There are many ways to do business in Qatar: find yours!
The first thing one must know about doing business in Qatar, regarding the legal system, is that this jurisdiction is based on a civil law system, supplemented by sharia law. Secondly, that there are many forms of business vehicles and it is important to know the advantages and disadvantages of each of them in order to make the right decision.
- Limited liability company (LLC)
The private LLC is very common, as it can be established in almost all sectors of the economy (excluding banking, insurance and financial investment on behalf of others), has no minimum capital requirement, and is one of the easiest ways for a foreign shareholder to establish a legal presence in Qatar.
However, there are restrictions, starting with the fact that a Qatari citizen must hold at least 51% of the share capital of an LLC. Exceptionally the Minister of Economy and Commerce may grant an exemption from this rule. However in practice it can be challenging to meet the criteria required for obtaining an exemption and there are very few examples where a foreign shareholder has successfully established a company in which it owns a majority of the shares. Accordingly, a joint venture with a Qatari is the most common approach, and such LLCs can be established relatively quickly with relatively few formalities.
An LLC must have at least one and not more than 50 shareholders and it cannot issue shares to the public.
- Single person company (SPC)
An SPC is an LLC with only one shareholder. It is possible for a foreign company to establish an SPC as a wholly owned subsidiary if it obtains an exemption to the Foreign Investment Law but this process may take many months or years and success is not guaranteed.
- Qatari shareholding company (QSC)
A QSC is also known as a joint stock company. These are LLCs that can accommodate shareholder bases larger than 50 and are designed for large-scale business enterprises, investment projects, insurance and banking. There are two types:
- Public QSCs. Thesecan issue shares to the public, including listing on the Qatar Exchange. Non-Qataris can hold up to 49% of the share capital, or a higher percentage with the approval of the Council of Ministers. The government, other public authorities and corporations, or companies in which the state holds at least 51% of the shares (or less on prior approval of the Council of Ministers) can establish public QSCs.
- Private/closed QSCs.These cannot issue shares to the public. Non-Qataris can hold up to 49% of the share capital, or a higher percentage with the approval of the Minister of Economy and Commerce (although restrictions on the type of activity apply).
- Article 207 of the Companies Law has introduced a new category of private QSC and allows the government or a government entity (or a foreign entity together with the government or a government entity) to establish a private QSC. These companies can, through their articles of association, contract out of the provisions of the Companies Law, allowing for a considerable degree of flexibility. For example, it is possible to create different classes of shares, something which is not otherwise permitted under the Companies Law.
- Holding company
A QSC or LLC that will financially and administratively control one or more companies through at least 51% ownership can be established as a holding company. The activities are restricted to certain administrative and investment activities, owning intellectual property rights, and owning other property needed to carry out these activities. Holding companies must have a minimum share capital of QAR10 million and cannot hold shares in other holding companies, general partnerships, limited partnerships or partnerships limited by shares.
- Branch of a foreign company
The branch office is one of the most common ways that foreign companies do business in Qatar. There is no requirement for a Qatari citizen to have any interest in a branch, but a branch can generally only be established for the purposes of completing one or more contracts with the government or a governmental or quasi-governmental entity to facilitate the performance of a public service or utility.
- Representative Trade Office of a foreign company (RTO)
Foreign companies can apply to the Minister of Economy and Commerce to open an RTO but approval is not guaranteed. Its activities are limited to marketing and administration so they cannot, for example, conduct any financial transactions in Qatar. These offices are established for an unlimited duration but registration must be renewed on a yearly basis.
- Companies in the Qatar Financial Centre (QFC)
The QFC aims to operate at international standards and provide a world class business and regulatory infrastructure for investors seeking to do business in Qatar.
There are no foreign ownership restrictions, and repatriation of capital and profits is permitted with no restrictions. The QFC allows for various types of legal entities, including limited liability companies, general and limited liability partnerships and protected cell companies. Branch registrations are also permitted, for which there is no governmental contract requirement.
- Companies in the Qatar Science and Technology Park (QSTP)
The QSTP is a part of the Qatar Foundation. It is a centre of research and commercial excellence for scientific development and aims to be the Middle East’s leading location for the development and commercialisation of technology. It is a free zone, and confers on its tenants certain benefits. In particular, QSTP entities are not subject to foreign ownership restrictions, are not taxed, and can import goods and services free of any customs duties.
There is a completely separate regime for LLCs established in the QFC and to some extent for the QSTP.
- Upcoming economic zones
Law No. (34) of 2005 in connection with Investment Free Zones (Free Zones Law) contemplates the establishment of free investment zones to encourage and attract investments in the industrial, agricultural, technical and tourism fields, and any other field decided by the Council of Ministers.
The construction of these zones is still under way and the details regarding the establishment process and associated benefits for investors are currently not clearly set.
However application is already possible through the Economic Zones Company online portal application system and more information is available at www.manateq.qa/en-gb/Pages/Landing.aspx.