Qatar Central Bank (QCB) recently issued a Board Resolution (the Resolution) restricting the ownership of shares in listed financial institutions.
The Resolution provides that one person's ownership of shares may not exceed five percent of the shares of any Qatar Stock Exchange-listed financial institution, whether direct or indirect. However, this percentage may be increased up to 10% subject to the prior approval of the QCB.
Shares owned or held by the state, Qatar Foundation for Education, Science and Community Development, the funds of the General Retirement and Social Insurance Authority, Qatar Investment Authority and Qatar Holding Company are exempt.
The Resolution further provides that, without prejudice to the QCB's authority to apply penalties to the financial institutions pursuant to Law No. 13 of 2012 on the QCB and Regulation of Financial Institutions, no person may benefit from the voting rights in the shareholders' general meeting or in the management of a financial institution in excess of the permitted percentage limit.
In application of the provisions of the Resolution, indirect ownership means: the ownership by economically or legally interrelated persons of an organisation's shares, whether they are natural or legal persons, and whether such relationship is by means of ownership, common management or interrelated interests.
'Common ownership or management' means any economic or legal relationship by means of ownership or management.
'Interrelated interests' means each and every interest or relationship giving a person the right to control another person or exercise influence over them in respect of making financial or operational decisions or an alliance of a group of persons.
The Resolution stipulates that all financial institutions subject to its terms adjust their statutes and amend their articles of association to conform no later than one year from the effective date, being March 21 2016. Failing this, they may be subject to the penalties set out above, including the limit on voting rights.
Although the application of the Resolution might create both practical and legal challenges for the affected financial institutions in terms of compliance, the initiative reflects Qatar's strategic plan to improve governance rules, protect consumers and investors against monopolies and also to strengthen the financial sector's infrastructure.