A recent amendment to the Qatari Commercial Companies Law No. 5
of 2002 (Companies Law) established, for the first time, a regime
for take-over of companies in Qatar¹.
The new provisions in Chapter 9 of the Companies Law set out the
definition and procedural elements of a take-over. Article 282 bis
1 states, inter alia, that,
It appears at first glance that the new provisions of the Companies
Law were enacted to cover situations where a company acquires a
majority interest in another company. However, the first part of
Article 282 bis 1 has been worded such that a take-over occurs by
virtue of any acquisition by a company of shares in another
company, without providing a minimum threshold for the
acquisition.
In many other jurisdictions, the take-over laws recognise the
possibility of a change of control with acquisition of a lower
percentage than 51%. Against this background, it is not clear how
Article 282 bis 1 would be interpreted by the Qatari courts and the
authorities. It also remains to be seen if, in practice, there will
be any challenges mounted by interested parties against a proposed
acquisition where it does not comply with these take-over
provisions, even though the acquisition is not of a majority stake
in a company.
Additionally, although the take-over provisions do refer to an
"indirect partial acquisition", they do not define what
amounts to an indirect acquisition nor do they clearly address and
define the concept of related parties in an acquisition. As such,
it is arguable that these provisions could be circumvented through
an acquisition by parties acting in concert.
Under the new take-over provisions, both the offeror and the target
are required to approve the acquisition by way of a resolution of
an Extraordinary General Assembly (Article 282 bis 2 (1)). In the
case of a Qatar Shareholding Company, this effectively means
approval of shareholders holding at least two thirds of the shares
represented at an Extraordinary General Assembly and, in the case
of a limited liability company, 75% of the share capital of the
company.
A take-over must also be ratified by the Minister of Business and
Trade. It is not clear what criteria or factors would be taken into
account by the Minister when ratifying or objecting to the
take-over. The factors could conceivably range from minority
protection or procedural issues to broader economic and policy
considerations.
Article 282 bis 2(2) requires the offeror to increase its share
capital by the amount of the offer and if accepted, such share
capital is issued to all of the shareholders of the target in
proportion to their shareholding. Consequently, the target becomes
a subsidiary retaining its separate legal personality. Although not
explicitly stated in this Article, this procedure presumably only
applies to take-overs through an exchange of shares.
The take-over provisions state that the provisions of the QFMA Law
would apply to take-overs of companies listed on the Qatar
Exchange. The QFMA Law currently does not contain any take-over
provisions, but it is anticipated that the QFMA will introduce a
code on take-overs in the near future. Soon after introduction of
the new provisions, the changes were applied to the Qatar
Navigation-Qatar Shipping and the Barwa-Alaqaria mergers. Clearly,
until the QFMA introduces its own regime, listed and unlisted
public companies are likely to apply the take-over provisions
contained the Companies Law and the authorities will continue to
approve such application of the process.
Ordinarily, any offers of acquisition of shares in a limited
liability company is subject to a statutory right of pre-emption
granted to current shareholders under the Companies Law unless the
company's articles of association otherwise permits (Article
236). With Qatar Shareholding Companies, statutory pre-emptive
rights only extend to shares created as a consequence of an
increase in capital. How these pre-emptive rights will sit
vis-à-vis the take-over provisions is not clear; a possible
interpretation is that the specific provisions on take-overs would
override the pre-emptive rights where a take-over is being
conducted in accordance with the statutory provisions of chapter
9.
Another potential cause of confusion is Article 282 bis 2(6), which
states that in order for a take-over to be valid, one of the
conditions to be met is:
A Ministerial Decision has yet to be issued in respect of these new
provisions and it is not clear what sort of proposals an acquirer
would be obliged to present to the minority shareholders. It would
cause some concern if the effect of this Article was such that an
acquirer has to make an offer to purchase the shares for cash from
the minority shareholders. If the take-over had been conducted by
way of an exchange of shares, an obligation to purchase further
shares by way of cash could pose problems for an acquirer from a
financial perspective and also creates uncertainty in how a
take-over would be implemented and completed.
As the new take-over provisions of the Companies Law are applicable
to acquirers which are companies, there remains a gap in the law
with regard to individuals seeking to take control of a company. It
remains opens for a potential acquirer to by-pass the take-over
laws through the use of family members or associates and the
authorities will have to deal with the same.
Whilst the new take-over provisions have already been used to
effect the two very recent mergers mentioned above, it will be very
interesting to observe the application of the take-over provisions
with a hostile take-over.
Footnotes
1. Companies set up in the Qatar Financial Centre
do not fall within the purview of the Companies Law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
