Under the applicable laws and regulation in the State of Qatar, publicly listed companies can combine by either mergers or acquisitions as addressed under articles 276-290 of the Qatari Commercial Companies Law No. 11 of 2015 (Commercial Companies Law).
Publicly listed companies in Qatar, or what are commonly referred to as public shareholding companies, or, public joint stock companies are incorporated through a certain number of initial founders, no less than five, who must within 60 days of incorporation, offer its stocks to the public through an initial public offering.
Article 276 of the Commercial Companies Law states that ‘a company’ . . . (meaning any company listed under the Commercial Companies Law, which includes public shareholding companies) . . . ‘shall have the right to merge or combine with any other company, whether or not such company was of the same form or type, even if it was undergoing liquidation’.
Under the default rules, public shareholding companies are not permitted to conduct private sales as that would be in violation of the company’s obligations towards its stockholders. Publicly listed companies’ shares (ie, shares of companies listed on the Qatari Stock Exchange) may be sold and bought by any person duly registered with the relevant bodies in Qatar, which include but are not limited to, the Qatar Financial Markets Authority (QFMA) and Qatar Central Bank (QCB). Public Shareholding Companies may also sell or buy stocks, merge or acquire other corporations through private offerings.
There are only two types of publicly listed entities in Qatar, which are: public shareholding companies and investment funds (investment funds can be Qatari or foreign). According to the default rules under the Commercial Companies Law and with the exception of private sales, public shareholding companies are permitted to merge, acquire, be acquired and be divided. Combinations of business entities under Qatari law can take place through either a merger or an acquisition.
Merging is the process of combining two or more entities into one single entity. This process is addressed under Chapter 2, articles 276 -281 of the Commercial Companies Law, which states that a merger involves the combination of two or more companies together whereby only one entity exists after the completion of the process. The entity shall either be one of the merging entities or it could be a newly formed entity born by virtue of the merger. Article 161 of the Qatar Central Bank Law No. 13 of 2012 (QCB Law) reiterates the same principles mentioned above. As a prerequisite condition for all mergers, an evaluation of the merging companies’ assets and shares or stocks will be required in order to determine the value of such a merger. In addition to the above, any merger will be contingent on the issuance of an extraordinary general assembly resolution of the shareholders or stockholders with a consenting voting percentage of no less than that required for the amendment of the merging companies’ articles of association (AoA). The steps involved towards the completion of the merger would generally include the following:
- issuance of a resolution for the dissolution of the merged company;
- evaluation of the merging company’s assets in accordance with the applicable regulations;
- issuance of a resolution by the engulfing company approving the merger of the company mentioned under point (i) to the engulfing company and approving an increase in the share capital reflecting the added assets as per the evaluation mentioned under point (ii) above (if all the companies are being dissolved and a new entity is being formed, this resolution will not be required);
- distribution of the added share capital onto the shareholders or stockholders pro rata their existing shareholding or stockholding percentages;
- publishing of the merger resolution in two daily local newspapers, at least one of which shall be in Arabic; and
- publishing of the merger resolution on the engulfing company’s website.
Acquisition: article 287 of the Commercial Companies Law states that an acquisition can take place through any of the following means:
- acquiring, whether directly or indirectly, a percentage of the share capital of the acquired company that grants the acquirer a majority voting power;
- acquiring majority voting rights through an agreement with the shareholders or stockholders, provided that the agreement is not to the detriment of the acquired company;
- acquiring a controlling voting power over the general assembly meetings or resolutions of the acquired company (owning 40 per cent of the stocks or shares shall be considered an acquiring percentage provided that such percentage is the highest stockholding or shareholding percentage); or
- acquiring a voting power that enables the acquirer to appoint or remove the majority of the members of the board of directors, supervisory council or managers of the acquired company.
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