Sustainable Horizons: The Saudi Arabian Vision

We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.

For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.

There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.

Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.

Read the full edition

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May 2012
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Qatar Court of Cassation Judgment- liability of managers in a Qatari limited liability company

Qatar Court of Cassation Judgment- liability of managers in a Qatari limited liability company

Ahmed El Amoury - Senior Associate - Litigation / Employment and Incentives / Legislative Drafting / Insurance

a.amoury@tamimi.com

Doha

Background

The Claimant entered into a murabaha agreement with a limited liability company (LLC). A dispute arose from the said agreement and the Claimant commenced court proceedings against the LLC and its manager alleging that the LLC conducted illegal activities. The Claimant sought an order from the Court requesting that the LLC and the manager jointly and severally repay the Claimant’s monies.

The Court of First Instance and, on appeal, the Court of Appeal held in favour of the Claimant and ordered the LLC and the manager jointly to repay the Claimant’s monies. The manager and the LLC filed a further appeal with the Court of Cassation arguing that a manager cannot be liable for the contractual obligations of a company.

The Court of Cassation decision:

The Court of Cassation disallowed the appeal and decided the following:

The provisions of the Articles 226 and 240 of Commercial Companies Law (Numbered 5 of 2002) stipulate that a manager of a limited liability company shall have full authority and power to manage and bind the company insofar as the company’s constitution does not limit his power.
A manager shall not be personally liable for any obligations resulting from the management of the company, with the exception of what is required for the protection of third parties dealing with a limited liability company. The law provides that the name of the company should be accompanied by the words “company with limited liability” in all the company’s letters, correspondence and contracts. If the managers fail to abide by this requirement, they will be held personally and jointly liable for the liabilities of the company.
Both judgments of the Court of First Instance and the Court of Appeal found that the LLC had entered into a murabaha agreement and the manager had not added the phrase “with limited liability” to the company name, the Court of Cassation concluded that the appellants were jointly and personally liable for the obligations of the company based on the aforesaid provisions of the Commercial Companies Law.

Comment on the judgment

Notwithstanding that it may be a simple task to ascertain whether or not an entity is a company with limited liability, the failure of managers of such company to make it clear to all persons that the company they are dealing with is a limited liability can shift liability to such managers personally.