QUESTION: I am the CEO of a company in Doha and also the authorised signatory in its commercial registration (CR) and in bank dealings. In my capacity as the signatory, I have issued a number of post-dated cheques to project accounts. While entering into construction agreements, we issue a security cheque for 10% of the contract price in favour of the employer as a “performance bond”. What is my risk if the cheque bounces? I am not the owner/shareholder of the company.
KT, Doha
ANSWER: As per Article 357 of the Qatar Penal Code, whoever draws in bad faith a cheque without sufficient funds or who, after giving the cheque withdraws all or part of the funds, so that the remaining balance is insufficient to cover the amount of the cheque, or gives an order to the drawee to stop payment, or deliberately writes or signs the cheque in such a manner as to make it dishonour shall be sentenced to imprisonment or fine or both.
Accordingly, whoever, irrespective personal or representing company, issue/sign a cheque without sufficient balance shall be punished. When cheques are issued on behalf of the company, the case shall be filed against the signatory of the cheque and also against authorised signatory.
By an order of the prosecutor, the signatory shall be prevented from travelling and the case shall be referred to the competent court. There is no legal provision favouring the signatory (though signed the cheque representing the company) to claim discharge from criminal charges.
Moreover, under Article 605 of the Commercial Laws, the public prosecution shall publish the names of convicted persons in the official gazette, stating their professions, places and sentences in the event of conviction in one of the crimes of the cheque provided for in the Penal Code.
However, the criminal case shall terminate if payment is made or assignment is established after commission of the offence and before a final ruling is made in respect thereof. If this occurs after the ruling became final, its enforcement will be seized.
Contract binding
Q: I have signed a contract with my employer which is automatically renewed every two years. The first contract was made when I joined the company in 2011. So, after 2011 my contract got renewed in 2013 end and now it is due to be renewed in 2015. The contract says my yearly air ticket to my home country shall be provided by the employer. But the management now states that the contract will be corrected with immediate effect and from now on, yearly tickets shall not be issued. Is this legal? As I understand, any modifications to the existing contract can be made only at the time of its renewal.
VC, Doha
A: Employment contract executed between the employer and the employee defines and regulates relations between them. The contract executed will be binding on both parties. Any change to the employment contract by the employer itself is arbitrary and hence not legal. Accordingly, you will be eligible to receive the yearly ticket allowance unless until you agree to revise the terms of engagement.
Clause on condition
Q: What’s the legal validity of back-to-back contract in Qatar? In a draft contract prepared by the contractor it is stated that “contractor shall pay the sub-contractor as soon as contractor is paid by the owner”. Our work is an independent job. How will it be legally possible? Who will be responsible for our work if we leave it?
HT, Doha
A: Article l54 of the Qatari Civil Code provides that the contract may contain any condition acceptable to the parties unless it is legally prohibited or inconsistent with public order or morals.
Therefore the clause in the contract, that receipt of payment by the contractor from the owner for the sub-contract work is a condition precedent to release payment by the contractor to the sub-contractor. It creates a condition precedent to the main contractor’s obligation to pay, shifting the entire risk of the employer’s non-payment to the sub-contractor.
Regarding responsibility of the work, the main contractor shall remain responsible for the work of the sub-contractors before the employer.
Capital problem
Q: Is it mandatory that the capital of an LLC in Qatar to be stated in the Articles of Association, being LLC is a partnership and not a company in its wider meaning?
ST, Doha
A: A company’s capital should be stated in the Memorandum and Articles of Association. As per Article 16 of the Commercial Companies Law, all contracts, correspondence, receipts, notices and other papers issued by the company shall bear its name, statement of its kind, principal place of business and its commercial registration number.
The words “limited liability company”/“with limited liability” to be written followed by the name of the company in a distinct and legible manner. In brief the capital of the company shall be stated on all its contracts, invoices, advertisements, letter-headed paper and publications, failing which the manager(s) of the company shall be jointly liable to the full extent of their private assets towards third parties dealing in good faith with the company.
♦
LEGAL SYSTEM IN QATAR
According to Article 1074, a receipt or an assignment of rent in advance for a period not exceeding three years is not valid against a mortgagee unless it has a specific date prior to placing attachment entry over the property’s registration. If the payment or assignment of rent is made for a period exceeding years, it will not be valid against a mortgagee unless it is registered in the land registry before registration of the mortgage. In default of such registration, the period will be reduced to three years.
In general, a mortgagor is the guarantor of the effectiveness of the mortgage. The mortgagee may oppose any act or mission that appreciably diminishes his security, and, in case of emergency, take all necessary preservative measures and claim from the mortgagor the expenses incurred in this respect.
If the mortgaged property perishes or deteriorates by the fault of the mortgagor, the mortgagee may either claim adequate security or immediate payment of the debt. But when the loss or deterioration is not imputable to the mortgagor and the mortgagee does not agree to leave his claim without security, the debtor may either furnish adequate security or pay the debt in full before it falls due.
In all cases, if acts are done which may result in the damage of or deterioration to the mortgaged property or which may render the mortgaged property insufficient to secure the debt, the mortgagee may apply to the court to order the cessation of such acts and the adoption of the necessary measures to avoid the occurrence of the damage.
In the event of damage of or deterioration to the mortgaged property for any reason whatsoever, the mortgage is transferred in its order of rank to any right obtained as a result of such loss or deterioration, such as compensation, monies paid on account of insurance or payments on account of expropriation for public utility.
The mortgagee may recover his debt from the mortgaged property according to the prescribed procedures. If the mortgagor is a person other than the debtor, only the mortgaged property, to the exclusion of his other property, may be executed against and the mortgagor.
He shall have no right to demand expropriation unless there is an agreement to the contrary. Such mortgagor may avoid any proceedings against him by abandoning the mortgaged property according to the procedure and the rules laid down for the abandonment of an immovable by a third party possessor.
