Qatar: SMEs In Qatar And Listing On The QE Venture Market

Last Updated: 23 April 2012
Article by David Salt and Fouad El Haddad

The development and support of Small and Medium Enterprises ("SME") is necessary to bolster economic diversification in the State of Qatar ("Qatar"). In recent years this sector has been considered weak, however, legislative initiatives have been put in place to drive it forward. SMEs are material to Qatar's National Vision 2030 which has set up a number of strategic goals, including building a well-diversified economy. The new approach focuses on stimulating services for SMEs, supporting diversification and creating employment opportunities for the national work force.

Qatar Authority for the Development of SMEs

The Emiri Decision No. (17) of 2011 ("Emiri Decision") establishes a Qatar Authority for the Development of SMEs (the "Authority") which is run by a board (the "Board"), holding all powers necessary for achieving the Authority's objectives.

The Emiri Decision defines SMEs as such small and medium scale enterprises as may be determined by a Board's resolution.

Article (4) of the Emiri Decision describes the Authority's responsibility as encouraging the development of the SME sector in Qatar. It is mandated to put a strategy in place to encourage growth for these enterprises by providing them with technical assistance and coordinating with banks and governmental institutions for the purpose of financing and marketing projects.

QE Venture Market

Listing on Qatar Exchange ("QE"), or going public, is the process of offering shares of a previously privately owned company to the general public. In Qatar the initial public offering ("IPO") process is governed by Qatar's Commercial Companies Law No. (5) of 2002 as amended and is regulated by the Qatar Financial Markets Authority ("QFMA").

QE is creating a junior bourse for SMEs to give a lift to this sector, the QE Venture Market. QE Venture Market will be dedicated to SMEs who will by definition have a minimal track record and a higher risk profile but companies nonetheless who are growing and need the access to capital that being listed entails. The establishment of a secondary market would give SME owners an opportunity to be listed in the bourse in accordance with lighter and flexible regulations, while giving further finance sources in order for them to grow and expand their businesses.

On the 17th January 2012 QE announced the readiness of technical and regulatory infrastructure dedicated to the market. The market is able to receive listing applications to be submitted by business owners from Qatar and the GCC countries and give information on the listing criteria and trading rules.

Companies in the QE Venture Market will benefit from the same regulatory safeguards as those afforded to main market companies but will be readily identifiable as a separate and dedicated marketplace.

Over time, it is expected that QE Venture Market companies to graduate to the main market as they grow and develop the necessary track record.

Listing Requirements for QE Venture Market

SMEs operating through the medium of joint-stock companies (also known Qatar Shareholding Companies or QSC) must, amongst other things, satisfy the following requirements:

Capitalization

Minimum subscribed capital of QR 5 million. Minimum of 50% of the nominal value must be paid-up (100% required in the case of public offering).

Minimum Shareholders

Applicable rules require an issuer to have a minimum of 20 shareholders.

Securities

Ordinary shares. Whole class must be listed.

Track Record

One year track record of core business is a requirement and issued audited financial statements for that year.

Accounting Standards

Reports must be drawn up in accordance with International Accounting standards (IAS) and International Financial Reporting Standards (IFRS).

Profitability

None for purposes of QFMA Listing Rules but shareholders' equity, shown in the last audited financial statements, must not be less than 75% of the paid up capital.

Minimum Free Float

QFMA Listing Rules require an issuer to have a minimum free float of 10%.

Lock-Up Requirements (applicable for converted companies)

A lock-up 50% of the shares of owners of private joint stock company (closed shareholding company) converted to a public joint stock company for one year.
All Board members are required to retain a minimum number of shares for the duration of their office.

Foreign Investors Incentives

And most Important for any foreign investor is that:

  • non-Qatari companies are eligible to list; and
  • the reporting language is in dual English/Arabic.

A listed SME must satisfy, amongst other requirements, the following ongoing disclosure and periodic disclosure requirements:

Ongoing Disclosure

  1. All types of information/events capable of affecting the price of the securities.
  2. Time and venue of AGM & EGM (to be made available to shareholders a minimum fifteen calendar days prior to the meeting).
  3. Date of Board of Directors meeting to discuss semi-annual and annual financial results (minimum fifteen calendar days prior to meeting).
  4. Any decision relating to the rights of securities holders.
  5. Details of pending or future lawsuits which may have a meaningful impact on business.

Periodic Disclosure

  1. Quarterly reports within 30 days of end of relevant period.
  2. Semi-annual reviewed reports within 45 days of end of relevant period.
  3. Audited annual reports within 90 days of end of relevant period.

In addition to the QFMA Listing Rules and QE Rulebook, companies on the QE Venture Market are required to adhere to specific elements of the Corporate Governance Code published by QFMA. The Code is a set of rules designed to deliver efficient, effective and entrepreneurial management that contributes to the board discharging its duties in the best interest of shareholders.

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.

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Authors
David Salt
 
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