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New QFC Corporate Form: LLC(G)

Published: Monday, November 30, 2015

Quick QFC Brief:

The Qatar Financial Center economic zone (most refer to it as a free-zone, but taxes do apply there) permits a range of business activities that may be conducted within it and through it. Albeit those activities are not the subject of this article, for those who are interested, they are located in Schedule 3 of the QFC Law.

Permitted activities are further dissected into regulated and non-regulated activities. The former includes banking, insurance, securities, and so forth. While the latter includes audit, accounting, tax, consulting and legal services and the like.

Usually, entities looking to set up a QFC based company to conduct of any permitted activities in or from the QFC do so through the establishment of a legal presence in the QFC either by way of incorporating a limited liability company (an LLC) or branch. Of course, there are other options such as single family offices, or limited liability partnerships and the list goes on.

The Headline - LLC(G)

On April 05, 2015, the QFC introduced another applicable form of establishment: an LLC by guarantee or otherwise referred to as an LLC(G). In brief, this is the same form as an LLC except that it cannot be formed with a share capital. Notably, most of the provisions that apply to an LLC, from processing fees to mandates on Directors, apply in the same manner to an LLC(G).

Unlike the LLC which has separate legal personality from its shareholders whose liability is limited to paying to the LLC the amount, if any, unpaid on the shares held by them; the LLC(G) limits the liabilities of its founders to the amounts the founders undertake to contribute to the assets of the LLC(G) in the event of its being wound up.

The fact that an LLC(G) cannot have a share capital limits its capital raising capacity, simply because it cannot issue shares to those who back it and join it.

A way around this is that companies could impose subscriptions and/or a joining fees for new owning members.

As there are no shareholders, it is not possible to own an LLC(G) in the way that a company with a share capital is owned by its shareholders. The members of the guarantee company control it, in the same way as shareholders control a share company, but they do not have any shares or other security in the company that they can sell to another.

Generally, companies limited by guarantee are widely used for charities, community projects, clubs, societies and other similar bodies. Most guarantee companies are not-for-profit companies which entails that they do not distribute their profits to their members but either retain them within the company or use them for some other purpose.

The questions as to whether the QFC intends for this corporate form to be used for non-profit purposes strictly, or is it also an optional form for profit making investors.



Sultan M. Al-Abdulla
Sultan Al-Abdulla & Partners
Country:
Qatar
Practice Area:
Full Service
Website:
Phone Number:
+974 44 42 0660
Fax:
+974 44 42 0663
Mr. Sultan Al-Abdulla is the founder of Sultan Al Abdulla & Partners (SAP). As part of his practice, he provides legal services to a wide range of corporate and institutional clients. Prior to establishing his practice in 1999, Mr. Al-Abdulla worked for Qatar Petroleum (QP) for 22 years. During the last three years of his career with QP, he served as Managing Counsel and in this capacity represented the government of the State of Qatar and QP and its subsidiaries in major transactions as lead negotiator. Mr. Al Abdulla in his private practice, has counseled, and negotiated on behalf of, local and multinational clients, major business transactions and projects. As a litigator, he represents clients before all tiers of courts in Qatar up to the Court of Cassation. He is a member of the International Bar Association and the Association of International Petroleum Negotiators and Inter Pacific Bar Association

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