Qatar's Commercial Companies Law
Qatar possesses a business-stimulating environment that instigates investors to invest in different business entities. Setting up a business in Qatar was not restricted to any specific kind of business. The region has expanded itself to encourage various company incorporations in Qatar.
As per the law, a commercial company is an agreement where there is a rise to a profit-creating project. Two or more natural or legal persons bestows by providing capital or works and shares the profit and loss incurred from the project.
In Qatar, Law No. 11 of 2015 promulgates the commercial company law. Recently an amendment has been made to Law Number 11 of 2015 of the Qatar Commercial Companies Law. The changes will enhance the regulatory framework of Qatar.
Under the Commercial Company Law, there are different forms of companies, they are:
- Limited Liability Company
- Joint Liability Company
- Limited Partnership
- Joint venture company
- Public shareholding company
- Private shareholding company
- The partnership is limited by shares.
Limited Liability Company
A limited liability company (LLC) is the most common form of company that an investor opts for in Qatar. The minimum number of participants required to set up an LLC in Qatar is a minimum of 2 and a maximum of 50 with at least one Qatari shareholder. This business entity in Qatar has formed under a 51 percent to 49 percent relationship, where foreigners have the flexibility to own 49 percent of the entire shareholding. However, the remaining 51 percent needs to be held by Qatari shareholders.
There are three primary documents mandatorily required to register a limited liability company:
- Commercial registration (CR)
- Trade License
- Computer Card
Joint Liability Company
It comprises two or more natural persons, where both of them would be jointly liable for the company's obligations. As per, Article 22 of Law No. 11 of 2015, the joint liability company should include the names of all the company partners. If it consists of the name of any person, who is aware that he is not a partner, he shall also be liable for the debts incurred by the company.
Shares in a joint liability company can only be transferred by the consent of all the partners or by any amendments made in the company's contract. In addition, another condition is, a partner is not allowed to engage in any business similar to the company's business. However, they can do the business only if they get the consent of other partners. The company contract of this shall include:
- Date of incorporation,
- Name and object of the company,
- Capital and shares with the partner's name,
- Full details of all the partners,
- Financial year details, profit, and loss distribution.
There are majorly two types of partners in Limited partnership, joint partners and silent partners. The contract of the company must include the names of both joint and silent partners. The partners in this shall be natural persons only.
Joint partners manage and run the company and would be liable for their assets for all the company's liabilities.
Silent partners did not manage the company but only contributed the capital amount to the company. They are not responsible for any obligations but only respond to the extent of their capital or what they pay to the company. Silent partners should not interfere in the work and management of the company. If they do so, they shall be jointly liable for the consequences results occurring from the activities.
Joint Venture Company
As per Article 53 of Law No. 11 of 2015, a Joint Venture Company is a business agreement and a concealed company that does not apply to third parties. The contract of the company should have objects, rights, and liabilities of partners described clearly. Profit and loss distribution should also be specified clearly. If the Joint Venture Company partner is non-Qatari, then they are not allowed to do the businesses which are prohibited by the law for the non-Qataris.
Public Shareholding Company
When the capital is divided into equal shares and the share is capable of being traded is known as a public shareholding company. A shareholder of the company shall be liable only to the amount invested by him as the company's capital. This type of company should have a name that denotes its object. The name of the company should be followed by - "Qatari public shareholding company."
Private Shareholding Company
In a private shareholding company, there should be a minimum of 5 founders who establish a private company that does not offer its shares for public subscription. As per Article 205 of the law, the minimum capital of a private shareholding company should be 2 million Riyals. If a private company want to convert into a public shareholding company, it must fulfill the following conditions:
- Value of issued shares must be paid fully.
- A private company should have to complete a minimum of two financial years.
- The average profit of 2 financial years should not be less than 10% of the capital.
- By a majority of three quarters, the extraordinary general assembly will decide about the company's conversion.
- The Minister shall announce the decision of conversion. The decision should be published with the attachment of the company's contract, the article of association, and the expenses listed by the company.
Partnership Limited by Shares
A partnership limited by shares is divided into two teams of partner's -
- Active partners
- Non-active partners
Active partners are jointly involved in the management and the company's activity. They are jointly liable with their own money for all the debts incurred by the company, but non-active partners shall only be responsible for the debts of their share capital invested in the company. The minimum capital should be 1 million Riyals, paid fully at the time of incorporation.
Amendments to the Qatar Commercial Companies Law
As per the new amendment, a public shareholding company's chairman, board of directors, and senior executive management should disclose their positions to the general assembly concerning whether they are holding classes in a personal capacity or as representatives.
With this amendment, private joint-stock companies can now list on the stock exchange. For this, the Qatar Financial Markets Authority (QFMA) will issue the guidelines.
Earlier, the general assembly meeting invitation of public joint-stock companies was to be sent 15 days before the meeting. Still, after the amendment, now it has to be sent to the shareholders 21 degrees before the meeting. In addition, earlier it was mandatory to publish the invitation in two daily newspapers, but now there is no requirement.