Company law
Construction company
Engineering construction-related office
Other options
Comment
Company law
A company may be incorporated in Qatar under three different legal regimes:
- the Commercial Companies Law (Law 5 of 2002, as amended);
- the Qatar Financial Centre (QFC) Companies Regulations; or
- the Qatar Science & Technology Park (QSTP) Free Zone Regulations (Schedule A of the Company Regulations).
The QFC regime was designed for banking, finance, insurance and other related businesses, while the QSTP regime was developed for businesses involved in research and development, technology, education, training and other related activities. Other types of businesses, including construction-related businesses, can avail themselves of the Commercial Companies Law regime.
Given the specific scope of application of the QFC and QSTP regimes, the Commercial Companies Law provides the most appropriate legal framework for incorporating a construction company in Qatar. It recognises several types of entity, including single person companies, limited liability companies, public and private shareholding companies, and so-called 'Article 68 companies'. An Article 68 company is a special type of shareholding company, at least one partner of which must be the government of Qatar, a public corporation, a public authority or a company 51% of the capital of which is held by the State of Qatar. If less than 51% of the shares in the capital are held by the State of Qatar, the formation of the company is subject to the approval of the Council of Ministers.(1)
Subject to certain exceptions, foreign investors may invest in most sectors of the national economy (including the construction sector), provided that they team up with one or more Qatari partner which owns a minimum of 51% of the shares in the capital of the local company (the Foreign Investment Law (Article 2.1 of Law 13 of 2000)).(2) Therefore, a single person company (ie, a company with only one partner) is a feasible option for a foreign investor only if an exemption is obtained from the Ministry of Business and Trade.(3)
Engineering construction-related office
The establishment of a local or an international engineering consultancy office in Qatar is governed by the Engineering Law (Law 19 of 2005). An engineering consultancy office created under the Engineering Law may undertake engineering construction-related work in Qatar.(4)
Local engineering consultancy office
A foreign engineering company may register a local engineering consultancy office provided that it has one or more Qatari partner which owns no less than 51% of the shares in the capital of the local engineering consultancy office.(5) Qatari partners can be a Qatari physical or legal person. In the latter case it must be a wholly owned Qatari entity.
The local engineering consultancy office is divided into three classes. For each class, the Engineering Law provides special requirements, in particular regarding the minimum number of engineers involved and the scope and value of projects to be conducted.
International engineering consultancy office
A foreign engineering company may register an international office in Qatar as a branch. The main office abroad must be licensed to provide engineering consultancy services and must have been continuously active in the engineering sector for at least 10 years. An international engineering consultancy office does not require a Qatari partner and is not divided into different classes. All of the engineers working for the local or international engineering consultancy office must be registered before the Engineering Committee and hold a Qatari engineering practice licence.
Depending on the circumstances, there may be no need to incorporate a local company for carrying out construction-related business in Qatar. Depending on the precise nature of the activities to be carried out, construction-related business may be undertaken by either a foreign branch or a trade representative office. A Qatari partner is not required in any of these scenarios.
Foreign branch
Subject to obtaining an exemption from the Ministry of Business and Trade, a foreign construction company may register a branch in Qatar under Article 3 of the Foreign Investment Law. To obtain this exemption, the foreign construction or engineering company must have a contract or subcontract which facilitates the rendering of a service or otherwise benefits the public in Qatar. This generally entails entering into a contract or subcontract with the Qatari government or a quasi-governmental entity.
An exemption obtained from the Ministry of Business and Trade applies only in respect of the project for which it is granted. The Qatari branch of the foreign construction or engineering company is entitled only to conduct the necessary activities to fulfil its obligations under the specific project in respect of which the exemption has been granted, and therefore its lifetime is linked to the duration of the project.
Trade representative office
A trade representative office might be considered to be a kind of 'shop window'. It may be used to promote a foreign construction or engineering company in Qatar by introducing that company to the Qatari market through marketing and promotions. The trade representative office cannot sell or enter into contracts in Qatar. Business must be carried out either by the foreign construction or engineering company (where the contract can be performed outside Qatar) or by a company or branch established in Qatar (where the contract must be performed in Qatar).
There are four alternatives for foreign investors which wish to undertake construction-related activities in Qatar. They may:
- set up a local company under the Commercial Companies Law;
- register a foreign branch (provided the scope and nature of the proposed project meet the criteria set forth in Article 3 of the Foreign Investment Law);
- establish a local or an international engineering consultancy office; or
- establish a trade representative office (simply to promote construction business).
For further information on this topic please contact Melina Llodra or Georges Racine at Lalive's Swiss office by telephone (+41 22 319 87 00) or email ([email protected] or [email protected]). Alternatively, contact Marcus Boeglin or Ramy Saleh at Lalive's Qatari office by telephone (+974 4496 7247) or email ([email protected] or [email protected]).
Endnotes
(1) Law 2 of 2008 amending provisions of Law 5 of 2002 relating to the commercial companies.
(2) Law 13 of 2000 Regulating the Investment of Foreign Capital in Economic Activities as amended by Law 31 of 2004, Law 2 of 2005, Law 6 of 2006 and Law 1 of 2010 respectively.
(3) The Ministry of Business and Trade may grant an exemption in relation to selected sectors, such as agriculture, industry, health, education, tourism, development of natural resources or energy and mining, consultancy services, IT services, and other services related to sports, culture, entertainment and distribution (Article 2.2 of the Foreign Investment Law).
(4) Engineering Consultancy: preparing architectural and constructional drawings, diagrams, designs, surveying, diagramming; supervising over performance; giving advice; conducting feasibility studies; estimating costs and computing quantities; and managing projects in the various engineering professions (Article 1 of Law 19 of 2005).
(5) Law 19 of 2005 Regulating the Practice of Engineering Professions and Decision 1 of 2006 issuing the Regulations for implementing Law 19 of 2005 of the Board of Directors of the Public Works Authority and the General Authority of Planning and Urban Development.