At the beginning of each fiscal year Ministries of finance or treasury issue the government budget for the coming year , in some cases , including deficiencies in the budget and the amount of such deficiencies and how to face or cover them . One of the available instruments to face the budget deficiencies , during that year , could be issuance of bonds .
Issuance of bonds is not only undertaken or followed by Governments , we are saying this because also big companies particularly commercial banks, investment companies or insurance companies, normally issue bonds. Legally speaking and according to the provisions of the commercial companies law and the securities market law in Qatar ( and other Gulf Cooperation Countries ) big prime companies are eligible to issue bonds when they deem appropriate according to their financial and investment policies.
I have been asked by some companies to explain the contents of bonds to be issued in Qatar . We take this opportunity to say that bonds to be issued here or everywhere, shall include certain details and terms that are commonly found in international bonds. To begin with, the face of each bond shall clearly explain that the issuer of the bond ( name of the company to be inserted ) , for value received , promises to pay to the bearer the amount of the bond ( to insert the amount ) . Also to pay the interest at the prescribed rate in accordance with the detailed terms and conditions enclosed on the back of the bond.
The vital point is regarding the terms and conditions of the bond and it is important to draw the attention of all potential investors that they should read the terms and conditions of each bond very carefully before starting or undertaking any business related to the bond . We are saying this because in practice we have noticed that many parties never go through the terms and they discover new unacceptable points , for them , when it is too late .
Normally there are coupons that are attached to what is known as the fixed rate bonds , and each of these coupons is for an interest payment in a fixed amount . These coupons are , normally, detachable and separately negotiable by the bearer . This is we could say , an unforeseen advantage because these coupons are negotiable at ant time .
The bonds , generally speaking , state that they are issued subject to and with the benefit of the specified fiscal agency agreement that is available for inspection at any of the paying agents . In some cases there is a need to issue a formal trust deed when the issuer is a company . It is also stated that the bondholders and coupon holders are bound by and deemed to have notice of their terms .
Technically speaking , as we have explained earlier , and with reference to the English Law there is no clear objection to binding a bondholder to terms by reference . In such instances this term (of reference) should not be misrepresented in any offering material even if the bondholders had a right to inspect the bonds.
In this connection , and in relation to terms by reference , each investor or any other person related to the investment must bear in mind the varying international position particularly with reference to surprise clauses incorporated by reference and the attitude to unfair contract terms and terms imposed by standard contracts , for example , traveling tickets and insurance or laundry tickets cases.
In most jurisdictions , and legally speaking , rules are found whereby exculpation clauses and harsh provisions in contracts that are signed with parties of little sophistication or weak bargaining power are subjected to close judicial scrutiny and may be nullified by courts . Many of these provisions are now encapsulated in consumer protection clauses or apply only to contracts involving consumers , however , we have to explain that this is not the case in all times .
The contracts that are particularly under attack are standard terms of business imposed on a party who had neither the bargaining power nor the sophistication to resist their terms . In such a case it could not be said that freedom of contract exists .
In many countries , it has been noticed that the courts limited or qualified the impact of these clauses by covert means . In other words , to ascertain that a party is not found by surprise terms contained by reference in his contract which he could not expect, such as, an exclusion clause mentioned in traveling tickets or in a laundry ticket or bus ticket, and that the rules whereby exclusion clauses are construed are not strictly against the party relying on them .
This means , to insist that negligence or liability for a fundamental breach which goes to the root of the contract can not be excluded expect by very clear words that are drawn to the attention of the other party at the time or before signing the contract .
Attacks are more likely to happen in relation to bonds that are brought by members of the public , as opposed to sophisticated investors , who are well able to look after themselves. In any event , the best policy is that any unusual or adverse terms should be reflected in the bonds themselves and they should be clearly explained , in black and white , to all investors before starting any business that is related to the bond in question .
The companies interested to issue bonds , to individuals or institutional investors , are obliged by the law to adhere to the required principles of transparency . These companies are required to draw the attention of potential investors about all necessary terms and conditions that they are supposed to learn before starting the business related to the issued bonds . In case these companies did not follow the necessary transparency , the may face legal proceedings and or other similar proceedings .
Dr . AbdelGadir Warsama Ghalib
Founder & Principal Legal Counsel
Dr.AbdelGadir Warsama Consultancy
E-mail : awarsama@warsamalc.com
