251) The Company shall have a

Article (251) The Company shall have a general assembly composed of all partners. The assembly shall meet upon the invitation of the managers at least once a year within four months of the end of the fiscal year, at the time and place indicated in the Company’s incorporation document. The invitation letter shall designate the meeting’s time and place and shall be accompanied by the agenda and copies of the budget. The managers shall call the general assembly to meet within the timeframe established in the present article. The management may send the invitation within a period of fifteen days as of the expiry of the timeframe above. The managers shall be jointly liable for any damage incurred by the partners or by third parties as a result of a failure or delay in holding the assembly.

Article (252) The managers shall prepare for every fiscal year a balance sheet, a profit and loss statement, a report on the Company’s activity, financial status and a proposition on profit distribution within two months as of the end of the fiscal year. Managers shall send a copy of the documents above, a copy of the report of the audit board, a copy of the report of the accounts auditor to the Department and to every partner within a period of one month as of preparing the documents above. Every partner in a company that does not have an audit board shall request from the managers to call for a meeting of partners in order to discuss these documents.

a meeting of partners in order to discuss these documents. Article (253) Every partner shall be

Article (253) Every partner shall be entitled to attend the general assembly irrespective the number of shares he/she owns. He/she may designate a representative among the other non managerial partners. Every partner shall have a number of votes equivalent to the number of shares he/she owns or represents.

Article (254) The Company’s annual general assembly agenda shall discuss the items below:

1. The manager’s report on the Company’s activity and financial status during the year and the auditor’s report;

2. Discuss the balance sheet, profit and loss statement and validate the same;

3. Determine the profit distributed among partners;

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4. Appoint managers, board of directors, members of the audit board if any, and determine the fees of each;

5. Appoint an account auditor and determine his/her fees;

6. Other matters entrusted thereto by the law or by the Company’s incorporation document.

Article (255) The general assembly may only discuss the items on the agenda, unless pressing matters arise and necessitate discussion. Where one of the partners requires that a specific item is put on the agenda, the managers will have to honour the request, otherwise the partner may refer to the general assembly.

otherwise the partner may refer to the general assembly. Article (256) Every partner shall be entitled

Article (256) Every partner shall be entitled to discuss the items on the agenda and managers are compelled to answer the questions raised by the partners. Every partner shall refer back to the general assembly where he/she believes the answer to the question was insufficient. The assembly’s decision shall be enforceable.

Article (257) The decisions of the general assembly shall be valid when they are made by a number of partners who represent at least half the capital unless the Company’s incorporation document specifies a higher percentage. Where this majority is not found in the first meeting, the partners shall be convoked to a second meeting held within twenty one days of the first meeting. The decisions of this meeting shall be made with the majority of the votes represented therein, unless otherwise specified by the incorporation document.

Article (258) Managers may not vote on the decisions that give them clearance from the management liability or dismisses them.

(258) Managers may not vote on the decisions that give them clearance from the management liability

Article (259) The incorporation document may not be amended, the company’s capital may not be increased or decreased but with the consent of a number of partners who represent 75% the company’s capital, unless the incorporation document specifies that in addition to the quorum above, a quantitative majority of members should be present. Nevertheless, the Company’s obligations may only be increased with their collective consent.

Article (260) Minutes of the meeting shall be drafted and shall contain a detailed summary with the discussions of the general assembly. The minutes and decisions of the assembly shall be noted in a separate register kept at the Company’s headquarters and made available to the partners themselves to a their representative who shall be entitled to examine the budget, profit and loss statement and the annual report.

Article (261)

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The company shall have one account auditor or more appointed by the general assembly every year. The provisions relevant to account auditors in the shareholding companies shall be applicable.

Article (262) Without prejudice to the rights of bona fide third parties, shall be deemed invalid, the decision made by the general assembly or any partners against the provisions of the present law or the texts of the Company’s incorporation document. Nevertheless, invalidation may only be claimed by the partners who objected to the decision or where unable to formulate their objection after being informed with the same.

their objection after being informed with the same. Title Nine Holding Companies Where the report is

Title Nine Holding Companies

Where the report is invalidated, the decision shall be deemed inexistent for all partners. The invalidation case shall not be heard after one year of the relevant decision. The filing

of

the case shall not suspend the decision unless the competent court orders otherwise.

Article (263) (10%) of the Company’s net profit shall be deducted on a yearly basis to constitute the statutory reserve. The partners may decide to stop the deduction where the reserve amounts to half the paid capital.

The statutory reserve may cover the Company’s losses or increase the capital thereof, upon the general assembly’s decision.

Article (264)

A

herein, except with regards to provisions that conflict with the one person capital. The company shall be run by the capital owner who shall appoint one manager or more, represent the company before third parties and the judiciary and be liable for managing the same before the owner. Where the company’s owner ill intentionally liquidates the same or stops the activities thereof prior to the expiry of its duration or before the fulfillment of its purposes, he/she shall be liable for the Company’s obligations to the extent of his/her private assets. The Company’s owner shall as well be liable to the extent of his/her private assets if he/she does not differentiate between his personal interests and the Company’s interests.

one person limited liability company shall undertake to comply with all the provisions

company shall undertake to comply with all the provisions Article (265) A holding company is a

Article (265)

A holding company is a shareholding company or a limited liability company that

provides the financial and administrative management of one company affiliated thereto

or more, by means of owning (51%) at least of the shares or contributions of that company or companies, be they shareholding or limited liability companies.

Article (266)

A

shareholding company may not own shares in any type of joint liability companies or

in

joint ventures. It shall not as well own shares or contributions in other shareholding

companies.

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Article (267) The capital of a holding company shall not be less than ten million Riyals.

Article (268) The purposes of a shareholding company shall be as follows:

1. Assisting with the management of the companies affiliated therewith or in which it owns shares;

2. Investing its funds in shares, bonds and securities;

3. Providing the support necessary to companies affiliated therewith;

4. Owning property rights in terms of patents, trademarks, industrial prototypes, franchise or other legal rights, using the same, or providing the lease thereof to the companies affiliated therewith or with other parties, be it locally or abroad.

therewith or with other parties, be it locally or abroad. 5. Owning the movables and real

5. Owning the movables and real estate necessary to starting its activity within the limits authorized by the law.

Article (269) The sentence “Holding Company” shall be added to all documents, ads, correspondences and papers issued by the Holding Company next to its corporate name.

Article (270) The Holding Company shall take all the measures necessary to ensure that companies affiliated therewith shall keep the necessary accounting records to enable the board members or the managers of the Holding Company to verify that the financial records and the profit and loss accounts are compliant with the provisions of the present Law. A Holding Company, shall, by the end of every fiscal year, prepare its compiled balance sheet, profit and loss statement, cash flow relevant to itself or to all the companies affiliated therewith and submit the same before the general assembly along with the clarifications, and data relevant thereto as required by the rules of accounting and the internationally recognized rules of auditing.

and the internationally recognized rules of auditing. Article (271) Without prejudice to the provisions of the

Article (271) Without prejudice to the provisions of the present Tile, the provisions applicable to shareholding or joint liability companies shall be applicable to Holding companies, depending on the case.

Title Ten Transformation, Merger and Partition

Chapter One Transformation

Article (272) A company’s type may be transformed subject to the terms and conditions of amending a Company’s Articles of Association or Statute and provided the terms of incorporation and publishing of the type the company wishes to transform to are fulfilled.

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The decision to transform shall be accompanied with a statement specifying the Company’s assets and liabilities as well as the approximate value of these assets and liabilities.

The company’s transformation shall be noted in the Commercial register. Where the company is transformed to a shareholding company, a period of two years must have elapsed since its registration in the commercial register. The Department may, when necessary and at any time, publish specific terms on the transformation of a specific type of company to another,

Article (273) A Company’s transformation does not entail the birth of a new legal person. The Company shall remain in possession of its rights and obligations prior to the transformation.

of its rights and obligations prior to the transformation. Article (274) The transformation does not entail

Article (274) The transformation does not entail a clearance to the joint partners from the obligations borne by the Company prior to its transformation, unless with the creditors’ consent. The consent is assumed valid when the creditors do not object to the transformation within a period of three months following the formal notification with the company’s decision to transform, as per the procedures established in the Minister’s decision.

Article (275) Where a company is transformed into a shareholding, an Equities Partnership Company or a Limited Liability Company, every partner shall be entitled to a number of shares that is equivalent to the value of its share after assessment thereof.

Where the partner’s share is inferior to the minimum amount of shares in the limited liability company, the partner shall be bound to completing the same.

company, the partner shall be bound to completing the same. Article (276) Partners or shareholders having

Article (276) Partners or shareholders having objected to the transformation decision shall submit a request to leave the Company.

Chapter Two

Merger

Article (277) Even in times of liquidation, a Company may merge with another company of a similar or different type.

Article (278) Merger shall be made by adding one or more companies to another existing company or by merging two companies or more within a company that is under construction. The merger contract shall specify the conditions thereto and shall specifically assess the financial assets of the merging company and the number of shares it owns in the capital of the company where the merger has taken place or arising from the merger. The merger shall only be valid upon the decision of every Company that is party thereto and as per the conditions that amend the Company’s Articles of Association or Statutes.

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The decision shall be made public by the established means in view of the amendments introduced to the Articles of Association of the merging company or the Statutes thereof.

Article (279) Merger by means of annexation shall abide by the procedures below:

1. A decision shall be made by the merging Company to dissolve the same;

2. The net assets of the merging Company shall be assessed as per the provisions that assess the in kind contributions established in the present law;

3. The Company with which the merger has taken place, shall publish a decision to increase its capital as per the assessment of the merging Company;

4. The capital increase shall be allotted to the partners in the merging company proportionately to their shares;

in the merging company proportionately to their shares; 5. Where the shares are represented by equities

5. Where the shares are represented by equities and two years have elapsed since the

incorporation of the company in which it has merged, these equities shall become tradable upon their issuing.

Article (280) Merger is made by means of mixing namely to have every merging company issue a decision on the dissolution thereof to have them establish a new company as per the conditions established in the present law. Every merging company shall be allotted a number of equities or shares equivalent to his capital share in the new company, equities shall be divided among the partners of every merging company proportionately to their share therein.

Article (281) The merger decision shall be issued in two local news papers published in Arabic and on the website of the companies if any.

Article (282) All the rights and obligations of the merging company shall be transferred to the Company where the merger has occurred or to the company arising from the merger upon the completion of the merging procedures and registration of the Company as per the provisions of the present law. The Company where the merger has occurred or arising from the merger shall be a legal successor of the merging companies and shall supplant the latter in rights and obligations.

and shall supplant the latter in rights and obligations. Chapter Three Partition Article (283) A Company

Chapter Three

Partition

Article (283) A Company may be partitioned into two companies or more, with the partitioned company ceasing to exist or remaining active. The terms and procedures relevant to the merger shall apply in terms of assessing the capital. Every company arising from the partition shall have an independent legal capacity that results in specific consequences. The decision to partition the Company shall determine the number of shareholders or partners, the names thereof and the shares allotted to each in the companies arising from the partition. The decision shall as well determine the rights and obligations of these companies as well as the repartition of assets and liabilities among them.

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Article (284) The companies arising from the partition may take any corporate legal form provided the legally required condition for every type is fulfilled.

Article (285) The partition shall be made by a decision of the extraordinary general assembly of the company or by the partners, depending on the circumstances, with the majority of the votes of the owners having 75% of the capital. The companies arising from the partition shall supplant the partitioned Company and act legally on its behalf, within the limits of the rights granted thereto by the partitioned company and in line with the provisions of the partition decision without prejudice to the rights of creditors.

Chapter 4 Acquisition
Chapter 4
Acquisition

Article (286) The shares of the companies arising from the partition may be tradable upon their issuing, provided the shares of the company subject to the partition are tradable when the decision to partition is made.

Article (287) Partners, shareholders or equity holders having objected to the partition decision may demand their withdrawal from the Company.

Article (288) A Company may acquire another company in the conditions below:

1.

Where the Company takes over, directly or indirectly, part of the capital that provides it with the majority of votes;

2. 3. 4.
2.
3.
4.

Where the Company controls the majority of votes as specified in an agreement made with other partners or shareholder without prejudice to the interests of the acquired Company or the purpose thereof;

Where the Company owns voting rights that enable it to exercise real control over the decisions of the general assembly in the acquired Company. In some cases, the ownership of (40%) of the shares or equities is similar to acquisition; Where the Company has voting rights that enable it to appoint or dismiss the

majority members of the board, the audit board or the managers, depending on the circumstances.

Article (289) An acquisition may be valid, when it fulfils the following:

1. The extraordinary general assembly of the both the acquired and acquiring companies issue a decision in approval of the acquisition, waiver the priority rights given to the shareholders, and the administration validates the decisions of both companies; Where the acquired company is a Limited Liability Company, all partners must consent to the acquisition;

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2. The acquired company shall make a decision to increase its capital, distribute the capital increase between the partners or shareholders proportionately to their shares in the Company, as per the Company’s Articles of Association and Statutes;

3. The procedures necessary to transfer the shares subject to the acquisition to the acquiring company shall be finalized. The ownership is only acknowledged after the shares are registered under the provisions of the present law;

4. The acquiring company, in the event of an acquisition by means of purchase, shall pay the acquired Company the value of the shares or equities, subject to the acquisition. The amount shall later on be put in a special account pending its distribution among the partners or shareholders who are listed in the books on the day the extraordinary general assembly approved to sell the shares or equities; Where an acquisition takes place by means of offering shares or bonds, the acquiring company shall offer the same to the acquired company who will distribute them among the partners or shareholders listed in the books on the day the extraordinary general assembly approved to sell the shares or equities;

general assembly approved to sell the shares or equities; Title Eleven Company’s Termination Chapter One Company

Title Eleven Company’s Termination

Chapter One Company Dissolution

5. The acquired company shall take the measures necessary to amend its Articles of Association and Statutes and elect a new board accordingly;

6. The acquired company shall take the measures necessary to protect the rights of the minority including making offers to buy the remaining shares or equities against no less than the value of the shares or equities subject to the acquisition or the amount specified by an expert appointed as per the provisions of Article (159) of the present Law.

Article (290) The decisions of the two extraordinary general assemblies in approval of the acquisition shall be made public in two local newspapers published in Arabic at the expense of the acquired company and on the website of the two companies if any.

company and on the website of the two companies if any. Article (291) The provisions of

Article (291) The provisions of the law regulating the Authority as well as the rules and provisions issued in implementation of the acquisition, shall apply to the companies on the financial market.

Article (292) Subject to the termination reasons of every type of companies established in the present Title, a Company may be dissolved for one of the reasons below:

1. The duration specified in the Company’s Articles of Association or Statutes has lapsed unless it has been renewed as per the rules applicable to each;

2. The purpose for which the Company was established has ended or was impossible to achieve;

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3. The shares have been transferred to a number or partners or shareholders who shall not be inferior to the legally required minimum unless the Company has within a period of six months after the transfer, transformed into a different type of companies or has increased the number of partners or shareholders to the minimum;

4. The Company’s funds have perished in whole or in part, which makes any useful investment of the remaining amounts impossible;

5. The partners unanimously agree on dissolving the Company prior to the termination thereof, unless the Company’s Articles of Association specify that it shall be dissolved pursuant to a specific majority;

6. The Company merges with another company;

majority; 6. The Company merges with another company; 7. A judgment is made to dissolve the

7. A judgment is made to dissolve the Company or declare the bankruptcy thereof.

Article (293) The court may decide to dissolve a Joint Liability Company, a Limited Partnership Company or a Joint Venture Company upon the request of one partner, provided it has

found serious grounds justifying the same. Any term that prohibits the partner from using this right shall be considered null. Where the reasons that justify the dissolution have resulted from the behavior of one partner, the Court may decide that he/she shall be excluded from the Company in which case the Company shall continue to exist among the other partners. The share of the partner who is excluded from the Company shall be estimated according

to

cash and may not be entitled to the Company’s future benefits, except to the extent where

the value thereof on the day the judgment was made. He/she shall obtain his share in

those benefits have resulted from operations made prior to his/her ouster. The court may decide as well to dissolve the Company upon the request of a member where a partner does not fulfill his/her requirements.

Article (294)

A

shall be terminated upon the death of one partner, the interdiction, bankruptcy, insolvency or withdrawal of the same. Nevertheless, the Company’s Articles of Association may stipulate that if one partner dies, the Company shall continue to exist with his/her heirs, even if they were minors. Where the partner’s withdrawal is ill-intentioned or inappropriately timed, he/she may be sentenced to continue his/her activity at the Company and to pay compensation when

his/her activity at the Company and to pay compensation when Joint Liability Company, a Limited Partnership

Joint Liability Company, a Limited Partnership Company or a Joint Venture Company

necessary.

Article (295) Where the Articles of Association at a Joint Liability Company, a Limited Partnership Company or a Joint Venture Company do not stipulate that it shall continue to exist after the death of one partner, the interdiction, bankruptcy, insolvency of the same, partners may within a period of sixty days as of one of the cases above decide unanimously among themselves that the Company shall continue to exist. This agreement shall only be

invoked as of its publication in the Commercial register for the Joint Liability or Limited Partnership Companies.

In the cases where the Company shall continue to exist among the remaining partners, the

share of the partner having left the Company shall be estimated according to the last

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inventory unless the Company’s Articles of Association specify otherwise. The partner or heirs thereof shall not be entitled to the Company’s future benefits except to the extent where those benefits have resulted from operations made prior to his/her ouster.

Article (296) Where the losses of the Company have attained half the capital, the board members shall ask the extraordinary general assembly to reconsider the Company’s continuum or to dissolve the same before the deadline specified in the Statute thereof. Where the board does not call the extraordinary general assembly to meet, or where a decision is found impossible in that matter, every stakeholder may request from the competent court to dissolve the Company.

request from the competent court to dissolve the Company. Article (297) Where the number of shareholders

Article (297) Where the number of shareholders in a shareholding company falls below the minimum required, the Company may be transformed into a Limited Liability Company where the remaining shareholders shall be liable for the Company’s debts within the limits of its assets. Where an entire year has elapsed since the number of shareholders has decreased below the minimum requirement, every stakeholder may request from the competent court to dissolve the Company.

Article (298)

A

the death, interdiction, bankruptcy, insolvency of the same unless the Articles of

limited liability Company shall not be dissolved upon the withdrawal of one member,

Association specify otherwise.

Article (299) Where the losses of a Joint Liability Company reach half the capital, the managers shall within thirty days offer the partners to cover the capital of dissolve the Company. The decision to dissolve the Company requires the majority necessary to amend the Articles

of

Where the managers neglect to call the partners, or the partners are unable to reach a decision, the managers or the partners, depending on the circumstances shall be jointly liable for the obligations borne by the Company as a result of their neglect.

Association.
Association.

Article (300) A Limited Partnership Company shall be dissolved upon the withdrawal of a joint partner, the death, interdiction, bankruptcy, or insolvency of the same, unless the Company’s Statutes specify otherwise. Where the Statutes do not stipulate on that matter, the extraordinary general assembly shall decide the continuum of the company and shall follow in that matter the procedures necessary to amend the Company’s Statutes.

Article (301) Where the withdrawal, death, interdiction, bankruptcy or insolvency include all joint partners in a Limited Partnership Company, the latter shall be dissolved unless the Statutes specify that it may be turned into a different type of companies.

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Article (302) The dissolution reasons applicable to a shareholding company shall apply to a Limited

Partnership Company, subject to the fact that if the dissolution is due to the transfer of the full ownership of shares to a specific partner who is a joint partner, he/she shall be liable

to the extent of his/her full assets for the Company’s debts.

Article (303)

A single person Limited Liability Company shall be terminated upon the death of its

capital owner unless the shares of the heirs compile in one person or the heirs decide the continuum of the Company under a different legal type within a period of no later than

six months after the death has occurred. The Company shall as well be terminated upon the termination of the legal person who owns its capital.

Chapter Two Liquidation
Chapter Two
Liquidation

Article (304) Except for the Joint Venture Companies, the decision to dissolve a Company shall be noted in the commercial register and made in two local daily newspapers published in Arabic. This decision shall be invoked against other as of the publication thereof. The Company’s directors and the chairman of the board shall depending on the circumstances follow up on the implementation of this procedure.

Article (305) Upon the Company’s dissolution, the liquidation process shall be initiated and the Company shall not lose during the liquidation process the legal personality necessary to conducting the same. In the mean time, the corporate name shall include the word (under liquidation) clearly written.

liquidators.
liquidators.

Article (306) The authority of the managers or the board shall end upon the liquidation of the Company. Nevertheless, they shall pursue the Company’s management and shall, with regards to other, act as liquidators pending the appointment of a liquidator. The Company’s bodies shall remain in place during the liquidation and the powers thereof shall be restricted to the procedures of liquidation that do not fall within the scope

of

Article (307) The Company’s liquidation shall be made subject to the provisions established in the Articles of Association or the Statutes thereof or whatever agreement concluded among the partners upon liquidation. Where no text or agreement is found, the provisions of the articles below shall be applicable.

Article (308) Liquidation shall be made by one liquidator or more appointed by the partners or the general assembly in presence of the simple majority required to take the Company’s decisions.

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Where the liquidation is based on a judgement, the competent court shall establish the method of liquidation and appoint the liquidator. In all cases, the job of a liquidator shall not end with the death of the partners, bankruptcy, insolvency or interdiction of the same, though he/she might be appointed by such partners. The liquidator shall be entitled to a fee established in the appointment document or by the competent court.

Article (309) The liquidator shall publish the appointment decision as well as the restrictions imposed on his/her authority as well as the partners’ agreement or general assembly’s decision regarding the liquidation method or the judgement issued on that matter by means of publication necessary to amend the Company’s Articles of Association or Statutes. The appointment of the liquidator or the liquidation method shall only be invoked against third parties as of the date of publication.

invoked against third parties as of the date of publication. Article (310) Where several liquidators are

Article (310) Where several liquidators are found, they shall work collectively unless the appointment authority requires that they work separately. They shall be jointly liable to compensate the Company, partners and third party for the damage incurred as a result of power abuse or of the mistakes they committed in the course of their duties.

Article (311) The liquidator shall undertake all the tasks necessitated by the liquidation namely:

1. Collecting the Company’s dues with third parties;

2. Collecting the Company’s debts;

3. Selling the Company’s movable or unmovable property by auction or by another mean that guarantees the highest price, unless the liquidator’s appointment document does not specify a certain method; Everything that is necessary to preserve the Company’s funds and rights;

4. 5.
4.
5.

Representing the Company before the judiciary and accepting reconcilement and arbitration.

Article (312) The liquidator shall not start a new operation unless required to pursue the former operation. Where he/she undertakes new operations that are not required by the liquidation, he/she shall be liable to the extent of his/her private assets for these operations. Where several liquidators are found, they shall be held jointly liable.

Article (313) The maturity date of all debts incumbent upon the Company shall be due upon the Company’s dissolution. The liquidator shall submit to all creditors certified letters with the opening of the liquidation and shall call upon them to submit their requests. The notification may be made by publication in two local newspapers published in Arabic where the creditors are unknown or their places of residency are unknown. In all cases, the notification shall provide the creditors with no less than seventy five days to submit their requests, provided the notification by publishing is renewed within one month. If

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the creditors do not submit their requests, their debts shall be kept at the treasury of the competent court until the owners show up or the statute of limitations is applicable.

Article (314) The liquidator shall reimburse the Company’s debts after deducting the liquidation fees including the fees of the liquidator as per the order below:

1. The amounts due to the Company’s personnel;

2. The amounts due to the State;

3. The rental fees due to the owner of any rented real estate;

4. The other amounts that are due as per the order of preference established in the applicable laws.

the order of preference established in the applicable laws. Article (315) The liquidator shall, upon payment

Article (315) The liquidator shall, upon payment of the Company’s debts, exclude the amounts of the disputed debts. The debts arising from liquidation shall have precedence over other debts.

Article (316) The Company shall abide by the actions undertaken by the liquidator as required by the liquidation operation, as far as they fall within the scope of his/her authority. He/she shall not be held liable for initiating any of the mentioned operations.

Article (317) The liquidator shall, within three months of initiating the process, prepare jointly with the Company’s auditor, if any, an inventory of the Company’s assets and liabilities. The managers or board members shall submit to the liquidator the Company’s books, documents, clarification and necessary data. The liquidator shall provide partners with the necessary clarification or data on the liquidation. Where the liquidation exceeds one year, the liquidator shall prepare a balance sheet, profit and loss statement as well as a report on the liquidation process. The documents shall be submitted to the partners, the general assembly or the competent court, depending on the circumstances, who shall grant their approval subject to the Company’s Articles of Association or Statutes. In all cases, the period of liquidation shall not exceed three years except with a decision of the competent court or the minister.

with a decision of the competent court or the minister. Article (318) The liquidator shall, after

Article (318) The liquidator shall, after reimbursement of the Company’s debts, return to the partners the value of their capital share and distribute the surplus upon them proportionately to the profit share of each. The Company’s in kind contributions shall be divided among the partners on the basis of the plotting. The rules established in dividing common property shall apply unless otherwise specified in the Company’s Articles of Association.

Article (319) Where the Company’s net funds are insufficient to pay the shares of the partners in full, the loss shall be divided among them proportionately to the percentage set for distributing losses.

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Article (320) Upon the completion of the liquidation, the liquidator shall produce a closing account and submit the same to the partners, general assembly or competent court. The liquidation shall only be deemed finished when the parties above validate the closing account. The liquidator shall publish the end of the liquidation and such may only be invoked against third parties on the date of the publishing. The liquidator, after the completion of the liquidation, shall require the Company’s cross off from the commercial register.

Article (321) A liquidator’s dismissal shall be made similar to his/her appointment. Any decision or judgment to dismiss the liquidator shall include the appointment of a new liquidator. The dismissal of the liquidator shall be published and may only be invoked against third parties upon its publication.

Title Twelve Monitoring
Title Twelve
Monitoring

Article (322) A case filed against the liquidator because of the liquidation process shall not be heard when three years have elapsed since the publishing of the liquidation. The case may not be filed upon expiry of the specified period against partners because of the company’s activities or against managers, board members or auditors because of the tasks entrusted thereto.

Article (323) The Ministry shall be entrusted with monitoring public and private shareholding companies, joint ventures and limited liability companies to verify that they have implemented the provisions of the present Law, the decisions in implementation thereof and the statute of each.

1- 2- 3- 4-
1-
2-
3-
4-

Article (324) Where one of the companies above breaches the provisions of the present Law or the decision in implementation thereof, the Department shall be authorized to take the measures below in total or in part:

Give instructions on the necessary correction measures; Warning; Blame; Prohibit anyone from acting as a board member or a manager in any of the companies;

5-

Impose a fine of no more than (10.000) Riyals for every day of continued contravention;

6-

Impose a fine of no more than (1.000.000) one million Riyals.

The Department shall inform the breaching Company with the decision to inflict a penalty and shall be authorized to publish the decision by any means it finds appropriate. The Department may reconcile with the breaching Company as per the rules and regulations specified in the Minister’s decision.

Article (325)

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The Department’s employees, acting as legal officers upon the decision of the Public Attorney, in agreement with the Minister shall unmask and prove any breach of the present law or the decision enforcing the same.

Article (326) Where any of the crimes specified in the present law is committed, the officers specified above shall issue a memorandum as per the prototype issued by the Minister. A copy of the memorandum shall be handed to the competent police department to do the necessary as per the law.

Article (327) The authorized personnel at the Department acting as judicial officer under the provisions of Article (325) of the present law, shall have the right to inspect the companies established in Article (33) of the present law and to examine the registers thereof. They shall, for these purposes, inspect the books, records, ledgers and other documents and examine the same at the Company’s headquarters or elsewhere. The board members, account auditors, managers and personnel shall provide them with the required data, documents and copies. The report on the supervision and inspection procedures established above shall be submitted to the Minister who shall take the necessary measures.

to the Minister who shall take the necessary measures. Article (328) The Minister shall designate the

Article (328) The Minister shall designate the employees, who are authorized judicial officers, to attend the meetings of the General Assemblies of the companies without holding the government liable against the Company’s shareholders or stakeholders. The parties assigned with drafting the minutes of the general assembly shall certify the presence of the designated ministry personnel who shall not have the right to give an opinion or to vote. Their only task will be to note the details of the meeting in a separate record drafted after the meeting.

or to vote. Their only task will be to note the details of the meeting in

Article (329) Every shareholder and partner in the companies registered under the provisions of the present law shall examine the published information and data and especially those that are kept at the Department, obtain certified copies and receive, upon the request of the competent court, a certified copy of any unpublished data against a fee specified in the relevant laws.

Article (330) The shareholders or partners having 20% of the capital in a shareholding, limited liability company or Limited Partnership Company shall ask the Minister to issue an order of inspection to verify the serious violations against the board of directors and auditors with respect to the duties entrusted thereto by the law and the Company’s Statues, whenever grounds are found to outweigh these violations. The request should include conclusive evidence showing that the petitioners have serious reasons to justify such procedure. The partners who submit the request should also deposit the shares they own, which will remain deposited until a decision is reached. The Minister will submit the request to the Department who shall hear the deposition of inspection requestors, board of directors, auditors and those it deems necessary. The

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Department will at a later stage prepare a report about the result of its activity including its opinion and shall submit the same to the Minister.

Article (331) The Minister having examined the report established in Article above, shall appoint the auditors, at the expense of the petitioners, among the auditors in the auditor’s register to inspect the Company’s activities and books. The board members and Company personnel shall provide the auditor assigned with the inspection, with the Company’s books, documents and registers they keep or are entitled to obtain. The authorized inspector shall submit a detailed report about his/her activity to the Minister within the deadline specified in the appointment decision.

Title Thirteen Sanctions
Title Thirteen
Sanctions

Article (332) Where the Minister finds that the accusations made by the petitioners against the board members or auditors are incorrect, he /she may order that the report is published in part or in full in two local daily newspapers published in Arabic, the publication fees shall be borne by the petitioners without prejudice to their liability to compensate, if necessary. Where the Minister finds the violations imputed to the board members or auditors valid, he/she shall order that the necessary procedures are taken and a general assembly is convoked immediately, in which case the sessions shall be chaired by a delegate from the Department chosen by the Minister.

Article (333) The general assembly may decide to dismiss the board members or auditors and to file a liability case against them. The decision shall be valid when approved by the shareholders and partners who own half the Company’s capital excluding the shares of the board member subject to dismissal. Dismissed members may not be re-elected to the board until five years have elapsed since the dismissal decision is made.

years have elapsed since the dismissal decision is made. Article (334) Without prejudice to the right

Article (334) Without prejudice to the right to claim compensation when necessary, any operation, transaction or decision contrary to the provisions of the present law, without prejudice to the rights of bona fide third parties, shall be considered invalid. Where the invalidation reason may be imputed to many persons, they shall be held jointly liable for compensation. The invalidation case brought one year after the stakeholders are informed with the violation, shall not be accepted.

Article (335) Without prejudice to any severe sanction specified in another law, shall be sentenced to imprisonment for not more than two years and shall not be fined more than one million Riyals or to any of the two sentences:

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1. Whoever has deliberately included in the bulletins that issue shares, bonds or

securities data that is false or contrary to the provisions of the law, and whoever signs these bulletins while knowing that they constitute a breach to the law;

2. Every incorporator in a limited liability contract who knowingly guarantees false pretenses related to the distribution of the share capital among the shareholders or the payment of the full amount thereof;

3. Whoever overstates the value of in kind contributions by means of fraud or deceit;

4. Every incorporator or manager having sent an open invitation to subscribe in the Company’s securities, of whatever type, for the account of a company other than

a shareholding or a limited partnership company, and whoever submits these

securities to subscription for the account of the company; 5. Whoever has declared or distributed,
securities to subscription for the account of the company;
5. Whoever has declared or distributed, with bad faith, profits, interests or returns
contrarily to the provisions of this Law or the company’s Statutes and any account
auditor having ratified the same with bad faith.
6. Every accounts controller and whoever works in his office, who deliberately made
false reports about the result of his verification, or has willfully concealed any
substantial facts or ignored the same deliberately in the reports submitted to the
general assembly in accordance with the provisions of this law or speculated over
the shares of the company subject to his auditing or disclosed any secrets related
to
the Company.
7. Every board member, manager or liquidator who was deliberately involved in the
preparation of a balance sheet, financial status or data that is not conform to
reality with the intent of concealing the Company’s real financial situation, or has
deliberately concealed fundamental facts with the intent of concealing its financial
statue or has ill intentionally used the Company’s funds or shares in pursuance of
personal benefits for himself or for third parties by direct or indirect means;
8. Every liquidator who deliberately caused damages for the company, the partners
or
creditors thereof.
9.
10.
11.
Every public servant who disclosed a secret related to his/her job or established
deliberately in the reports any incorrect facts or willfully ignored facts that affect
the outcome.
All those who committed fraud in the Company’s books, established incorrect
facts therein or prepared a report to the general assembly including wrong or
incorrect information with the purpose of influencing the assembly’s decisions.
Every chairman, broad member or employee having disclosed a Company secret
or deliberately caused damage to its activities or had a direct or indirect interest
with any party that carries out operations intended to change the prices of the
securities issued by the company.

Article (336) Without prejudice to any other severe sentence provided by another law, a fine of no more than fifty thousand Riyals shall be inflicted upon:

1. Whoever deals with the Company’s shares or equities against the provisions of the present Law; 2. Whoever accepts the appointment in the board of a Shareholding Company or as a designated member for the management thereof or continues to enjoy the membership or accepts the position of an auditor in spite of the ban provisions established in the present

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law and every designated member in a company that commits one of the violations above, where this violation is committed knowledgeably;

3. Every board member having failed to offer the shares that serve as a guarantee for

his/her management as established in the Company’s Statutes within a period of sixty days as of receiving the appointment decision. Whoever fails to submit the documents,

he/she is bound to submit, provides false information or purportedly disregards one of the report material, as well as every board that establishes incorrect data in the company’s report and deliberately refrains from producing the same;

4. Whoever deliberately prohibits management personnel, the auditor a board member or

a liquidator from inspecting the Company’s books and documents that they are made

available by the law, and whoever shall refrain from producing the required information, data and clarification;

5.

withholds the meeting thereof.

6.

the provisions of this law, and whoever accepted to provide the credit or guarantee.

and whoever accepted to provide the credit or guarantee. Every board member who purportedly delays the

Every board member who purportedly delays the invitation of the general assembly or

Every board member having obtained a loan or guarantee from the company against

Article (337) In the event of a subsequent offence, or where the offender refrains from removing the violation subject to a condemnation ruling, the sentences established in the articles above shall be doubled.

Article (338) Any decision made by the general assembly shall not result in the invalidation of the public action brought against the board members for mistakes committed in the course of their duties.

Where the action is brought before the general assembly by means of a report made by the board or the auditor, the case shall fall within the statute of limitations five years after the general assembly validates the board’s report. Nevertheless, where the board members are accused of committing a crime or a misdemeanor, the case shall only be terminated when the public action is terminated.

accused of committing a crime or a misdemeanor, the case shall only be terminated when the

The Department and every shareholder shall be authorized to file this case. Any statutory clause that provides for a waiver or requires that the filing of the case is conditional upon obtaining the general assembly’s authorization or taking any other measure shall be null and void.

Article (339) Except for joint venture companies, the right of creditors to file the cases that arise from the Company’s activities shall be subject to the statute of limitations after five years. In the case of liquidators, the period shall start as of the end of the liquidation.

Article (340) In all trade companies, the case brought by creditors against a Company shall fall within the statute of limitation after five years of the company’s incorporation or the withdrawal of one partner in the event of cases brought against the partner.

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The statute of limitations hall run as of the date of registration in the commercial register in whichever case registration shall be compulsory, and as of the date of liquidation in the cases arising from the liquidation itself.

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