Qatar: Commercial Companies Law changes

Author: | Published: 24 Aug 2015
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Al Tamimi & Company

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Al Jazeera Tower, 7th Floor
61 Conference Street, Zone 61
PO Box 23443
West Bay
Doha, Qatar

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+974 4457 2777

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+974 4436 0921 Visit Website
Ahmed Jaafir Frank Lucente
The Commercial Companies Law 11 of 2015 (New Companies Law) received Emiri assent on June 16 2015 and will replace Law 5 of 2002 (Old Companies Law) 30 days after its publication in the official gazette.

Much of the New Companies Law mirrors provisions in the Old Companies Law but there are some significant changes affecting both joint stock companies and limit liability companies (LLCs). Such changes include the following.

LLCs will be permitted to have only one member as opposed to the minimum two members under the Old Companies Law. As such, this has necessitated dispensing with the so-called single person company.

Whereas under the Old Companies Law the share capital of an LLC had to be 'sufficient to carry out its objects and in all cases not less than QR200,000' ($55,000), the New Companies Law does not specify any minimum capital requirement.

The name of a joint stock company was previously Qatar Shareholding Company (QSC) and these words were to follow the company's name. Now joint stock companies are to be known either as a Qatari Public Shareholding Company (QSC Public) or a Qatari Private Shareholding Company (QSC Private). These abbreviations are for the convenience of this discussion; there is no reference to any official abbreviation.

Article 68 companies were previously QSCs, the shareholders of which included the Qatar government or a (51% plus) government owned entity. Under article 68 of the Old Companies Law, where legislative provisions of the Old Companies Law contradicted any provision contained in the company's memorandum and articles of associations, the provisions of the memorandum and articles of association would prevail. This allowed any government company or joint venture company significant freedom to exclude itself from the provisions of the Old Companies Law. Under the New Companies Law, freedoms under article 68 remain in place but only whilst an article 68 company remains a QSC Private, once it becomes a QSC Public it must comply with all the provisions of the New Companies Law and cannot be excluded from any such provision.

The New Companies Law provides that if a QSC Public fails to offer its shares for subscription within 60 days of its date of incorporation, it will be considered no longer in existence unless the shareholders resolve to convert it to any other form of company identified under the New Companies Law. Where a QSC Public does not list for trade within one year of its date of incorporation it will automatically convert into a QSC Private.

Board members of QSCs Public are now limited to being board members of no more than two QSCs Public and individuals are now limited to being board members of no more than three QSCs Public. One third of board positions may be occupied by independent directors who require no share ownership qualification.

Attendance at a QSC board meeting is now permitted by electronic means and board decisions are also clearly permitted to take place by circular resolution in urgent cases, provided that the same is agreed by all board members and it is ratified at the next subsequent board meeting.

The nominal value of QSC shares has now been altered to QR100 instead of the previous QR10.

The New Companies Law provides that a company is deemed to have taken over another company in any of the following cases: (a) it acquires, directly or indirectly, enough of the capital that grants it the majority of voting rights; (b) it controls the majority of voting rights under an agreement with other partners or shareholders; (c) it acquires sufficient voting rights that grant it the ability to exercise actual control over the general assembly of a company. Ownership of 40% of such rights will be deemed to be sufficient if no other person has a right to a higher level of voting rights; and (d) it acquires sufficient voting rights that grant it the power to appoint and dismiss the majority of the members of the board of directors, control board or managers.

Significantly, article 19 of the New Companies Law now provides a mission statement for the Ministry of Economy and Commerce. The Minister is empowered to determine by a resolution methods for incorporation procedures in a manner that 'guarantees the accomplishment thereof easily, including the representation of all related authorities in the single window system'. This would appear to be one of the first times that a law in Qatar imposes an efficiency obligation on an authority.

Ahmed Jaafir and Frank Lucente