The Qatari Way
Foreign businesses can be confident in the rule of law in Qatar, as its bicephalous legal system is conceptually accessible to foreign investors. Foreign investors can conduct business in a variety of ways, such as but not limited to registering with the QFC, incorporating a local entity under Law No. 5 of 2002, and appointing a commercial agent, branch office, or representative trade office.
In August 2015, the new Commercial/Corporate Law was introduced along with changes such as to the minimum capital requirement for limited liability companies, which was previously QAR200,000. Being familiar with the law, the local market, and regulations is a bonus in a state such as Qatar for the generation of business/commercial development. This article includes a variety of important information regarding the commercial/corporate sector.
A company is a legal entity, allowed by law to appoint and permit a group of people, as shareholders, to apply to the relevant governmental authority (Ministry of Economy and Commerce) for an independent organization to be created. There are different types of companies as listed below:
Limited liability company (LLC)
An LLC no longer requires a minimum capital of QAR200,000 to be established. No capital is required under the current commercial law and regulations. The structure of the company can be based around one shareholder who owns 100% of the company and its shares. Both Qatari nationals and foreign investors may set up an LLC; however, foreign investors must be aware that an exemption is to be issued for them to have this privilege and invest in sectors in which priority is given to Qatari nationals.
A single-person company, an “SPC,” is an LLC with only one shareholder. A foreign investor can wholly own an SPC if s/he obtains an exemption to the Foreign Investment Law. This process may take several months or years and success is not always guaranteed.
Another way foreign investors may conduct business in Qatar by establishing a company is to have a Qatari partner who owns 51% of the shares in the company, leaving the investor with 49%. It is of value to add that these percentages do not reflect profit shares.
LLCs may not issue shares or bonds even if they were freely transferable; all of the shareholders must be aware of the transfer, and they must all be offered transfer by pre-emption or they may waive their rights.
With one of the world’s largest gas reserves, the upcoming 2022 FIFA World Cup, and a robust economic profile, investment and business opportunities are expanding in Qatar. The country has and is still attracting foreign and international investors and businesses to the region.
There are two types of public shareholdings and private shareholdings.
Public shareholdings must be registered with the Qatar Stock Exchange (QSE) within 12 months of being established; otherwise the state reserves the right to convert the company to a private shareholding. If a shareholding is registered on the QSE (public), it must have at least 30 shareholders. The minimum capital for public shareholdings registered with the QSE is QAR40 million. The start-up shareholdings must have a capital of QAR10 million before registration at the QSE under Article 9 of the Companies Law.
Private shareholdings encompass their own regulations based on Article 207 in the new law, which was previously the old “Article 68″ regime; it is no longer possible to incorporate a public shareholding company under the new Article 207. Government or governmental entities, even a foreign entity together with the government or a governmental entity, can establish a private shareholding. These companies can, through their articles of association, contract out of the provisions of the Companies Law, allowing for a considerable degree of flexibility such as making the shares of foreign investors higher than the standard 49% with the approval of the Ministry of Economy and Commerce.
To obtain a commercial registration and establish a company in the State of Qatar, the following is needed:
•€‚A Memorandum of Understanding and Articles of Association that must be in Arabic as that is the only legal form accepted by the Ministry of Economy and Commerce.
•€‚Bank account details/bank statement of the value of the deposit of the share capital in the bank.
•€‚For foreign companies, the provision to the Ministry of Economy and Commerce of a Certificate of Incorporation that is authenticated and notarized, including a power of attorney appointing someone to represent the company in Qatar.
•€‚A new trade name to be approved by the commercial registration officer.
•€‚Chamber of Commerce registration and Commercial Registration Certificate. These documents are required to prove the company’s membership in the Chamber of Commerce.
Once a company has issued its commercial registration the share capital is released to the main authority to run the company. To complete full registration, the following must be obtained:
1) Immigration card
2) Signage license
3) Commercial license
Relevant authorities for license approvals:
•€‚Industrial companies—approval from the Ministry of Energy and Industry
•€‚Law firms—approval from the Ministry of Justice
•€‚Education institutions—approval from the Ministry of Education
•€‚Healthcare entities—approval from the Ministry of Health
•€‚Tourism companies—approval from Qatar Tourism Authority
•€‚Engineering consultancy office—approval from Ministry of Municipal Affairs and Agriculture
For specified government contracts performed by foreign investors a special exemption is required to avoid taxation; otherwise branches are fully taxable under taxation laws and regulations in the State of Qatar.
A Qatari partner is not required for a branch office; however, it must be government qualified by the Ministry of Economy and Commerce.
A branch office cannot conduct business with the private sector; all business must be governmental.
A Qatari national is used to distribute products for a company that is not established in Qatar and just wishes to sell its products and services in the Qatari Market. A couple of agents may be appointed or the company may appoint an exclusive agent to distribute its products. Registration of exclusive agencies is subject to the Commercial Agents Law No. 8 of 2002.
Termination of agencies burdens the original company to reward them with compensation even at the expiration of a fixed term. Commission is awarded to the agents for sales of the product/services even if this was indirect. Those who claim to be agents without authoritative registration/permission will be penalized under Commercial Law No. 27 of 2006.
Representative trade office (RTO)
The decision (142 of 2006) of the Ministry of Economy and Commerce permits registration and regulation of RTOs. An RTO is prohibited from conducting business contracts/contractual agreements in Qatar. They can only be generated to promote a foreign company in the Qatari market.
Any form of business must be conducted by the foreign company being promoted by the RTO; the contracts must be formed outside of the State of Qatar. When a business entity has been completely established it is required to protect its interests especially when contracting with other companies/entities. International company contracts are free to choose the law and jurisdiction that will govern that contract. If they do not choose an applicable law, the contract will automatically be governed by the State of Qatar’s Civil Code.
Labor Law – LAW 21 of 2015 (EXPATS ENTRY, EXIT, and RESIDENCE)
A contract-based relationship
The new law was published in the official gazette and came into force on December 13, 2016. The employer/employee relationship will be governed by a contractual agreement. There will no longer be a kafala (sponsorship) system. Old post residency restrictions have been scrapped according to the new law and expats do not need to leave the country for two years before applying for a new job. The new changes allow expats to switch jobs at the end of a fixed-term contract. If an employee terminates his contract early, he will have to leave the country and come back after the contract term has expired unless he gets the approval of his ex-employer, the MOI, and the MOLSA (Art. 21).
Unlimited-term contracts: employees will have to stay a minimum of five years at a company (Art. 21), and all types of contract will start from the date of enforcement of the new law regardless of how many years the employee has spent at the company. With regards to end-of-service benefits, past years spent in the company will be counted.
Another long-awaited change was made to the process of applying for an exit permit from the sponsor to leave the State of Qatar; expats no longer need to apply for approval for an exit visa. The new regulations require a 72-hour period to apply for permission from the employer before being able to leave. Should there be complications in this process or permission has been denied, the expat may complain to a grievance committee under the new law. In case of emergency, the Council must take a decision within three days (Art. 7)
Developments in the law have enhanced the strength of state policies for international human rights and are a success in implementing Qatar National Vision 2030.
Changes and developments
The changes that are set to transform worker lives in Qatar once the new law is enforced are:
1.€‚Employment of expats in Qatar will now be entirely governed by contracts.
2.€‚The post-residency restrictions have been scrapped; previous restrictions imposed a two-year ban on a new work visa, but such restrictions will no longer be legal.
3.€‚No approval from former employer if employee is recruited by a new employer.
4.€‚Exit permit will not be required for travel; this will become invalid with enforcement of new law.
5.€‚To leave the country, an employee needs to inform his employer three days before and apply through the online Metrash 2 system.
6.€‚All employment contracts of all expatriate workers who are already in Qatar will be replaced with new contracts by the end of this year.
7.€‚The date an employee has signed the fresh employment contract will be the date from which the new contract will be counted.
8.€‚Employment contracts have to be approved by the Ministry of Labor and Social Affairs.
9.€‚Closed contracts shall not exceed a period of five years.
10.€‚Employees with open-ended contracts can move to another employer after spending a minimum of five years with the first employer.
11.€‚Workers with fixed-job contracts can change their jobs and sign new contracts if they wish so at the end of the contract period without any NOC, but approval from the Ministry of Interior and the Ministry of Labor and Social Affairs.
12.€‚An expat can also move to another sponsor with the approval of MOI and MOLSA if the sponsor is dead or the company no longer exists for any reason.
13.€‚There is a QAR50,000 fine and jail terms of up to three years for recruiters who allow their employees to work for other parties without prior official approval.
14.€‚QAR10,000 to QAR25,000 fines for keeping the passport of an expatriate employee.