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Legal and regulatory framework
Laws and regulations
What are the relevant statutes and regulations governing securities offerings? Which regulatory authority is primarily responsible for the administration of those rules?
The Qatar Stock Exchange (QSE) provides the main board for listed companies (main market) as well as a parallel (secondary market) for small and medium-sized enterprises (SMEs), officially known as the Venture Market. The Venture Market is designed for smaller companies and has a less stringent set of listing and disclosure requirements for issuers listing on this secondary market.
This chapter only covers offerings on the main market.
The key statutes and regulations governing securities offerings in Qatar are:
- the Qatar Financial Markets Authority (QFMA) Law No. 8 of 2012 and QFMA Regulations in respect of the establishment and operation of the QFMA;
- the QFMA Rulebook regulating the listing of securities on a financial market in Qatar (the QFMA Offering and Listing Rulebook of Securities of 2010);
- the Governance Code, which addresses corporate governance (corporate governance for companies listed in markets regulated by the QFMA of 2009)
- the QSE Rulebook regulating the listing and admission of securities on the QSE and ongoing compliance requirements for an issuer listed on the QSE (QSE Rulebook of 2015); and
- the Commercial Companies Law No. 11 of 2015, which regulates the incorporation and ongoing requirements of companies incorporated in Qatar.
The QFMA and the Ministry of Economy and Commerce are the regulators in this regard. The QSE administers listed companies and provides the main market, as well the secondary market for listed companies.
What regulatory or stock exchange filings must be made in connection with a public offering of securities? What information must be included in such filings or made available to potential investors?
The listing or offering of securities in Qatar requires submission of an application to the QFMA and the approval of the QFMA. The QFMA Rulebook is applicable where there is a public offering of shares or listing of an entity on the QSE. Once approval from the QFMA is granted, a process will also need to be undertaken with the Ministry of Economy and Commerce if the entity is converting to a public company from a limited liability company.
An application should be simultaneously submitted to the QSE to admit the trading on issued shares. Such application may be submitted to the QSE either at the same time of submitting the offering application, or after obtaining the QFMA’s approval on the offering. In the first scenario the issuer will not be required to submit the same information twice.
While the laws and regulations provide general scope as to required filings and process, in practice the QFMA will determine the process and filings on a case-by-case basis depending on the nature of the offering and parties involved.
The QFMA Rulebook provides that the party wishing to offer or list securities should submit to the QFMA an application that shall include:
- an original copy of the prospectus with four additional copies;
- two copies of the offering invitation in Arabic;
- a copy of the board of directors’ resolution on approving the offering or the listing of the shares to be offered or listed;
- if the prospectus issued by the issuer included a declaration from its relevant manager concerning the sufficiency of the operating capital then a written letter issued by the consultant, confirming the same, should be attached to the prospectus;
- if the prospectus included a statement of the expected profits, a written letter issued by the consultant, confirming that this statement was issued by the manager of the issuer, should be enclosed;
- the financial statements of the issuer;
- a copy of the agreement made with the offering manager;
- a copy of the agreement made with the person undertaking to cover the issuance; and
- any other documents requested by the QFMA.
In addition, the QFMA Rulebook provides that the QFMA may, when considering an offering or listing application, request any additional information not included in the application or request the applicant to answer any specific questions or undertake further investigation and enquire about information provided as appropriate.
The QFMA Rulebook provides specific requirement for bonds and sukuks.
Review of filings
What are the steps of the registration and filing process? May an offering commence while regulatory review is in progress? How long does it typically take for the review process to be completed?
Following the undertaking of the required due diligence and obtaining all the necessary information required for the preparation of the prospectus and initial or secondary public offering documents, the application, with all required documents attached, will be submitted to the QFMA.
An outline of the process and timeline of an initial public offering (IPO), after submission of the application up to the actual trading date, may be summarised as the following.
An application is submitted to the QFMA concerning the offering and listing of shares. In most cases, the QFMA will come back with comments, queries and requirements, which should be satisfied in order to secure the QFMA’s approval. Simultaneously, an application should be submitted to the QSE to admit the trading on issued shares. Such application may be submitted to the QSE either at the same time of submitting the offering application, or after obtaining the QFMA’s approval on the offering. In the first scenario the issuer will not be required to submit the same information twice.
Within 30 days from the date of submitting the application and all required documentation, the issuer will secure the QFMA’s final approval. Such period may be extended for another 30 days upon the discretion of the QFMA. This is the most critical phase of the whole process, as QFMA approval will contain a specific date to complete the IPO. However, the QFMA does not set an offering date without coordinating with issuers; in practice an interactive discussion takes place between the issuer, the QSE and the QFMA.
At least one week prior to the starting date of the subscription period, the issuer must place public announcements regarding the offering in two newspapers (one of which must be in Arabic), in which the issuer invites the public to subscribe in the shares. The subscription period commences on the date determined by the QFMA and the subscription period may not be less than two weeks and not more than four weeks. However, it may be extended for another two weeks if there are sufficient grounds to do so.
Within one week from the end of the subscription period date, the process of allocation and distribution of shares to the subscribers must be completed. Within two days from the distribution of shares, the issuer must announce the results of the allocation of shares. Within one week from the announcement of allocation, the QFMA will review the allocation results and send its approval to the QSE for listing the shares.
The QSE trading admission application should be submitted to the QSE within a period not exceeding six months from the date of obtaining the listing approval from the QFMA, if it was not previously submitted or if there are any additional required documents. Failure to do so will result in the approval being deemed to be cancelled, unless the application presents reasons considered satisfactory to the QFMA.
Within one week from the date of allocation of the shares, the issuer should refund the amount of money to the investors whose subscription was fully or partially unattained. Within one week from QSE receipt of the QFMA’s approval to list, the issuer should secure QSE approval to admit the shares, and obtain the market notice regarding the trading date. Within two working days from obtaining the approvals from the QFMA and the QSE for listing and one week prior to the first trading date, the issuer must place the necessary public announcements in the newspapers concerning such trading date. Lastly, trading may commence on the set date and the Ministry of Economy and Commerce should be notified once the process has been completed.
What publicity restrictions apply to a public offering of securities? Are there any restrictions on the ability of the underwriters to issue research reports?
If the QFMA approves the application for offering or listing securities and the QSE approves trading the same, the applicant must, within two working days after the approval by the QFMA and the QSE, issue a public announcement, which should be published in at least two local newspapers, one of which must be Arabic, within one week from the date of trading. The QFMA Rulebook specifies the information to be included in such announcement.
Are there any special rules that differentiate between primary and secondary offerings? What are the liability issues for the seller of securities in a secondary offering?
There are no special rules differentiating between primary and secondary offerings.
What is the typical settlement process for sales of securities in a public offering?
The QFMA Rulebook provides that the trading of securities, the settlement of transactions and the registration and transfer of ownership shall take place in accordance with all such rules and regulations in the market where the securities are traded.
Trading in shares is generally effected on an electronic basis, through the registry maintained by the QSE. Shares may be freely traded and transferred in accordance with the rules and regulations of the QSE and in compliance with the applicable laws of Qatar including the rules and regulations of the QFMA and QSE, which will include, among other things, limitations on foreign ownership under the Foreign Capital Investment Law (which caps foreign ownership of listed companies at 49 per cent of issued capital) as well as limitation on the transfer of shares as prescribed for under the Commercial Companies Law.
Transactions in shares will normally be effected for delivery on the same day on which the transaction is performed. Transactions in securities admitted to trading on the QSE are generally governed by a three-day settlement cycle and, when applicable, delivery-versus-payment procedures.
Are there specific rules for the private placing of securities? What procedures must be implemented to effect a valid private placing?
The QFMA Rulebook does not apply to private offerings. For such purposes, an offering is considered private if it is addressed directly to current securities holders or potential buyers not exceeding 100 and without having sent any invitation to the public.
The private placement of securities could potentially trigger the rules under the QFMA Mergers and Acquisition Rules and the Commercial Companies Law.
What information must be made available to potential investors in connection with a private placing of securities?
Only where the QFMA Mergers and Acquisitions Rules or Commercial Companies Law are triggered (ie, where certain thresholds of acquisitions are met).
Transfer of placed securities
Do restrictions apply to the transferability of securities acquired in a private placing? And are any mechanisms used to enhance the liquidity of securities sold in a private placing?
Only where the QFMA Mergers and Acquisitions Rules or Commercial Companies Law are triggered (ie, where certain thresholds of acquisitions are met).
What specific domestic rules apply to offerings of securities outside your jurisdiction made by an issuer domiciled in your jurisdiction?
A local issuer licensed to list securities from the QFMA in Qatar shall not list the same for trading in a foreign stock market, unless it has received prior approval from the QFMA. Otherwise, the aforementioned rules will apply irrespective of the identity or location of the offeree.
Offerings of other securities
What special considerations apply to offerings of exchangeable or convertible securities, warrants or depositary shares or rights offerings?
Only that specific details of the particular financings need to be made clear as to their nature and effect as part of the offer process as well as being approved by the QFMA.
Types of arrangement
What types of underwriting arrangements are commonly used?
The QSE is a very small market with only 45 companies and only one listing has taken place in the past two years. Therefore, it is not possible to postulate as to what are ‘common’ occurrences.
What does the underwriting agreement typically provide with respect to indemnity, force majeure clauses, success fees and overallotment options?
The QSE is a very small market with only 45 companies and only one listing has taken place in the past two years. Therefore, it is not possible to postulate as to what is ‘typical’.
What additional regulations apply to underwriting arrangements?
The Civil Code and the Commercial Code of Qatar apply to any commercial agreements in Qatar.
Ongoing reporting obligations
Applicability of the obligation
In which instances does an issuer of securities become subject to ongoing reporting obligations?
The QFMA Rulebook imposes a number of ongoing and periodic obligations on listed companies to make disclosures. Adequate disclosure helps investors assess an issuer’s corporate governance practices.
The QFMA Rulebook requires listed companies to immediately notify:
- both the QFMA and the QSE of any events or information that may affect the prices of securities; and
- the QFMA, without delay of any material events, which includes:
- if trading is stopped or listing in foreign exchange suspended or cancelled;
- if securities of any affiliate are traded in a local or foreign exchange;
- if a receiver is appointed for the company, parent company or affiliate;
- a petition to appoint or if a liquidator is appointed for the company, parent company or affiliate;
- if the shareholders take a decision to liquidate and dissolve the company, parent company or affiliate;
- sale of more than 10 per cent of the total assets of the company, parent company or affiliate;
- if the listed company enters into negotiations for any merger or acquisition;
- if a lawsuit is brought against the company or a court order issued in favour of or against the company;
- if a court issues an order that affects the capacity of the company, parent company or affiliate to dispose of more than 10 per cent of the total assets;
- any change to the memorandum of association or the articles of association or the address;
- any change to the information related to members of the board and the senior executive management; and
- convening a general assembly meeting.
In addition to the ongoing disclosure requirements, under the QFMA Rulebook there are also periodic disclosure requirements. A listed company must prepare, publish and file with the QFMA and the QSE periodic reports on a quarterly, semi-annual and annual basis. The semi-annual reports are to be reviewed and the annual reports audited by the company’s auditors. The annual report shall include operating results for the entire fiscal year, the cash flows and the financial position at the end of the year, together with a comprehensive analysis of the performance compared with previous years and expectations for the next year. The QFMA Rulebook sets out in detail how ongoing and periodic disclosures should be made, and also provides that, in certain circumstances, the QFMA may accept a delay in disclosure, a limited or preliminary disclosure, or permit an exemption from disclosing certain information.
Information to be disclosed
What information is a reporting company required to make available to the public?
The QFMA Rulebook provides that the applicant for the offering or listing or the issuer of the securities traded on the QSE shall make information and documents required under the QFMA Rulebook available to the public on the website free of charge or through the adviser or party responsible for covering the issuance process, or through the QSE.
What are the main rules prohibiting manipulative practices in securities offerings and secondary market transactions?
Qatari law provides for a general prohibition on insider trading that has a broad application, even by international standards, as well as other legal restrictions. Therefore, it is essential that issuers both understand their obligations and restrictions in relation to insider trading, and develop comprehensive systems to define, monitor and identify potential insider trading in order to ensure that they stay on the right side of the law, as breaking the law can lead to severe financial penalties and even prison terms.
Permitted stabilisation measures
What measures are permitted in your jurisdiction to support the price of securities in connection with an offering?
Two distinct valuers need to be utilised who are independent from the company (and its shareholders) to ensure that the valuation opinions are free from any bias. In addition, the valuers should have substantial expertise together with relevant and significant prior experience of performing business or company valuations. Each valuer needs to be approved and registered with the QFMA to be able to perform valuations for listing purposes.
In addition, the QFMA Auditors’ Rules also stipulate certain requirements on how the terms of reference or agreement between valuers and the company engaging the valuers should be reached. For instance, the duties and responsibilities of the valuers, as well as the company, need to be clearly agreed so that the scope of the valuation and flow of information is not restricted.
Liabilities and enforcement
Bases of liability
What are the most common bases of liability for a securities transaction?
Statutory liability is the most common.
What are the main mechanisms for seeking remedies and sanctions for improper securities activities?
The main mechanisms are criminal prosecution for sanctions and civil litigation for remedies.