Qatari Commercial Companies Law Amendments, A Detailed Review
Among the well-established approach of the Qatari legislator with regard to the continued efforts to keep the laws and regulations of the State of Qatar modern, in line with international best practices, and up to date in a manner that enhances the continued development aimed by State to achieve the Qatar 2030 vision and be ready to host macro-universal events occurring in one of the smallest countries in the region, the Qatari legislator introduced new amendments (law number 8 of 2021 amending the law on trading companies number 11 of 2015).
The aforementioned changes entered into force on 7e of September 2021, as published in the official journal of 8e August 2021.
After considering the changes in detail, we will divide them into two parts, the first part is the part where the legislator amended the current articles of the Law on Commercial Companies (CCL), and the second part is where the legislator has added new articles to the law. Current CCL. On a brief statistical explanation, the amendments added 10 new articles and amended 28 articles, which equates to about 11% of the CCL, a calculation that can show the importance of these new amendments.
The modifications covered various subjects, widening the scope of some existing articles, regulating new subjects and giving more powers to the Financial Markets Authority (QFMA), these and many others will be discussed in depth in the following article.
Part 1: Changes to existing articles
Article 1 of the amendments specifies that the expression “Minister of Trade and Industry” is replaced by the expression “Minister of Economy and Trade” wherever it is mentioned in the CCL, in addition to the replacement from expressions such as “Ministry of Trade and Industry” “Auditor” to be “Ministry of Economy and Trade” and “Auditor”.
The second article of the modifications added 4 new terms to article 1 of the CCL, the 4 new terms are imported from the Code of governance of companies and legal persons listed on the main market of QFMA and are defined in this article as follows:
- Custodian: The company approved by the Authority to exercise depositary and registration functions for all matters relating to transferable securities traded on the financial markets (QCSD)
- senior management: Chief Executive Officer (CEO) and other senior executives reporting directly to him, including the heads of the Company’s internal control units.
- Subsidiary: In accordance with law number 13 of 2012, controlled companies which are owned at least (50%) in shares or participations by a parent company.
- Minority: Shareholders who represent a category of shareholders who do not control the Company so that they cannot influence the Company.
Article 18 has been amended to open the door to the listing of private limited companies on the financial market. Article 76 has been amended to raise the limit on the shares authorized to be subscribed by the founders from 60% to 70% of the company’s share capital. In addition, and in parallel with other changes allowing private limited companies to be listed on the financial market, the word “public” has been deleted in order to extend the scope of Article 96 to private limited companies. . In addition to the previous modifications, article 96 introduces one of the roles of the depositary mentioned in article 1 as an alternative to the term bank in the deposit of the amount of share capital held by the shareholder. In addition, it specifies that at least one third of the board members must be independent and that there is a majority of members who do not receive any payment from the company, therefore, the board will include seats for the minority and seats representing the workers of the company. Last but not least, the article stipulates that the governance rules and regulations issued by QFMA or QCB are binding with regard to integrity and independence.
Articles 103 and 108 introduce the new term “senior official”, adding to his powers; the general management can obtain the acceptance of the general assembly in the event that one of the members carries out any activity in competition with the company or trades for himself or for his own account or for the account of a third party in one of the divisions of the activities carried out by the company.
Articles 109, 121 and 122 allow presidents, directors and managers of private companies with private participation to join forces in companies competing with their company, subject to the authorization of the general meeting.
The amending law also requires chairmen, members of the board of directors and senior management to declare to the board of directors any direct or indirect interest in the transactions of the company. If the transactions are equal to or greater than 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 lower proportion, the prior authorization of the general assembly is required.
In terms of compensation, members of the board of directors of private joint-stock companies can receive a lump sum payment if the companies do not make a profit, according to the amending law. However, this must be specified in the articles of association and the prior authorization of the general assembly is required. The ministry can issue a directive setting a ceiling on these payments.
In addition, article 133 specifies that notices of general meetings of public limited companies must now be sent to shareholders 21 days before the meeting (instead of 15 days previously) and that publication in two dailies is no longer compulsory. . However, invitations must be published on the Qatar Exchange website and on the company’s website (if applicable), as well as published in a daily newspaper or emailed to shareholders in any way that confirms the knowledge of the assembly.
General meetings can also be organized using online tools. Voting can also be done electronically. The ministry will publish guidelines for electronic communications. Shareholders who control 5% of the capital can now put items on the agenda of the general meeting by virtue of the amending law. Previously, adding new items to the agenda was only allowed to shareholders holding 10% of the capital; a convocation to hold a general meeting was linked to serious reasons at the origin of the request which must be determined by the applicant and approved by the board of directors; this condition was removed by the legislator, in particular in article 124, second paragraph. In addition, article 137 in its 3rd paragraph prohibiting the transfer of the company’s registered office, the old condition for changing the main purpose of the company has also been removed.
Section 160 now includes both public and private limited companies. In addition, article 184 obliges the company to publish the half-yearly financial report in Arabic and on the company’s website after having been reviewed by the auditor (legal accountant), new shares are always excluded from this. publication.
Sections 264 and 288 both came with alternating requested ownership ratios, since 264 is changed to 50% instead of 51% and section 288 – in the case of an acquisition – is now greater than 50%. instead of 51%.
Section 323 clearly clarifies the jurisdiction of the QFMA, giving it broader powers for the sake of regulating and organizing the field. In addition, Article 324 sets out the sanctions and measures that will be taken in the event of violation of this law in what can be called an upgrade that corresponds to the new amendments. Finally, article 330 in its first article reduced the requested ration to 10% instead of 20%.
Part two: New articles introduced.
10 new articles have been introduced in the CCL, the first is article 18 (repeated) which has been modified in order to adapt the authorization of private companies to be listed on the financial market.
Article 18 repeated, revolves around the compliance of the CCL with the AML / CTF law which provides that the Minister of Economy and Trade (the “Minister”) will take regulatory decisions to meet the criteria of the fight against Qatar’s money laundering and terrorist financing. Law. Regulatory decisions will establish the records and information that businesses must keep and how those records are to be provided to the Ministry of Trade and Industry (the “Ministry”).
Article 98 (repeated) stipulates and identifies the integrity of the board of directors and the conditions that must be fulfilled in order to guarantee their integrity, since article 107 (repeated) obliges the board of directors to establish a committee of ‘audit in accordance with the QFMA law.
Article 161 (repeated), 265 2sd paragraph and 329 2sd paragraph, state that the stake used to identify a holding company has 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 which owns more than 50% of its controlled subsidiaries. The amending law provides that subsidiaries of a holding company cannot hold shares in that holding company.
To conclude, amendments of this nature are an essential step for the developing Qatar market, while the amendments are new and not yet practiced, the practical implementation still needs to be tested, more topics and procedures need to be explained. , clarified and contested.