Legal framework governing foreign investment and company registration in Qatar

Foreign institutions can be confident in the rule of law in Qatar, as its bicephalous legal system is accessible to international investors. Business can be conducted in various ways: by registering with the Qatar Financial Centre; incorporating a local entity under Law No. 5 of 2002; or appointing a commercial agent, branch office or representative trade office.

In August 2015 the new Commercial Companies Law (CCL) of 2015 was introduced along with changes such as the minimum capital requirement for limited liability companies, previously set at QR200,000 ($54,926). It is important for foreign investors to be familiar with the law, the local market and regulations. This white paper included important information regarding the commercial sector. A company is a legal entity, allowed by law to appoint and permit a group of people as shareholders, and to apply to the relevant governmental authority – the Ministry of Economy and Commerce (MEC) – for an independent organisation to be created. There are different types of companies, as listed below.

Limited Liability Company (Llc)

An LLC no longer requires minimum capital of QR200,000 ($54,926) to be established. No capital is required under the current commercial law and regulations, and the structure of the company can be based around one single 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 issued an exemption if they wish to invest in sectors that are prioritised for Qatari nationals. A single person company (SPC) is an LLC with only one shareholder. A foreign investor can wholly own an SPC if they obtain an exemption to the foreign investment law. This process may take several months or years, and success is not guaranteed.

Another way foreign investors may establish a company in Qatar is to have a local partner who owns 51% of the shares in the company, leaving the investor with 49%. These percentages do not necessarily reflect profit shares.

LLCs are not permitted to issue shares or bonds even if they are freely transferable. All shareholders must be aware of the transfer, and they must all be offered the opportunity to transfer by pre-emption or they may waive their rights.

With Qatar owning one of the world’s largest gas reserves and playing host to 2022 FIFA World Cup, investment and business opportunities are expanding in the country, attracting a growing number of international investors and businesses to the region.

Shareholding Company

There are two types of shareholding companies: public and private.

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 into a private shareholding. If a shareholding is registered on the QSE, it must have at least 30 shareholders. There is a minimum capital requirement of QR40m ($11m) for public shareholdings registered with the QSE. Start-up shareholdings must have a capital of QR10m ($2.7m) before registration at the QSE under Article 9 of the CCL.

Private shareholdings are governed by their own regulations based on Article 207 in the new CCL, previously the old Article 68 regime. It is no longer possible to incorporate a public shareholding company under the new article. Government or government entities can establish a private shareholding, which can be done in partnership with foreign entities. These companies can, through their articles of association, opt out of the provisions of the CCL.

This allows for a considerable degree of flexibility, such as increasing the share allocation of foreign investors to a rate above the standard 49%, provided they are granted the approval of the MEC.

To obtain commercial registration and establish a company in Qatar, the following is needed:

• Memorandum of understanding and articles of association in the Arabic language;

• Bank account details and statements displaying the value of the share capital deposit in the bank;

• For foreign companies, a certificate of incorporation that is authenticated, notarised and provided to the MEC, including granting power of attorney to someone representing the company in Qatar;

• A new trade name to be approved by the commercial registration officer; and

• Chamber of Commerce registration and the commercial registration certificate. Once a company has received its commercial registration certificate, the share capital is released to the main authority to run the firm. For full registration, one must obtain an immigration card, a signage licence and a commercial licence. The relevant authorities for licence approvals are:

• Industrial companies seek approval from the Ministry of Energy and Industry.

• Law firms seek approval from the Ministry of Justice.

• Education institutions seek approval from the Ministry of Education and Higher Education.

• Health care entities seek approval from the Ministry of Public Health.

• Tourism companies seek approval from Qatar Tourism Authority.

• Engineering consultancies seek approval from the Ministry of Municipality and Environment.

Branch Offices

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 Qatar.

• A Qatari partner is not required for a branch office – this must be sanctioned by the MEC.

• A branch office cannot conduct business with the private sector – it must be governmental.

Commercial Agency

A Qatari national can be appointed as an agent 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. Registration of agents is subject to Commercial Agents Law No. 8 of 2002. Termination of an agent burdens the contracting 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 and services, even if this was indirect. Those who claim to be agents without authoritative registration or permission will be penalised under Commercial Law No. 27 of 2006.

Representative Trade Office (Rto)

Decision No. 142 of 2006 of the MEC permits registration and regulation of RTOs. An RTO is prohibited from signing business contracts or contractual agreements in Qatar. Any form of business must be conducted by the foreign company promoted by the RTO, and the contracts must be formed outside of Qatar. When a business entity has been completely established, it is required to protect its interests, especially when contracting with other companies and entities. International companies may 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 Qatar’s Civil Code.

Labour Law

The new Law No. 21 of 2015 regarding expatriate entry, exit and residence was published in the Official Gazette and came in to force on December 13, 2016. It stipulates that the employer/ employee relationship must be governed by a contractual agreement. There will be no more kafala, or sponsorship, system. Old post-residency restrictions have been scrapped according to the new law, and expatriates do not need to leave the country for two years before applying for a new job.

The new changes allow expatriates to switch jobs at the end of a fixed-term contract. If an employee terminates their contract early, they will have to leave the country and come back after the contract term has expired, unless they get the approval of their ex-employer, the Ministry of Interior (MoI) and the Ministry of Administrative Development, Labour and Social Affairs (MADLSA), according to Article 21.

All types of contracts will start from the date of enforcement of the new law, regardless of how many years the employee has spent in 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 Qatar. Foreign nationals no longer need to apply 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 the exit visa is denied, the foreign national may complain to a grievance committee under the new law. In the case of an emergency, the council must make a decision within three days, according to Article 7.

Changes & Development

The main changes to the laws governing foreign workers include:

• The employment of expatriates in Qatar is now entirely governed by contracts.

• Post-residency restrictions have been scrapped.

• Previous restrictions that imposed a two-year ban on a new work visa will no longer be legal.

• No approval from former employer needed if employee is recruited by a new employer.

• Exit permits will not be required for travel. They will become invalid with the enforcement of the new law.

• To leave the country, an employee needs to inform their employer at least three days before and apply through the online Metrash 2 system.

• All employment contracts of all expatriate workers who are already will be replaced with new contracts by the end of 2017.

• Contracts start from the date an employee signs a fresh employment contract.

• Employment contracts have to be approved by the MADLSA.

• Closed contracts shall not exceed a period of five years.

• Employees with open-ended contracts can move to another employer after spending a minimum of five years with the first employer.

• Workers with fixed job contracts can change their work and sign new contracts if they wish at the end of the contract period without a no objection certificate, but approval from the MoI and the MADLSA is required.

• A non-Qatari national can also move to another sponsor with the approval of the Mol and MADLSA if the sponsor is dead or the company no longer exists for any reason.

• A QR50,000 ($13,730) fine and jail terms of up to three years will be given to recruiters who allow their employees to work for other parties without prior official approval.

• A QR10,000 ($2746) to QR25,000 ($6866) fine will be given for withholding the passport of a non-Qatari employee.

Human Resources

Qatar’s Law No. 15 of 2016 on human resources is designed to motivate and encourage public sector employees. The law shall be applicable to civil employees in ministries, governmental institutions and public establishments and bodies, in addition to the entities financed by the state or a company owned in whole or in part by the state, for Qatari and non-Qatari employees.

Employees appointed by the following entities shall be excluded from the application of the law: Al Diwan Al Amiri, diplomatic and consular corps, universities, Qatar Petroleum, the State Audit Bureau and the Qatar Investment Authority.

The law affirmed the state’s support to people with disabilities. Moreover, it aimed to strengthen the Qatari family, as conditions were added allowing Qatari women to work part-time and to obtain long-term leave to care for sick children. The supervisory body to apply the terms of the new law is the MADLSA instead of the General Department, which is the competent administrative unit in the human resources department in the government.

Some definitions have been added to the law such as “the ministry and the minister”. It amended salary to “the basic salary”, which means “the salary dedicated to the grade plus the periodical incentives only” and “the total salary”, meaning “the basic salary plus all kinds of incentives and allowances”. The old law excluded the added allowances, overtime allowance and allowance for private car use.

The law included the issuance of new grades and salaries, schedule (1) (2), and defined a fixed salary for the positions of undersecretary and assistant undersecretary. It includes 14 grades in addition to undersecretary and assistant undersecretary.

It created some schemes such as private incentives, including retention bonuses and monthly awards instead of yearly awards; holiday leave instead of additional working hours; as well as the possibility to occupy some jobs part-time. The law indicated that each governmental body has the right to prepare its budget and offer suggestions on creating new jobs and utilising its human resources.

Training courses shall be available to all employees nominated for promotion to allow them to gain any required skills to occupy their new position. The ministry will set out plans to obtain university and higher education qualifications for staff in coordination with the relevant governmental bodies.

The law also includes terms and conditions of appointment, specifying the salaries, allowances and other employee advantages, as well as the system of evaluation, promotion and transfer. Moreover, it stipulates that employees have the right to receive an end-of-service award and pension together.