The Director Duty of Care in Qatar

Abstract

In this age of globalization, cross-border investment and intense competition for capital, comparative corporate governance is an increasingly important topic. This Article examines and analyzes the duty of care for directors of publicly-traded companies, comparing Qatari law with Delaware law. It finds that Qatari law on the duty of care is deficient in several respects. Under current Qatari law, directors are liable for duty of care violations for “mistaken” business decisions. Neither gross negligence nor something more than mere negligence is required. Moreover, Qatari law makes these duties non-exculpatory. Thus, in comparison with Delaware, Qatari director obligations are riskier to directors in terms of personal liability and may discourage the most qualified people from becoming directors. Qatar would greatly benefit from modifications to its duty of care law. Specifically, Qatar should enact a business judgment rule (“BJR”) which is vital to creating a balanced risk-taking environment. Qatar’s Companies Law should be amended to include the BJR and should articulate the misconduct necessary to rebut the BJR. The threshold of such conduct should be gross negligence or a business decision for which there is no rational basis. Mere mistake or negligence alone should not be sufficient to impose liability. In addition, Qatar should consider allowing shareholders to approve exculpatory clauses which would insulate directors from liability for duty of care violations based upon conduct where there is no bad faith, self-interest or disloyalty. Doing so would encourage companies to hire the most qualified directors and would encourage the prudent risk-taking that is the hallmark of the world’s most successful corporations.

Keywords: Qatar, Director, Duty, Corporate Law, Company Law, Shareholder, Rights

JEL Classification: K2