Qatar’s Corporate Legal Framework - Global M&A Toolkit...
Transcript of Qatar’s Corporate Legal Framework - Global M&A Toolkit...
Background .................................................................................................. 3
Qatar corporate legal framework ................................................................... 3
The Qatar Financial Centre (QFC) ............................................................. 3
State of Qatar ............................................................................................3
Foreign investment regulation ..........................................................................4
Other matters ................................................................................................ 3
Schedule 1: Types of Qatar Financial Centre entities.............................. 5
Schedule 2: Types of Commercial Companies Law entities ................... 7
Key contacts .............................................................................................. 10
cont
ents
Background
In October 2008, the State of Qatar launched Qatar National Vision 2030, designed toprovide a framework for sustainable development and high living standards forgenerations to come in Qatar.
Qatar has gone a considerable way to achieving this goal, now ranking as one of thehighest GDP per capita countries in the world based on its oil and gas reserves. AsQatar looks to diversify its State revenue base, it seeks to foster foreign investment ina range of sectors.
Qatar corporate legal frameworkIn Qatar there are two corporate legal systems (the Qatar Financial Centre and the domestic corporate law, primarily governed by theCommercial Companies Law and related regulation). Depending on the nature of business, those looking to establish a presence inQatar may consider either system.
The Qatar Financial Centre (QFC)The QFC is a financial and business centre established by the State of Qatar under the Qatar Financial Centre Law No 7 of 2005, andlocated in Doha.
The QFC legal framework establishes a separate legal jurisdiction, having its own commercial and regulatory environment essentiallyseparate from the State of Qatar. It is operated by the QFC Authority (QFCA) and it has its own financial services regulator, the QFCRegulatory Authority (QFCRA).
Only a limited range of permitted activities are eligible to be carried out from the QFC. These fall into two categories, regulated andunregulated activities.
Regulated Activities (which are regulated by the QFCRA) comprise: financial, banking and investment business; insurance andreinsurance business; money market, stock exchange and commodity market business; money, asset and investment fund business;the provision of project finance and corporate finance and Islamic banking and financing business; funds administration, fund advisoryand fiduciary business; pension fund business and the business of credit companies; insurance broking, stock broking, and all otherfinancial brokerage business; financial agency business and the business of provision of corporate finance and other financial advice,investment advice and investment services; and financial custodian services and the business of acting as legal trustees.
Unregulated Activities comprise ship broking and shipping agents; provision of classification services and investment grading and othergrading services; business activities of company headquarters, management offices and treasury operations and other related functions forall kinds of business, and the administration of companies generally; provision of professional services including but not limited to audit,accounting, tax, consulting and legal services; holding companies, and the provision, formation, operation and administration of trusts andsimilar arrangements; and provision, formation, operation and administration of companies.
Entities established in the QFC may take a number of forms. These are summarised at Schedule 1. Though they are governed by theQFC law and regulations, Qatar domestic criminal laws apply to any QFC entity.
State of QatarAlternatively, corporate entities may be established and run in accordance with Qatari domestic laws, in particular the CommercialCompanies Law No 5 of 2002 (CCL). Potential amendments to the CCL are being considered (2013), but entities that may be establishedunder the current CCL are set out in Schedule 2.
© Clifford Chance, 2014 3
Background continued
Foreign investment regulationGenerally speaking, foreign investors may invest in all sectors of Qatar’s economy provided one or more Qatari shareholders ownat least 51%.
With relevant Ministerial approval foreign investment may exceed 49% and reach 100% in the fields of agriculture, industry, healthcare,development and exploitation of natural resources and certain other sectors.
Foreigners may now own up to 49% of the shares of Qatari companies listed on the Doha Securities Exchange (provided thecompany’s articles enable this). GGC nationals will be treated as Qatari nationals with respect to such companies listed on theQatar Exchange.
Ministerial approval may exempt certain investments from income tax for a period of upto 10 years and foreigners may freely repatriatefunds from the Qatar investments without foreign exchange controls.
Other mattersThere are several other aspects to consider in terms of investing or establishing a presence in Qatar, such as visa requirements,intellectual property protection, financing, and taxation which are beyond the scope of this paper. We would be happy to assist youwith these and ancillary matters as required.
4 © Clifford Chance, 2014
Schedule 1: Types of QatarFinancial Centre entities
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QFC entity type Primary features of the QFC entity General restrictions
Separate legalentity?
Capital Members Reportingobligations
Liability
QFC LLC Yes Minimum capitalrequirementsapply forRegulatedActivities. Nominimum forUnregulatedActivities (butsolvency testapplies)
At least 1 Annual Returnrequirement.Accounts to beaudited and laidbefore AnnualGeneral Meetingand filed with theCompaniesRegistrationOffice (CRO).However, theseaccounts are notavailable forpublic inspection.
Limited Only QFC permittedactivities.
QFC SpecialPurposeCompany(“QFC SPC”)
Yes.
Establishedspecifically for thepurpose of anIslamic finance orconventionalfinance structuredtransaction
Same as for aQFC LLC
One or more whois a nominee,financialtransactioninitiator or anotherSpecial PurposeCompany
Exemption: Notrequired to haveaccounts auditedor filed with CROunless requestedby the QFCA
Limited Only Special PurposeCompany activities:acquisition, holding anddisposal of an assetand obtaining financingin connection with aFinancing Transaction,any Regulated Activitythat is not carrying on abusiness, and anyUnregulated Activitypermitted by the QFCA
QFC HoldingCompany.
Yes Same as for aQFC LLC
At least 1 See QFC LLC Limited Licensed to only carryout holding companyactivities and musthave one or moresubsidiaries (which itmust control and maybe a QFC LLC or QFCSPC or anon-QFC entity)
QFC GeneralPartnership
No.
Is a partnershipwhich is not alimitedpartnership orlimited liabilitypartnership(see below).
Partners oweduties and carryon the business.Governed by apartnershipagreement.
Same as for aQFC LLC
Two or more If registered withCRO, AnnualReturnrequirement andaccounts to beaudited and filedwith the CRO
Joint and severaland unlimited
Only QFC permittedactivities.
Schedule 1: Types of Qatar Financial Centre entitiescontinued
6 © Clifford Chance, 2014
QFC entity type Primary features of the QFC entity General restrictions
Separate legalentity?
Capital Members Reportingobligations
Liability
QFC LimitedPartnership
No.
Is a partnershipcomprising of aGeneral Partnerand a LimitedPartner.
Same as for aQFC LLC
One or moreGeneral Partnersand one or moreLimited Partners
Annual Returnrequirement.
Accounts to beaudited and filedwith the CRO
General Partnerhas unlimitedliability, andLimited Partnerhas limited liabilityprovided it doesnot take part inthe managementof the partnershipbusiness or affairs
Only QFC permittedactivities.
QFC LimitedLiabilityPartnership
Yes.
Governed by alimited liabilitypartnershipagreement
Same as for aQFC LLC
Two or more See above Limited to amountagreed
Only QFC permittedactivities.
QFC ProtectedCell Company
PCC is a singlelegal person (buteach cell is not alegal personseparate fromPCC). Assetsand profits areseparated andcompartmentalised into cells.PCC to notifyparties that theyare dealing witha PCC.
Managed by aboard of directors
Same as for aQFC LLC
At least 1 See above Limited. Butunlike LLC, acell’s creditorsonly haverecourse to theassets of that cell.
PCC may issueshares foreach cell.
Only carrying onRegulated Activities asan Insurer or aCollective InvestmentFund.
Schedule 2: Types of CommercialCompanies Law entities
© Clifford Chance, 2014 7
QFC entity type Primary features of the CCL entity General restrictions
Separate legalentity?
Capital Members Reportingobligations
Liability
“Limited liabilitycompany” (LLC),Art 225 of CCL
Yes.
To have a nametaken from itsobjective.
The companymanager has fullauthority tomanage thecompany(equivalent to thepowers of theboard of directorsof a QSC, seebelow). Companyto allot each year,10% of net profitto a legal reserve,which can besuspended if thereserve reaches50% of thecompany’s capital.
Minimum isQAR200,000 orsuch higheramount to meetcompany’sobjectives
Between two and50. If more than20, there is to bean advisorycouncil of at leastthreeshareholders.
Yes, manager toprepare accountsand send a copyto the Ministry ofEconomy andTrade (in realityfiling does nottake place forLLCs). However,not available forpublic inspection.
Limited to paid upshare capital
Foreign investmentrestrictions. Subject toproxy law, mayintroduce operationalcontrol in agreements.Cannot undertakebanking, insurancebusiness or makeinvestments on behalfof others (principalor agent).
Cannot offer sharesto public.
Single PersonCompany (SPC)Art 260 of CCL
Yes.
To have a nametaken from itsobjective. Ownermay appoint amanager
QAR200,000 One person Yes, manager toprepare accountsand send a copyto the Ministry (inreality filing doesnot take place forSPC’s). However,not available forpublic inspection.
Limited Can be owned 100% byforeigners if a Ministerialexemption is granted.
“PrivateShareholdingCompany” orprivate joint stockcompany (QSC)Art 203
Yes.
Managed by aboard of directors.Minimum of fivedirectors and maxof 11.
It is to have adefinite period andif its objective is tocarry out aparticularbusiness, thecompany shallexpire at the expiryof that business.
Minimum is QAR2million or suchhigher amount tomeet company’sobjectives
At least 5 Yes, requirementfor annualaccounts to beaudited and filedat the Ministry
Limited Foreign investmentrestrictions.
Excluding staterepresentatives andholders of 10% or more,no person may be aboard member for threeQSC’s or more norChair or Deputy Chair inmore than twocompanies
“Public JointStock Company(QSC) Art 94
Yes.
See privateshareholdingcompany above
See privateshareholdingcompany abovebut able to offershares tothe public
At least 5 Yes, see privateshareholdingcompany above
Limited Yes, see privateshareholding companyabove
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Schedule 2: Types of Commercial Companies Lawentities continued
QFC entity type Primary features of the CCL entity General restrictions
Separate legalentity?
Capital Members Reportingobligations
Liability
“Article 68”Company Art 68of CCL
Yes.
A shareholdingcompany at leastone of theCompany’sshareholdersmust be a Qatargovernmentorganisationholding or acompany in whichthe state owns atleast 51% (orsuch loweramount as theCouncil ofMinsters mayapprove) of theshares in thatcompany.
An Article 68Company maythen effectivelycontract out of theprovisions of theQatar CCLthrough itsArticles.
As set out in theArticles ofAssociation
One or moredepending on theconstitution of therelevant company
As above, subjectto contraryprovisions in theArticles
Limited Subject to the provisionsof the CCL unless theArticles provideotherwise.
“PartnershipCompany” Art 19of CCL
No. No requirement At least 2 No requirement Joint and severalliability of thepartners
A partner cannotpractice to his ownaccount or the accountof others, any activity ofthe partnershipcompany or be apartner in a competingpartnership company.
“HoldingCompany” Art261 of CCL
Yes.
It is a QSC or aWLL or SPC.
Has financial andadministrativecontrol over one ormore companiesoperating under it,owning aminimum of 51%of shares in anunderlying QSC ora LLC or SPC.
Not less thanQAR 10 million
As per a QSC ora WLL or SPC asapplicable
As per a QSC ora WLL or SPC asapplicable
Limited It cannot be a partnernor can it own equitiesin other holdingcompanies.
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QFC entity type Primary features of the CCL entity General restrictions
Separate legalentity?
Capital Members Reportingobligations
Liability
“LimitedPartnership withShares” Art 206of CCL
Yes.
Has a controlboard of at least 3members but ismanaged by ageneral partner.
QR 1 million At least 1 “joint”partner and atleast 4shareholderpartners
Required to havean auditor
Joint partnershave joint andseveral liabilityand shareholderpartners havelimited liability
Foreign investmentrestrictions.
“ParticularPartnershipCompany” Art 44of CCL
No. Not aseparate legalentity from therelevant partners.
No requirement At least 1 “joint”partner and atleast 1 “silent”partner
No requirement forauditor
“Joint” partnershave joint andseveral liability and“silent” partnershave limited liability
If there is a non-Qataripartner, the particularpartnership companycannot practisebusiness which isprohibited fornon-Qataris by law.
Key contacts
10 © Clifford Chance, 2014
Richard ParrisOffice Managing PartnerDoha, QatarT: +974 4491 7041E: [email protected]
Tim PlewsPartnerDubai & RiyadhT: +971 4 362 0689E: [email protected]
Jason MendensPartnerDoha, QatarT: +974 4491 7049E: [email protected]
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