Limitation periods in the corporate Law
Man stabilizes legal positions and commercial transactions. Limitation periods in the corporate system can be divided into the following main types:
First: The statute of limitations for liability claims against directors and board members
It is a lawsuit filed by the company or partners against the director or members of the board of directors due to errors, negligence, or violation of the provisions of the system or the company’s articles of association that cause harm to it. Article 30 of the Companies Law clearly specifies the statute of limitations for this lawsuit.
Regular period: Paragraph (2) of Article Thirty stipulates that: “Except in cases of forgery and fraud, the liability claim shall not be heard after (five) years have passed from the end date of the company’s fiscal year in which the harmful act occurred or (three) years from the end of the director’s work or Membership of the member on the relevant board of directors, whichever is later.” “
Material analysis:
General principle: The lawsuit is dropped by two options, and the option that gives a longer period for claiming the right is taken into account:
Five years from the end of the fiscal year in which the error occurred.
Three years from the date of expiration of the membership of the Director or member of the Board of Directors.
Exception: These periods do not apply in cases of forgery and fraud, as they are subject to the general rules of statute of limitations for criminal offences.
Illustrative example: If a harmful act occurred by a manager in 2020, and his membership ended in 2022. The five-year term begins at the end of 2020 (i.e. ends in 2025), and the three-year term begins in 2022 (i.e. ends in 2025). In this case, the deadline for filing a lawsuit is the end of 2025. However, if his membership expires in 2024, the three-year term will expire in 2027, which is the longest term and therefore significant.
Second: The statute of limitations for a lawsuit to invalidate the decisions of partners or general assemblies
A partner or shareholder who objects to a decision issued by the General Assembly for violating the provisions of the system or the articles of association has the right to request its annulment before the judiciary. The system has set a very short duration for this lawsuit to keep the company’s decisions stable.
In the joint stock company: Article Ninety-Nine stipulates that: “The invalidity claim shall not be heard after the expiry of (ninety) days from the date of issuance of the decision.” It has the right to be submitted to the shareholder who objected to the decision or was absent with an acceptable excuse.
In the limited liability company: Article 170 stipulates the same period, stating: “No invalidation lawsuit shall be heard after the expiry of (ninety) days from the date of issuance of the aforementioned decision…” It has the right to be submitted to the partner who objected in writing to the decision or was unable to object to it after learning of it.
Third: The statute of limitations for the liability claim against the liquidator
After the company ends and enters the liquidation role, the liquidator takes over the management of its business. If he makes mistakes that harm partners or creditors, he can be prosecuted. But this claim is also limited by a statute of limitations.
Regular period: According to Article 259 of the Companies Law: “Except in cases of forgery and fraud, the lawsuit will not be heard against the liquidator after (five) years from the date of writing off the company’s registration with the commercial registry.” “
This period begins from the date of the company’s final delisting and is sufficient time to detect any errors that the liquidator may have committed during the liquidation process.
Determining these limitation periods aims to achieve a balance between protecting the rights of the company and partners on the one hand, and achieving legal stability and avoiding legal positions remaining suspended indefinitely on the other hand.
For law and legal consultations..Contact the office of lawyer Abdul Majeed Al Rashid
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