As Qatar seeks to grow and diversify its economy through innovation, it must accept that risk is unavoidable, and with risk, it is possible that a business or individual may face economic failure.
In this context, a possible reform of the country’s bankruptcy law is a way to help balance risk and reward, promoting a culture of sustainable investment regime. The way I see this reform unfolding is to first have a single bankruptcy code in Qatar. Second, some new provisions to protect both creditors and debtors should be added.
Currently, most bankruptcy provisions are found in the Commerce Act 2006, with liquidation provisions in the Commerce Act 2015 and the Civil Code 2004 containing provisions on the effects of bankruptcy. This situation is confusing and not aligned with the practices of various jurisdictions, such as in the United States.
The introduction of a single bankruptcy code would help to ensure that provisions are simplified and easily accessible
But my proposal goes beyond simple changes to the current form. At its heart is this premise: Qatar’s bankruptcy law should provide greater, but measured, protection to debtors.
Under current law, companies in financial difficulty can create a new plan and schedule to fully repay their creditors, or file for liquidation and wind down their business. I think debtors should have a third option, like reorganization, where they have a fresh start and can repay creditors less than the full amount.
This approach, adopted by many countries, would breathe new life into the economic activities of distressed debtors and therefore encourage entrepreneurship and the creation of new businesses, the ultimate result being to support diversification and growth. of Qatar’s economy.
Clearly, any reform to protect debtors would require rules to prevent fraudulent bankruptcy filings, as financially sound companies should not be able to use bankruptcy law to “game the system”.
There would be rigorous and extensive judicial review of the attribution of debtor assets to creditors. Such monitoring would imply increased resources for the courts to ensure that creditors and debtors are treated on an equal footing.
Yes, there would be an increased workload for the courts, but that would not be a problem as Qatar has recently set up an investment and commercial court, and the mandate of this court covers bankruptcy cases. My third concern with the current situation lies in Section 626 of the Commerce Act 2006, under which persons declared bankrupt cannot be “voters or members of the Shura Council, Central Municipal Council or Qatar Chamber of Commerce”. and industry of Qatar or associations, nor can he be a director or a member of the board of directors or a director of any company.
It’s a harsh approach that stigmatizes debtors, effectively pushing them to the point where they lose all of their personal assets to pay off their debts. The depersonalization of bankruptcy should be a priority — it is an economic process, not an individual one.
Finally, Qatar should follow the Qatar Financial Center (QFC) in adopting aspects of a model law on cross-border insolvency widely recognized, though not widely adopted, by the United Nations Commission on International Trade Law (UNCITRAL). This step would help attract foreign investment to Qatar and support local companies that have overseas assets. If adopted, a particular benefit would be that courts in Qatar would coordinate with other courts to ensure fairness for all parties to a dispute.
To ensure that these proposed reforms protect creditors as well as debtors, certain measures can be introduced, such as limiting the number of times a debtor can file for bankruptcy and strict judicial control of the process.
Ultimately, I believe these revisions to Qatar’s bankruptcy law would build confidence in the Qatari business climate and help increase economic activity in Qatar.
Maryam Al Thani is a recent Juris Doctor (JD) graduate from Hamad Bin Khalifa University Faculty of Law.