Qatar’s Commercial Companies Law Amended

Qatar’s Commercial Companies Law Amended

On 29 July 2021, Law No. 8 of 2021 (the “Amending Law”) was issued amending the Commercial Companies Law promulgated by Law No. 11 of 2015 (the “CCL”). The Amending Law should come into force on 8 September 2021. We offer below an overview of the changes:

Compliance with AML/CTF Law

The Amending Law envisages that the Minister of Commerce and Industry (the “Minister”) will issue regulatory decisions aimed at satisfying the requirements of Qatar’s Anti-Money Laundering and Counter-Terrorist Financing Law. The regulatory decisions will specify, among others, the documents and information companies are required to maintain and how such documents should be submitted to the Ministry of Commerce and Industry (the “Ministry”).

Private Joint Stock Companies to List on Stock Exchange

Several changes have been introduced to the provisions regulating joint stock companies (“JSCs”). Significantly, the CCL has been amended to open the door for private JSCs to list on the stock exchange. It is expected that the Qatar Financial Markets Authority (“QFMA”) will issue rules and/or guidance on the listing of private JSCs.

Harmony with QFMA’s Governance Code

The Amending Law brings harmony between QFMA’s Governance Code promulgated by QFMA’s Board Decision No. 5 of 2016 (“QFMA’s Governance Code”) and the CCL. For example, new definitions have been imported from QFMA’s Governance Code and added to the CCL. These are the definitions of “depository,” “senior executive management,” and “minority shareholders.” The Amending Law also stipulates that at least one-third of the board members of JSCs must be independent, the majority of the board members must be non-executive and the articles of association may allocate one or more seats to minority shareholders and company employees. Additionally, a board chairman may not, under the Amending Law, be a chairman and at the same time hold an executive position in the company. These changes are consistent with QFMA’s Governance Code (Articles 1, 6 and 7).

Boards of Directors of JSCs

The Amending Law allows chairmen, board members, senior executive management of JSCs, subject to an approval from the general assembly, to participate in businesses that compete with that of their companies.

The Amending Law also requires chairmen, board members and senior executive management to disclose to the board any direct or indirect interest in the transactions performed for the company. If the transactions are equal to or exceed 10% of the market value of the company or the value of its net assets, whichever is less and unless the articles of association provide for a lesser percentage, a prior approval must be obtained from the general assembly.

In relation to remuneration, board members of JSCs may, according to the Amending Law, receive a lump sum payment if the companies do not generate any profits. However, this must be stipulated in the articles of association and a prior approval must be obtained from the general assembly. The Ministry may issue a decision setting a limit for such payment.

General Assembly Meetings of JSCs

Under the Amending Law, invitations for general assembly meetings of public JSCs must now be sent to the shareholders 21 days before the meeting (compared to 15 days previously) and it is no longer a requirement to publish the invitation in two daily newspapers. However, the invitations must be published on the website of Qatar Exchange and the website of the company (if any) and be either published in a daily newspaper or sent to the shareholders in any way that confirms knowledge of meeting.

General assemblies may also be held using modern technology ways. Voting can also be electronic. The Ministry will issue the rules regulating electronic convocation and electronic voting.

Under the Amending Law, shareholders who own 5% of the capital can now add items to the agenda of the general assembly meeting. Previously, addition of new items to the agenda was only allowed for shareholders who own 10% of the capital.

Preferred Shares of JSCs

The articles of association of JSCs may grant preference to any specific class of shares, including preference in relation to voting and profits. The Minister will issue a decision on the rules regulating preferred shares.

Subsidiaries of JSCs

The Amending Law stipulates that subsidiaries of a JSC may not own shares in that JSC.

Holding Companies

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.