Rules governing foreign investment and company registration in Qatar

Companies intending to carry out business in Qatar must have a legal presence in the state. This may be by virtue of a company, branch office, trade representative office or agency relationship. Incorporating a company is usually the most suitable approach if the foreign investor intends to have a long-term presence in Qatar.

The type of company to be incorporated depends on various factors. According to Qatar’s Foreign Investment Law No. 13 of 2000, with a few limited exceptions, companies in Qatar must have at least 51% Qatari ownership. Where permitted by the Ministry of Economy and Commerce (MEC) and subject to its discretion, non-Qatari investors may own up to 100% of companies operating in the following “priority sectors”:

• Health;
• Education;
• Tourism;
• Agriculture;
• Manufacturing;
• Distribution services;
• Development and exploitation of natural resources;
• Energy and mining;
• Consultancy services;
• Technical work services;
• IT;
• Cultural services;
• Sport services; and
• Entertainment services.

Certain security-related services can only be carried out by an entity that is 100% Qatari-owned.

Businesses established in the Qatar Financial Centre (QFC) or in a “free zone” may be wholly owned by foreign investors. The QFC operates as a unique onshore system which allows for 100% foreign ownership and caters to professional and financial services companies and firms. The scope of companies that can be incorporated in the QFC is currently being broadened, with a temporary halt on the licence of new law firms having been adopted since March 2015.

The only free zone currently in operation is Qatar Science and Technology Park, which is reserved for technology companies or start-ups that contribute to technological development and training in the country.

In January 2016 the Qatari Cabinet announced a draft law on the opening of new free zones – the Special Economic Zones (SEZs). Three new SEZs are planned. The first phase of the first SEZ, Ras Bufontas, near Hamad International Airport, is due to open in the fourth quarter of 2017.

If a foreign company has a contract with the government, or a quasi-government entity, it may register a branch office to perform that contract, which would be 100% foreign-owned. The contract must be in respect of a government-qualified project which would facilitate the performance of a public service or benefit.

The branch is only permitted to carry out that specific contract; it cannot generally operate and do business in Qatar. In November 2014 Law No. 20 of 2014 amending the Commercial Registration Law (No. 25 of 2005) introduced a more streamlined process for applicants seeking to open foreign companies.

Incorporating A Company Under The Commercial Companies Law

Unless its commercial activities fall within one of the “priority sectors” and an exemption is granted, a company incorporated under the new Commercial Companies Law No. 11 of 2015 (CCL) must have at least 51% Qatari ownership.

The company structures available under Article 4 of the CCL are:

• A limited liability company (LLC);
• Limited partnership company;
• Joint partnership company;
• Particular partnership company;
• Equities partnership company;
• Public shareholding company; or
• Private shareholding company.

A common corporate structure in Qatar is the LLC. An LLC can have between one and 50 shareholders (Article 228, CCL), and can partake in most commercial activities. The new CCL removed the minimum capital requirement for LLCs, except for holding companies, which need a minimum capital of QR10m ($2.7m).

The liability of the shareholders of an LLC is limited to the value of their shares in the company. Profit can be allocated in different proportions to the shareholdings.

The CCL introduced a “single window” provision at Article 19, which provides that the MEC will guarantee ease and efficiency in incorporating and issuing licences to companies.

Under the new process, incorporating an LLC company should take between one and two days, and involves the following:

• Reserving the name of the company;
• Submitting the memorandum/articles of association of the Qatar company for approval to the Control Department of the MEC, as well as notarised, authenticated and consularised copies of the original and Arabic translations of:

1. The constitutional documents of the foreign shareholder entity; and
2. A board resolution and power of attorney (in English and Arabic) authorising someone to act on behalf of the foreign shareholder to establish and manage the Qatar company.

• Registering for the Commercial Registration Certificate (CRC) with the Commercial Registration and Licensing Department;
• Registering with the Qatar Chamber of Commerce;
• Depositing the agreed share capital in a Qatari bank;
• Entering into a lease contract for an office space; and
• Obtaining a municipal licence, signage licence and immigration card.

Companies must obtain a tax card within 30 days from the date of obtaining their CRC, or risk incurring a penalty of QR5000 ($1370). Additional licences and approvals may be required, depending on the commercial activities of the company. Most notably, a company that is performing engineering works must obtain a licence from the Committee for Accreditation of Engineers and Engineering Consultancy Offices, by virtue of Engineering Law No. 19 of 2005 and its regulations. Foreign companies looking to undertake any engineering consultancy activities in Qatar must provide proof of certification to undertake such activities in its country of incorporation.

An alternative to incorporation is entering into a commercial agency agreement with a Qatari agent to sell goods, or provide services related to such goods, in Qatar. Under such arrangements, Commercial Agency Law No. 8 of 2002, where it applies, may offer the commercial agent significant protections including rules on compensation for termination.

These protections apply where the agency is exclusive. A purchase and resale, rather than a commission based arrangement would not be regarded as an agency for these purposes.

A company looking only to promote its goods or services in Qatar may incorporate a trade representative office (TRO). This is provided that the goods it is promoting are registered in the country it is incorporated in. A TRO may promote, but not carry on or execute, commercial activity.

Labour Law

Employment in Qatar is primarily governed by the Labour Law (Law No. 14 of 2004) and a series of related ministerial resolutions. In 2015 two significant changes were made to the Labour Law in relation to payment of workers, visas and sponsorship. The Labour Law should be read in conjunction with the sponsorship and immigration laws, which are largely set out in Law No. 21 of 2015 on the Regulation of the Expatriates’ Entry, Exit and Residence (the Sponsorship Law). The Labour Law applies to everyone in Qatar (although employees of companies registered in the QFC are also subject to the QFC Employment Regulations – QFC Regulation No. 10, which displays some aspects of the Labour Law).

The Labour Law imposes certain mandatory minimum standards which cover a broad range of issues including wage payment, working hours, living conditions and restrictions on the employment of non-Qatari nationals (i.e., “Qatarisation”).

Recent amendments to the Labour Law target the wage payment mechanism, as well as laws regulating the entry, exit and sponsorship system, reflected in the new Sponsorship Law.

Property

The two types of ownership status in Qatar are:

• Absolute ownership: the ownership of property and all rights in the property, whatever purpose the property is for without restriction. Absolute ownership is an entitlement afforded to Qatari nationals and wholly owned Qatari entities only, except in certain areas.
• Leasehold rights: this is a long-term right to property owned by another. Leasehold rights grant the beneficiary the right to use and utilise, occupy or let the property for a period of 99 years. The right is transferable and can be sold, sub-leased, mortgaged or passed to heirs.

Leasehold rights are available to non-Qatari nationals.

Foreign Ownership

Historically, ownership of property in Qatar was restricted to Qatari nationals and wholly owned Qatari corporate entities (Law No. 5 of 1963). In 2002 GCC nationals and foreigners were granted restricted ownership rights in relation to residential units in certain areas of Qatar (Law No. 2 of 2002 and Law No. 17 of 2004). In 2006 this entitlement was extended by the Council of Ministers’ Resolution No. 6 to 18 geographical areas within Qatar, in which non-Qatari nationals could hold leasehold rights to residential property. In 2014 Law No. 6 regulating real estate development was introduced and further defines the right of non-Qatari people and corporate entities to land ownership.

Whilst GCC nationals are generally allowed to purchase property in Qatar, certain limitations are imposed. For example, only three properties may be owned on an area not exceeding 3000 sq metres, and the properties may only be used for residential purposes. A property may not, therefore, be purchased for commercial or investment purposes such as leasing.

Currently, non-Qataris (including companies not wholly owned by a Qatari) may only take absolute ownership of properties in certain designated areas including The Pearl-Qatar, West Bay Lagoon and Al Khor Resort.

The Red Law

As part of the government’s initiative to attract investment into the real estate sector, the Real Estate Development Law No. 6 of 2014 (the RED Law) was enacted to regulate real estate developers.

A key element of the RED Law is that it seeks to protect purchasers of off-plan units by ensuring the proceeds of such sales are used towards the construction of the development.

As a result of the new law, off-plan purchasers have rights “in rem” in the land rather than purely contractual rights pursuant to the sale and purchase agreement. Developers may only sell off-plan with the consent of the MEC.

The consent process includes creating the strata title for each off-plan unit (in collaboration with the Ministry of Municipality and Urban Planning), opening an escrow account and submitting the cash flow forecasts for completion of the project along with construction milestones and any promotional material relating to the sale. The RED Law also grants permission to non-Qatari companies of good standing and with 10 years of experience to carry out real estate development activities within designated geographical areas.

Impact Of Law No. 6 Of 2014 On Financing Real Estate Projects

Article 25 of the RED Law requires developers to get consent from the MEC prior to structuring the finance for a real estate project. Consent is given where there are unreserved off-plan units, the value of the financing does not exceed the value of the unreserved off-plan units, and the aggregate amount deposited in the escrow account exceeds the value of the construction works completed (as independently certified).

Banks providing real estate financing typically take a mortgage over the land and are afforded the rights subject to the rights of the customers that have purchased off-plan units.

Dispute Resolution

Parties may resolve disputes through litigation in Qatari courts, arbitration or any other means of alternative dispute resolution (such as mediation or expert determination) elected in their contracts or through agreement. Litigation and arbitration are usually preferred for most large public contracts. Parties are entitled to choose the law which will govern their contract, provided it does not contravene public policy and morals in Qatar and in relation to real property which, pursuant to Article 25 of the Civil Law, is governed by the law of the state where the property is located.

Litigation

The right of litigation is inviolable and guaranteed to everyone in Qatar. Civil law cases will first be heard by the Court of First Instance, on appeal by the Court of Appeal, and then by the Court of Cassation. The court investigates facts by appointing an expert to produce a report opining on the relevant facts of the dispute. The process is governed by Chapter Eight (Articles 333-361) of the Civil and Commercial Code of Procedure (CCCP) (Law No. 13 of 1990).

Experts meet each party and possibly attend a site visit, following which they will produce a report that is submitted to the court and parties. The parties may comment on the report, following which the judge will issue a decision either dismissing the claim or awarding a remedy. Not all judicial decisions are published, and those that are in Arabic.

Arbitration

Arbitration is codified in Qatar’s legislation within the CCCP at Articles 190-210, which govern the procedural aspects of arbitration in parallel with any chosen arbitral rules. In 2009 the Qatar International Centre for Conciliation and Arbitration (QICCA) was established. The court has mandatory jurisdiction of disputes relating to firms registered with the QFC and opt-in global jurisdiction. It also offers arbitration and mediation services; and in 2012 published the QICCA Rules of Conciliation and Arbitration, based on the UN Commission on International Trade Law model, to provide a private, fast, economical forum for the resolution of disputes.

Qatar is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and, as such, an arbitral award made in another jurisdiction will be enforceable against a company with assets in Qatar.