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Doing Business in Qatar ( QNB 2009 Report )

Structure and Governance of Companies

1. Types of Companies
2 . Establishing a Public Shareholding Company
3 . Requirements for a Public Shareholding Company
4 . Transformation, Merger and Division of Companies


1. Types Of Companies
The regulations relating to the structure and governance of companies are governed by the Commercial Companies Law, Law No. (5) of 2002, replacing Law No. (9) of 1998. Certain provisions of the Commercial Companies Law were changed as per Law No. (16) of 2006. One of the main changes of the new law is the removal of the provision where only nationals of the State were allowed to form certain types of partnership companies. Another significant change is the addition of two new types of companies. The New Commercial Companies Law provides for the incorporation of eight different kinds of companies in Qatar :

A. Simple Partnership Company
A Simple Partnership Company is a company formed by two or more natural persons who are personally and jointly responsible for the liabilities of the company.
• The name of the company shall be formed by reference to the name of all the partners, or the name of one partner followed by the words “And Partners”. A company may have a special commercial name, provided it is connected with the fact that it is a simple partnership company.
• A ll the partners in a simple partnership company shall be natural persons.
• A simple partnership company should have a Memorandum of Association.

B. Joint Partnership Company
A Joint Partnership Company is a company consisting of two types of partners:
I. Joint partners who are empowered to administer the affairs of the company, and are jointly and personally responsible for the company’s liabilities.
II. Trustee partners, who merely contribute to the company’s capital without being responsible for its liabilities except to the value of their shares in the capital.
• All the Joint partners in a joint partnership company shall be natural persons.
• A Trustee partner shall not interfere in the management of the company.

C. Joint Venture Company
A Joint Venture Company is a company formed by two or more persons. It is an un-incorporated entity, without validity against third parties and has no legal personality and is not subject to any registration procedures in the commercial register. A Memorandum of a joint venture may be proved by all evidential means including substantive and circumstantial evidence.
• The resolutions of a Joint Venture Company are decided by the unanimous vote of all the partners, unless stated otherwise by the Memorandum.
• If non-Qatari’s are partners of a Joint Venture Company, then the company is allowed to carry out only those business activities stipulated by law for non-Qatari’s.

D. Public Shareholding Company
A Public Share holding Company is a company whose capital is divided into shares of equal value, which are transferable. Shareholders of a Public Share holding Company are not liable for the company’s obligations except for the amount of the nominal value of the shares for which they subscribe.
• A Public Share holding Company should have a minimum of five shareholders and in all cases the name of the company should be followed by the words “Qatari Public Share holding Company”.
• Subscription to the shares of the company shall remain open for not lesser than two weeks and not more than four weeks. Founders may extend the subscription period by another two weeks if shares are not fully subscribed, after obtaining the consent of the Ministry.
• A Public Shareholding Company shall have a definite term, which should be indicated in the Memorandum of Association and in the Articles of Association, in accordance with a format issued by a Ministerial Decree. The fixed term of a Public Shareholding Company may be extended by an extra ordinary resolution of the General Assembly.
• The capital of a Public Shareholding Company should not be less than QR 10,000,000/- (Ten Million Qatari Riyals). The nominal value of each share may be less than QR 10, subject to the Ministry’s approval.
• A Company may purchase its shares for the purpose of selling them in accordance with the rules determined by the Qatar Financial Markets Authority.

E. Limited Shares Partnership Company
A Limited Shares Partnership Company is a company formed by two groups, namely:
I. Joint Partners comprising of one or more joint partners who are personally liable for the debts of the company.
II.Trustee Partners comprising of no less than four shareholding partners whose liability is limited to the value of shares held in the capital.
• The company should have a Memorandum and Articles of Association signed by all founding partners. In all cases the words “Limited Shares Partnership Company” should be added to the name of the company.
• For the joint partners, the company shall be governed in the same manner as a Simple Partnership Company and all the joint partners shall be natural persons.
• The company should have a minimum capital of QR 1,000,000/- (One Million Qatari Riyals), divided into shares of equal value that are transferable and indivisible and should be fully paid on incorporation.
• The company must have a General Assembly composed of all joint and trustee shareholding partners.
• A Limited Shares Partnership Company is managed by one or more joint partners.

F. Limited Liability Company
A Limited Liability Company is a company formed with at least two partners and not more than fifty partners, whose liabilities are limited to the value of shares held in the company. The shares of a Limited Liability Company are not freely transferable.
• The company should have a Memorandum and Articles of Association signed by all the partners. In all cases the words “Limited Liability Company” should be added to the name of the company.
• The company must have a minimum capital of QR 200,000/- (Two Hundred Thousand Qatari Riyals), divided into shares of equal value not less than QR 10/- (Ten Riyals) each.
• The management of a Limited Liability Company is conducted by one or more managers whether being partners in the company or not.
• A Limited Liability Company may not engage in the business of insurance, banking, or in the nvestment of funds, whether as a principal or an agent.

G. One Person Company
A One Person Company refers to a company in which every economic activity and its full share capital is held by one natural or corporate person.
• The company should have an Article of Association stating its rules, data, and procedures of its entry and registration. Such a company shall not have a corporate personality before its registration. The name of the company shall be linked with the name of the holder of is share capital followed by the words “One Person Company (O.P.C)”.
• The company must have a minimum capital of QR 200,000/- (Two Hundred Thousand Qatari Riyals), paid in full. Such share capital may include shares in kind, whose value is estimated by professional experts .
• The company shall be managed by the holder of its share capital, who may appoint one or more managers to represent the company in its transactions. The company’s owner shall be responsible from his own assets for company obligations, unless he seperates his personal interests from that of the company. The company shall be dissolved upon the death of the holder of its share capital, unless the shares of the heirs is held by one person, or the heirs select to continue the company in another legal form.

H. Holding Company
A Holding Company is a joint stock, limited liability or one person company financially and administratively controlling one or more other companies by holding at least 51% of the shares of such company(ies) whether they are shareholding, limited liability or one person companies.
• The Capital of a Holding Company shall not be less than QR 10,000,000/- (Ten Million Qatari Riyals).
• The words “Holding Company” should be added to the name of the company.
• To the extent not contradicting to the provisions, holding companies shall be subject to the provisions hereof relating to shareholding, limited liability or one person companies, as the case may be.


2. Establishing a Public Shareholding Company

The establishment of a Public Shareholding Company involves the issuance of a resolution by the Minister of Economy and Commerce. A Public Shareholding Company should have a Memorandum and Articles of Association which contain the following information:
• the company name and principal place of business;
• the objective for which the company has been established;
• the names of the founders, their nationalities, place of residence, occupations, and the number of shares subscribed by each of them;
• the amount of company capital, the number of shares into which the capital is divided, their type and value;
• the duration of the company;
• a statement of every non-monetary share, the name of the person contributing this share, all the conditions relating to its subscription, and the specific rights in kind attached to this share;
• a statement of the estimated amount of formation expenses, remuneration and costs paid or undertaken to be paid by the company during its incorporation; The founding members from among them shall elect a committee of not less than three and not more than five who shall take over the incorporation procedures before the authorised administration.

The founding members are required to subscribe to not lesser than 20% of the shares and not more than 60% of the shares in the company. No founding member shall subscribe to more shares than the percetage allowed in the company’s articles of association.

3. Requirements for a Public Shareholding Company

Board of Directors
A Public Shareholding Company should be managed by an elected Board of Directors. The Articles of Association shall define the company’s formation, the number of its members and the term of office of its members, provided the number of its members is not be less than five and does not exceed eleven. The tenure of board members are set for a period of three years and they can be re-elected more than once unless stated otherwise in the Articles of Association. The Board of Directors have to prepare for every fiscal year the company’s audited financial statements, along with a report on the company’s activities during the past year and the future plans for the coming year.

General Assembly
The meeting of the General Assembly (shareholders) is to be convened upon the invitation by the Board of Directors at least once a year. The meeting should take place within four months following the end of the company’s financial year. Invitations containing a clear summary of the agenda for the General Assembly should be sent to all shareholders by registered post. The Board of Directors shall call for a General Assembly meeting upon request by the company’s auditor or to discuss important matters upon the request of one or more shareholders holding not less than 10% of the capital. The Chairman of the Board of Directors should at least fifteen days before the general assembly meeting publish the company’s audited financial statements and report in two local daily Arabic newspapers.

• A n extraordinary General Assembly meeting is convened in discussing important matters such as; modifying the Memorandum or Articles of Association; increasing or decreasing the capital of the company; extending the duration of the company; dissolution, liquidation, assignment or merger with another company; or selling the entire undertaking for which the company was established.

Auditors
A Public Shareholding Company must have one or more auditors, who must be appointed by the General Assembly who also fix their remuneration. The auditors can be re-appointed annually but their term of office cannot exceed five consecutive years.

Closed Public Shareholding Company
A Closed Public Shareholding Company is a company in which there are at least five persons who hold the entire shares of the company, which cannot be offered for public subscription. The company should have a capital of not less than QR 2,000,000 (Two Million Qatari Riyals). A Closed Public Shareholding Company is governed by all the laws pertaining to Public Shareholding Companies, with the exception of public subscription and share transfers. A Closed Public Shareholding Company may be transformed into a Public Shareholding Company.

4. Transformation, Merger and Division of Companies
A company may be transformed into another type of company by a resolution of the General Assembly, subject to compliance with the requirements relating to the amendment of the company’s Memorandum and Articles of Association and the necessary steps for incorporation and commercial registration applicable to the category of the transformed company is taken. If the transformation is into a Public Shareholding Company, a period of three years must have expired from the date the company has been entered into the Commercial Register, and that the company has by carrying out the objects for which it was incorporated realised distributable net profits of not less than ten percent of the company capital during the two years preceding the transformation application.

A merger can take place by absorbing one or more companies into another existing company, or by combining two or more companies with a new company under incorporation. A company may merge with another company even while undergoing liquidation. No merger shall be valid unless a resolution has been issued by every company that is party to such a merger, in accordance with the requirements set for the amendment of a company’s Memorandum and Articles of Association.

A company may be divided into one or more companies upon the approval through a resolution issued by the General Assembly, consisting of shareholders holding at least three quarters of the company’s capital. Every company resulting from such a division shall assume a seperate legal entity, with all the consequences arising therefrom. The resolution to divide the company shall determine the number of shareholders or partners, their names, the entitlement of each in the companies resulting from the division, the rights and liabilities of such companies, and the method of distributing assets and liabilities among them.

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