Two new Circulars have recently been published by the Ministry of Commerce and Industry of Qatar on 1st February 2022 in connection with some procedural aspects of private and public shareholding companies. Both these two circulars were issued by the Head of Companies Affairs Department.
While the mechanism and methods of publishing the annual financial statements of public and private shareholding companies are regulated under Circular No.1 2022, Circular No. 2 of 2022 deals with the mechanism and controls of appointing experts to evaluate the in-kind shares and special benefits for shareholders of private shareholding companies.
The Circulars stipulate important guidelines on some procedural aspects of Commercial Companies Law that provide more clarity to the ministry’s employees, companies, shareholders, and other concerned parties.
CIRCULAR NO. 1 2022
Circular No. 1 of 2022 of the Qatari Ministry of Commerce and Industry (MoCI) specifies rules about the publication of financial statements.
MoCI, vide Circular No. 1 of 2022 has better interpreted and simplified the rules regarding the publishing of the annual financial statements of public and private shareholding companies.
Under Article 126 of the Commercial Companies Law No. 11 of 2015 (as amended by Law No. 8 of 2021) (the “Commercial Companies Law”), it is stipulated that “The chairman of the board of directors must publish the balance sheet, profit and loss accounts, a sufficient summary of the board of directors’ report and the complete text of the auditors’ report in two daily local newspapers at least one of which shall be in Arabic and on the company’s website (if available), at least fifteen (15) days prior to the date of the annual general assembly meeting. A copy of such documents shall be submitted to the relevant department at MoCI prior to publication to determine the publication mechanism and manner.”
Some important highlights of this Circular No. 1 2022 are as follows.
MoCI has issued the Circular, as regards Article 126 of the Commercial Companies Law, to determine the manner and mechanism of publication of annual financial statements and has stipulated the following rules, amongst others:
1. A copy of the following documents must be submitted to MoCI before publishing by the chairman of the board of directors or his deputy or any of the members of the board of directors or one of the members of the senior executive management authorized by the board of directors
- The company’s annual budget and profit and loss account are approved by the chairman of the board of directors or one of the members and by the company’s auditor
- An adequate summary of the board of directors’ report approved by the chairman or his deputy
- The full text of the auditors’ report for the ended financial year before publication, certified by the company’s auditor
2. The chairman of the board of directors, his deputy, or any authorized person by the board of directors must send a copy of the publication to the relevant department at MoCI simultaneously while sharing it with the newspapers
3. The publication must clearly state p
The name of the company, its legal form, its number in the commercial register, and the respective financial year must be clearly stated in the publication and all such documents need also to be titled clearly
4. Subject to the provisions of Articles 120 and 121 of the Commercial Companies Law, annual financial statements must be published in two local daily newspapers and one of which must be in the Arabic language
Article 184 of the Commercial Companies Law, though not specifically mentioned in this Circular No.1, mandates shareholding companies to publish their biannual financial reports.
CIRCULAR NO. 2 2022
Circular No. 2 of 2022 of the Qatari Ministry of Commerce and Industry (MoCI) specifies the mechanism and controls for the appointment of experts and evaluations of in-kind shares.
The recently issued circular regarding private shareholding companies, Circular No. 2 of 2022 dated 1 February 2022 regulates the mechanism and controls of appointing experts to evaluate the in-kind shares and special benefits for shareholders of private shareholding companies.
The Scope
Circular No. 2 of 2022 applies to all types of private shareholding companies which include
- Newly incorporated private shareholding company
- Upon increase of share capital
- Conversion of any type of company to a private shareholding company
- Merger with a private shareholding company
- Upon acquisition of a private shareholding company by a share swap
- Upon division into a private shareholding company
The Circular is an important advance toward clarifying and determining the obligations of each concerned party, in the process of
evaluating the in-kind shares and special benefits of the shareholders of private shareholding companies.
The reason behind the issuance of Circular 2 2022 is that such evaluation of in-kind shares and special benefits is required under the law on several occasions and during the incorporation, conversion, acquisition and merging of private shareholding companies.
As the mechanics of such evaluation has not been clarified under the Commercial Companies Law, the Circular will serve as a guide to all concerned parties such as the shareholders, evaluators and the employees of MoCI.
Schedule of Experts
The Circular documents that the MoCI, Departments of Control and Inspection of Establishment and Restructuring of Companies, shall prepare and make the issuance of a schedule of experts/evaluators from the following fields:
- Financial auditors in possession of licences in the State of Qatar and established under the MoCI or the Qatar Financial Centre
- Evaluators registered with the Ministry of Justice, and
- Experts with valid licenses to provide financial and economical consultancy services with experience in evaluation
The Procedures of Evaluation and Reporting
The Circular specifies the procedures to be followed by the MoCI, the company and the appointed experts/evaluators.
The procedures include but are not limited to, the following
- Submission of the application at the MoCI regarding the evaluation request
- Appointment of the evaluators
- Determining evaluation timelines
- Obtaining MoCI’s approval of the evaluation report
About the data/information to be made available in the evaluation report, the MoCI has specified the minimum information required to be available in the evaluation report, which should be issued in Arabic language or at least be translated into Arabic if provided in a different language.
Such information includes but is not limited to, the following
- The name of the evaluator
- The purpose of the evaluation
- The evaluation methodology
- The sources of information and data
- Disclaimers stating that the MoCI is not responsible for the content of the report and that the providers of the in-kind shares shall be jointly responsible for the information included in the report
