Under the Qatari Commercial Companies Law No. 11 of 2015 (the “Commercial Companies Law”), the Qatar Stock Exchange Market Authority (the “Authority”) is granted the power to issue the rules for companies transformation to public shareholding companies (“P.S.C”).
On 17 September the Board of Directors of the Authority issued Decision No. (1) of 2017 on the rules of transforming a company to a P.S.C for the purposes of listing in the stock market (the “Rules”). The Commercial Companies Law provides for the general rules for companies transformation, and for specific rules in respect of private shareholding companies’ transformation into a P.S.C. However, the Rules, recently enacted, laid out specific guidance for the process of transformation to a P.S.C for any company established under the Commercial Companies Law.
For the transformation of a company to a P.S.C. to occur, amongst the various prerequisites are:
- The value of shares or issued must be paid up in full.
- Two financial years must have passed since the incorporation of the company.
- For two financial years prior to the application to the Authority to transform to a P.S.C., the company must have achieved operating profit in line with its registered activities, and net profit amounting to five per cent of its paid up capital.
The application must be accompanied by several documents including draft articles of association, approval by the Ministry of Economy and Commerce, and financial records.
Furthermore, the Rules require a company seeking transformation to a P.S.C to sell or offer shares constituting a minimum of 20% and a maximum of 40% of its capital (after valuation) through public subscription. In addition, before transforming a company to a P.S.C, the shareholders may not dispose 50% of its capital (after valuation) for one year as of the beginning of selling these shares in the primary market. However, the shareholders may pledge or transfer such shares amongst themselves.