Each year, thousands of companies shut down their operations for a wide variety of reasons. Closing a business can require just as much work, or more, than establishing a new one. For companies located in Qatar, there is a specific process that must be followed.

This article defines the two types of company liquidation: voluntary and compulsory, details the circumstances under which a company may liquidate and goes through the steps required for company liquidation in Qatar.

What is Company Liquidation?

Liquidation is the process of closing a company or business. In most cases, liquidation involves ending operations of the entire entity. However, companies can also liquidate a part of their business, such as an unprofitable division. The liquidation process entails shutting down operations, selling off assets, settling outstanding debts, and distributing the remaining funds to company owners or shareholders.

There are two main types of liquidation — voluntary and compulsory.

• Voluntary liquidation
  This occurs when the board of directors or shareholders of a company decide to close the business by choice and in an orderly manner. The key distinction between this and compulsory liquidation is that with voluntary liquidation the company dissolution has not been imposed by a court.
  
• Compulsory liquidation
  Compulsory liquidation, also known as ‘creditors liquidation’, arises when a company is forced to close by order of the Qatari courts or a government agency due to the inability to pay its debts and fulfil its contractual obligations.

Why are companies liquidated

There are many reasons why a company might liquidate its assets. The most common include:

• Insolvency - This happens when the company becomes unable to pay its debts when they are due. In cases of insolvency, liquidation could be voluntary or compulsory.
• Changes in Market Conditions - Challenges such as new competitors, outdated technology, and tightened regulations could hinder the company’s ability to perform well in the market. The owners may then choose to close the company before it is adversely affected.
• Tax Benefits - In some situations, shutting down a business permanently or temporarily and allowing the company to reorganise could deliver some tax relief. Compulsory liquidation may also be imposed if the company is unable to pay its outstanding tax liabilities.
• Lack of Desire or Interest - Shareholders of the company could decide to stop operating the business for personal reasons or lack of interest. This often happens when a business owner passes away and passes the company along to their children. The children may choose not to continue running the business and cash out their newly inherited assets.
• Illegal Businesses - A business entity that is deemed illegal, such as not having the appropriate trade licence, by the courts or another government agency could face compulsory liquidation if the issue cannot be remedied.

What is the Process of Liquidating a Company in Qatar?

Company liquidations in Qatar are overseen by the Ministry of Commerce and Industry (MOCI). Companies looking to close or liquidate their businesses need to request approval from the MOCI, provide the appropriate documentation, and notify the public. This process can be complex, so it is important to carefully follow all instructions from the MOCI.

• Step 1: Assign a Liquidator - The first step of the process is for the company to assign a liquidator. The liquidator is the person, or entity, that will be responsible for overseeing the liquidation process.
• Step 2: Apply for registration of the liquidation through the MOCI - Next, an application must be submitted to the MOCI. Complete the application by providing the company’s information and pay the application fee.
• Step 3: Attach the Necessary Documents - The liquidation application will require the attachment of the following documents:
  • Trade licences and other company registration documents.
  • Written approval from all owners or partners. For joint-stock companies, a letter from the Chairman of the Board or Managing Director will suffice.
  • Approval letters or written requests from any government agencies, if applicable.
  • Personal identification documents for the owners and the applicant.
  • Letter from the liquidator accepting responsibility for the liquidation and their QID (Qatar Identification Document).
• Step 4: Notify the Public and Creditors - The company will be required to place an advertisement in at least two local newspapers (must be written in Arabic) announcing the liquidation and asking any creditors to come forward.
• Step 5: Closing the business – The liquidator shall, within three (3) months from commencing his work, together with the auditor of the company, if any, prepare an inventory for all the assets and liabilities of the company. Further, the company will be involved in collection and satisfaction of debts, sale of the firm’s assets and property, preservation of the company’s funds and rights, termination of existing agreements (if any), representation of the business before the courts and arbitral tribunals and settling claims.
• Step 6: Release all Workers - The company must pay and release all local and foreign workers who are there under sponsorship. Those foreign employees will have 30 days to exit Qatar or transfer their sponsorship to another company.
• Step 7: Distribution of profits (if any) - The liquidator shall, after paying the debts of the company, repay to the partners their cash shares of the capital, and distribute the excess amount according to their share in the profits.
• Step 8: Close Company Bank Accounts and final approval on the company’s accounts - All business bank accounts will need to be officially closed. Once complete, an auditor can prepare final financial documents. The final statement of account of the business needs to be approved by the shareholders.
• Step 9: Application for striking off - The liquidator makes an application to the proper authorities to cancel the licenses, obtain clearance letters, and finally to strike off the company from the Commercial Register.

How can PRO Partner Group help?

Liquidating a company in Qatar can be a challenge, especially if you have never liquidated or closed a business before. Failure to follow the appropriate procedures or proceeding without the proper government approvals can delay the process, incur additional costs, or result in legal action or fines.

PRO Partner Group has an experienced team with direct contact to the relevant government agencies. We can provide valuable insight and guidance throughout the liquidation process to ensure that your company is closed correctly and in compliance with Qatar laws and company regulations.

If you need guidance with company liquidation in Qatar or any other related company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or KSA then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at info@propartnergroup.com or complete the contact form below and we will be delighted to assist you.