Among the well-established approach of the Qatari legislator in regards with the continuous efforts of keeping the laws and regulations in the State of Qatar modern, in line with international best practices and up to date in a way that enhances the non-stop development aimed by the State to reach Qatar 2030 vision and to be ready to host macro – universal events occurring in one of the smallest countries in the region, the Qatari legislator has introduced new amendments (Law Number 8 of 2021 Amending the Commercial Companies Law Number 11of 2015).
The aforementioned amendments entered into force on the 7th of September 2021, as it was published in the official gazette on the 8th of august 2021.
After reviewing the amendments in detail, we will divide them into two parts, the first part is the part were the legislator amended current articles existing in the Commercial Companies Law (CCL), and the second part is where the legislator added new articles to the current CCL. On a brief statistical explanation, the amendments added 10 new articles and modified 28 articles, which sums up to equal approximately 11% of the CCL, a calculation that may show the importance of these new amendments.
The amendments revolved around different topics, widening the scope of some existing articles, regulating new topics, and giving more powers to the Financial Market Authority (QFMA), these and more will be discussed in depth in the following article.
First Part: Changes Made on Existing Articles
The first article of the amendments states that the phrase “Minister of Commerce and Industry” shall be replaced with the phrase Minister of Economy and Commerce” wherever it is mentioned in the CCL, in addition to the replacement of phrases such as “Ministry of Commerce and Industry” “accounts auditor” to be “Ministry of Economy and Commerce” and “accounts controller”.
The second article of the amendments added 4 new terms to the first article of the CCL, the 4 new terms are imported from QFMA’s Governance Code for Companies & Legal Entities Listed on the Main Market and are defined in this article as follows:
- Depository: The company licensed by the Authority to carry out the functions of deposit and registration for everything related to securities traded on the financial markets (QCSD)
- senior executive management: Chief Executive Officer (CEO) and other executive mangers reporting directly to him, including heads of the internal control units in the Company.
- Subsidiary: In accordance with law number 13 of 2012, the controlled companies that are owned by at least (50%) in share or stakes by a mother company.
- Minority: Shareholders who represent a class of shareholders that does not control the Company so that they are unable to influence the Company.
Article 18 was amended to open the door for private shareholding companies to be listed on the financial market, moreover, QFMA shall hold the responsibility of issuing the relevant governance rules and regulations for all listed companies. Article 76 was amended to increase the upper limit of shares allowed for the founders to subscribe from 60% to 70% of the company’s share capital. Moreover, and along with other amendments allowing private shareholding companies to be listed on the financial market, the word ‘public’ was removed in order to widen the scope of article 96 to include the private shareholding companies. In addition to the previous amendments, article 96 introduces one of the roles of the depository mentioned in the first article as an alternative for the term bank in depositing the amount of share capital owned by the shareholder. In addition, it clarifies that at least one third of the board members must be independent and that there is a majority of members that do not get any payments from the company, consequently the board shall include seats for the minority and seats representing the company’s workers. Last but not least, the article stipulates that governance rules and regulations issued by QFMA or QCB shall be binding in regards with integrity and independence.
Both articles 103 and 108 introduce the new term ‘senior executive management’, adding to its authorities; senior management can obtain the acceptance of the general assembly in case one of the members is engaged in any business that shall compete with the company or trade for himself or for their own account or for the account of a third party in one of the divisions of the activities practiced by the company.
Article 109,121 and 122 enables chairmen, board members, and senior executive management of private shareholding firms to join in enterprises that compete with their company, subject to authorization by the general assembly.
The Amending Law also requires chairmen, board members, and senior executive management to declare to the board any direct or indirect interest in the company’s transactions. If the transactions equal or exceeds 10% of the company’s market value or the value of its net assets, whichever is smaller, and unless the articles of association provide for a lower proportion, prior permission from the general assembly is required.
In terms of remuneration, board members of private shareholding firms may get a lump sum payment if the companies do not make profits, according to the Amending Law. However, this must be specified in the articles of association, and previous permission from the general assembly is required. The Ministry may issue a directive establishing a cap on such payments.
Furthermore, article 133 states that invitations to general assembly meetings of public Private shareholding companies must now be given to shareholders 21 days before the meeting (rather than 15 days earlier) and that publication in two daily newspapers is no longer required. However, the invitations must be published on the Qatar Exchange website and the company’s website (if any), as well as published in a daily newspaper or emailed to shareholders in any way that confirms awareness of the meeting.
General assemblies can also be held using online tools. Voting can also be done electronically. The Ministry will release the guidelines governing electronic communications. Shareholders who control 5% of the capital can now add items to the agenda of the general assembly meeting under the Amending Law. Previously, adding new items to the agenda was only permitted for shareholders who owned 10% of the capital; an invitation to hold a general assembly meeting was linked to serious reasons behind the request that must be determined by the requester and approved by the board; this condition was deleted by the legislator in particular in article 124 2nd paragraph. Moreover, Article 137 in its 3rd paragraph prohibited the transfer of the headquarters of the company, the old condition of changing the main purpose of the company was also deleted.
Article 160 now includes both public and private shareholding companies. Besides, article 184 obliges the company to have mid-year financial report published in Arabic language and on the company’s website after being revised by the auditor (legal accountant), new shares are always excluded of this publication.
Articles 264 and 288 both came with an alternation to the ownership ratios requested, as 264 is changed to be 50% instead of 51% and article 288 – in the case of acquisition- is now more than 50% instead of 51%
Article 323 clarifies clearly the jurisdiction of QFMA, giving it wider authorities for the sake of regulating and organizing the field. Moreover, article 324 states the sanctions and measures that shall be taken in case of any breach to this law in what we can call an upgrade that fits the new amendments. Finally, article 330 in its first article decreased the ration requested to be 10% instead of 20%.
Second Part: New Articles Introduced.
10 new articles were introduced to the CCL, the first is article 18 (repeated) that was altered in order to fit the allowance of the private shareholding companies to be listed on the financial market.
Article 18 repeated, revolves around the compliance of the CCL with AML/CTF law that anticipates that the Minister of Economy and Commerce (the “Minister”) will make regulatory decisions to meet the criteria of Qatar’s Anti-Money Laundering and Counter-Terrorist Financing Law. The regulatory decisions will establish the records and information that companies must keep and how such records must be provided to the Ministry of Commerce and Industry (the “Ministry”).
Article 98 (repeated) stipulates and identifies the integrity of the board and the conditions that need to be met in order to guarantee their integrity, as article 107 (repeated) obliges the board to establish an auditing committee in accordance with QFMA law.
Article 161 (repeated), 265 2nd paragraph and 329 2nd paragraph, stipulate that the ownership stake used to identify a holding company has now been changed under the Amending Law from “51%” to “more than 50%.” A holding company is now defined as a limited liability company or a joint stock company that owns more than 50% of its controlled subsidiaries, The Amending Law provides that subsidiaries of a holding company may not own shares in that holding company.
To conclude, amendments of such nature construct an essential step for Qatar’s developing market, while the amendments are new and not practiced yet, the practical implementation shall still be tested, more topics and procedures shall be explained, clarified and be contested.
Author: “Mohammad Mufid” Ratib Qurashi.