Qatar: draft of new Commercial Company Law releasedJanuary 28, 2013
The Ministry of Business and Trade released the draft of the new Commercial Company Law (CCL) on 14 January 2013. The draft, once effective, would repeal the current CCL issued by way of Law No. 5 of 2002.
The Ministry clarified that the main objectives of the draft include streamlining incorporation procedures and following international best practice in order to improve the ranking of Qatar in terms of ease in doing business.
The drafting of the new text was carried by a committee composed of representatives of the Ministries of Business and Trade, Economy and Finance, and Justice; Qatar Central Bank; Qatar Financial Markets Authority; General Secretariat of Council of Ministers; Amiri Diwan (Head of State’s Cabinet); and experts from other bodies and authorities.
The main features of the draft, which comprises 13 chapters and 340 articles, are as follows:
- Chapter one deals with general provisions applicable to all companies, such as definition of a company, forms, contributions, shares (or interest). The draft provides for the following forms of companies:
- General partnership (which has a legal personality)
- Limited partnership
- Joint venture (association en participation)
- Public joint stock company
- Private (closed) joint stock company
- Limited partnership by shares
- Limited liability company (LLC)
It should be noted that the draft, unlike the current CCL, does not consider the one-person company and the holding company as separate forms of companies. Under the draft, the former is a variety of LLC and the latter may either be a joint stock company or a LLC.
As to incorporation procedures, the draft introduces the concept of a one-stop shop, which would deal with all required procedures to establish a company. All concerned ministries and authorities would be represented therein. The details of implementation would be laid down in a decision of the Minister of Business and Trade.
- Chapter two contains provisions governing the general partnership companies. Main deviations from the provisions of current CCL include the addition of private joint stock companies to the list of companies through which a partner may not compete with the general partnership.
- Chapter three governs limited partnerships.
- Chapter four governs joint ventures.
- Chapter five deals with public joint stock companies. Main deviations from the current CCL include that: (i) companies incorporated by the Government (or the like) are subject to the same provisions as other joint stock companies, except with respect to the number of founders which may be less than five. Under the current CCL, the statutes of such companies may deviate from the provisions of the law in all respects; (ii) subscriptions to the capital of public joint stock companies may be made through banks or through companies established for this purpose; (iii) up to one-third of the members of the board of directors may be released from the obligation to own shares in the company; (iv) representatives of the state (and the like) in the board of directors are appointed for a term of three years, which may be renewed only once. This does not apply to representatives appointed in their capacity (i.e., because of the position they are occupying); (v) director’s fees are subject to limits when the company realizes profits; (vi) nominal value of shares may range from QAR1 to QAR100 (instead of QAR10 under the current CCL); and (vii) joint stock companies are allowed to issue tradable sukuk (i.e., securities complying with Islamic Sharia law).
- Chapter six deals with private (closed) joint stock companies.
- Chapter seven deals with partnerships limited by shares.
- Chapter eight governs the limited liability company. Main deviations from the current CCL include that an LLC may be incorporated by one partner (under the current CCL, the one-person company was a distinct form of companies). Also, no minimum capital is required to incorporate an LLC. The draft only provides that the capital must be sufficient to achieve the company’s purpose. The current CCL provides for a minimum capital of QAR200,000 (US$54,794). This is one of the measures that aims at making doing business in Qatar easier.
- Chapter nine deals with holding companies.
- Chapter 10 deals with conversion, merger, acquisition and division of companies.
- Chapter 11 governs the winding up of companies.
- Chapter 12 deals with control on companies and introduces a series of administrative sanctions that the Ministry of Business and Trade may impose on non-compliant companies. These sanctions range from the issuing of a warning or blame to the imposition of a financial sanction, which can be as high as QAR10,000 per day for continuous offences and QAR1 million in other cases.
- Chapter 13 deals with criminal offences and penalties.
The draft is published on the Ministry of Business and Trade’s website (in Arabic) for public consultation and comments. It still needs the approval of the Council of Ministers (after being formally submitted by the Ministry of Business and Trade) and the Head of State.
This is expected in the coming months.
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