As part of Qatar Central Bank’s plan for reforms to the banking sector in Qatar this year, the QCB issued a new circular, circular No. 1 of 2016 (the “Circular”) setting out new ownership limits and requirements applicable to financial institutions listed on Qatar Exchange (“Public FIs”).

Under the provisions of the Circular, the QCB restricts the ownership by a single person (natural or corporate) to 5%, whether owned directly or indirectly. The 5% limit may be increased to 10% with the prior approval of the QCB and provided that the QCB’s requirements under Article 4 of the Circular are met.

Article 4 of the Circular lists the QCB requirements which apply to any person, or entity (whether Qatari or non-Qatari), applying to hold more than a 5% interest in a Public FI. These requirements include background information and details of the applicant in a form produced by the QCB, details of related parties and their holdings in the Public FI, any disclosure of any joint interest with such related parties, audited financial statements for any corporate applicant of the last 3 years, a detailed study on the purpose of ownership and information relating to change in the organisational structure of the Public FI.

State owned entities, Qatar Foundation, pension funds owned by the General Retirement Authority (GRSIA), Qatar Investment Authority and Qatar Holding (“Exempted Entities”) are exempted from the above limits on ownership in Public FIs.

The QCB states in the Circular that whoever exceeds the above percentages, excluding Exempted Entities, must sell the excess shares within one year from the date of the Circular.

Under Article 3 of the Circular, shareholders holding a percentage in excess of the above limits may not enjoy voting rights that may exist pursuant to the excess shares in either the General Assembly or the board of directors of the Public FI.

The QCB also sets out other situations where the ownership limits may be exceeded in Public FIs and the mechanism for disposing of such excess shares. These include acquiring shares in satisfaction of a debt or by inheritance. Such situations may be existing or may occur after the date of the Circular. Disposing of the excess shares for existing cases should be made within 5 years from the date of the Circular and within 3 years from the date of the Circular for cases occurring after the date of the Circular.

Shareholders exceeding the above ownership limits due to a purchase transaction, distribution of dividends or otherwise, should dispose of the excess shares within 3 years from the date of the Circular.

All Public FIs are required to comply with the Circular within one year from the date of the Circular.