Regulations Regarding Finance Companies

Banking Business: Acceptance of deposits for use in banking operations, such as discounting, purchase or sale of negotiable instruments, granting loans, trading in foreign exchange and precious metals. And generally all that is considered as such by commercial laws or by custom.

Money Changing Business: Changing of foreign currencies in the form of banknote, purchase or sale of travelers’ cheques, coins, precious metals and gold bullions, handling of personal remittance business with correspondence agents abroad licensed in their own countries.

The Company: The finance company.

Finance Companies: Any financial company licensed to perform finance company business conforming to article (2) of this Resolution.

The Investment Companies Business: Investment on behalf of others, financial brokerage, organize public subscription and financing operations, financing for investment purposes, offer consultancies, custody services and any business stated by the Trade Code or banking customs as so and has been agreed upon by QCB.

Consumption Loans: All kinds of loans and Islamic finance operations granted for consumption purposes, according to what the Trade Code and the banking customs state and have been agreed upon by QCB as so. Such as operations of financing long-term and consumption products in all their kinds.

Article (2)

Finance Companies Business

1- The business of these companies is constituted of one or more of the following major activities:

1.1- Grant consumption loans for different categories of customers, whether individuals, institutions or companies.

1.2- Any other activity defined and approved by QCB as included in the finance companies’ activities.

2- Companies are forbidden from performing any of the following activities:

2.1- Receive deposits.

2.2- Perform exchange activities or ones particular to the investment activities, represent banks and foreign financial institutions or any of the banking activities, except what is related to the finance companies mentioned in this article.

3- The activities of the companies should follow traditional or Islamic basis, the way allowed by the Trade Code in the State of Qatar, and approved by QCB.

Article (3)

Licensing

1- Should not perform finance activities or be representative for foreign finance companies or any of their branches in the State of Qatar, but those who are licensed by QCB and registered in the Commercial Register and the register of the finance companies at QCB.

2- Any company wishing to practice the finance companies business or any finance company local or foreign, wishing to open an office or branch in Qatar have to submit a license application at QCB conforming to the form prepared for this purpose. It has to include all the information required and enclosed with all the documents defined in the form and the license application fee, i.e. five thousand QR. for the company or branch and ten thousand QR. for the representative office. These fees are non-refundable.

3- All articles of Resolution (1) of year 1995 are to be implemented on the representative offices of the foreign finance companies that wish to operate in Qatar. The Resolution (1) is stated in the “Executive Instructions Manual for Banks” issued by QCB concerning the licensing regulation, the business of the banks representative offices and the foreign financial institutions operating in Qatar.

4- QCB shall study the licensing application and ensure that all the requirements are fulfilled and the documents needed are provided. The license is then referred to the Minister of Finance, Economy and Trade, attached to the QCB recommendation, prior to its submittance to the Council of Ministers in order to issue a decision in its regard.

5- The license applicant may complain about the refusal decision to the Council of Ministers within thirty days after receiving the refusal notification. The decision of the Ministers Council shall be irrevocable and incontestable before any other authority.

6- License cancellation:

6.1- A license given to a company may be canceled by a decision of the Council of Ministers, conforming to the recommendation of the QCB, in the following cases:

6.1.1- Upon the request of the company.

6.1.2- The company’s explicit breach or repetitive breaches of any of the provisions of this Resolution or instructions issued in its respect.

6.1.3- The company’s non-initiation of business during one year after the issuance of the license.

6.1.4- The company’s cease to operate in Qatar or its liquidity and solvency being subject to risk.

6.1.5- The issuance of a decision to liquidate or dissolve the company for any other reason.

6.2- No company’s license can be canceled conforming to the provisions of items from (6.1.2) to (6.1.5) of paragraph (6.1) of this article before notifying the company with the recommendation of QCB and giving it a chance for comments.

6.3- In case the license is canceled, QCB shall give the company a period of time to terminate its business, provided that it does not perform any of the finance companies activities after the issuance of the decision.

6.4- Any company for which a decision of license cancellation was issued has to be liquidated. The decision shall regulate the way of liquidation.

7- Any company wishing to cease business in Qatar has to notify the QCB. The notifying period should not be less than six months. QCB may approve to reduce the notifying period if convinced that the creditors’ rights are being preserved. QCB has to ensure that the company wishing to cease business has cleared all its dues towards the borrowers and other creditors. This is to occur conforming to rules and procedures set by QCB.

8- QCB shall prepare a file for the company containing the following information:

8.1- Registration number and date.

8.2- Name and address of the company.

8.3- Legal status.

8.4- Capital and reserves of the company.

8.5- Names of the board of directors members and of the executive managers.

8.6- Name of the accounts auditor.

8.7- Headquarters and branches of the company.

8.8- Any other important information.

9- The license is renewed yearly upon the request of the company and after the approval of QCB.

10- The license issuing and renewal fees are collected from the finance companies as follows:

10.1- Twenty thousand QR as license issuing fees.

10.2- Twenty thousand QR as yearly license renewal fees for the headquarters.

10.3- Five thousand QR as license issuing fees for the branch.

10.4- Five thousand QR as license yearly renewal fees for the branch.

These fees are to be applied to all local finance companies and all branches and representative offices of foreign finance companies operating in Qatar.

Article (4)

Capital and Reserves.

1- In order to obtain the license, the paid-up capital of the company must not be less than twenty million Qatari riyals, if the company is Qatari. As for the foreign company branch, its capital allocated for business in Qatar must not be less than twenty million Qatari riyals.

2- Each company has to keep a reserve for its capital, and has to transfer from the net profits to the reserve an amount not less than 20% yearly, until the legal reserve reaches 100% of the paid-up capital.

3- The auxiliary loans in the company can be calculated as a percentage part of the capital adequacy after the approval of QCB and conforming to the terms it sets.

4- The company may not change the balance of its capital and reserves without the prior approval of QCB.

5- The capital adequacy of these companies has to be defined conforming to instructions issued by QCB in this regard.

Article (5)

The Board of Directors and the Executive Administration.

1- Without the approval of QCB, no one is allowed to be member of the board of directors of any company or to have any direct or indirect relation in its management in the following situations:

1.1- If he is a member in the board of directors of a bank, an exchange house or an investment or finance company, his license is terminated by the Decree Law No. (15) of year 1993 establishing Qatar Central Bank, article (46) paragraph (1), by article (3), item (7) of this Resolution or through a judicial court liquidating the investment company.

1.2- If a court verdict of imprisonment has been issued against him in any country for having committed a breach of trust. Except if five years have passed by since the issuance of the verdict or three years since the execution of the sentence.

1.3- If he declared bankruptcy, stopped settling his debts or some of his debt interests.

1.4- If he is member in the board of directors of any company with similar activities or an employee in any company related to organizing companies’ activities, supervise them or any other relation implying conflict in interests.

2- Approval of QCB is to be obtained before nominating members for the board of directors or appointing the senior executive officers of the company.

3- Anyone violating the provisions of the previous paragraph is penalized with a fine not exceeding five thousand riyals.

4- The members of the board of directors and the managers are personally questioned about the losses and damages that attain the company or others due to their negligence in work. The company is responsible with them for the losses and damages that attain others.

Article (6)

Control on Finance Companies

1- QCB issues instructions for the companies determining the conditions and rates that all companies should abide to, in order to guarantee its liquidity and adequacy, particularly the rates that should be available in the following elements:

1.1- The interest, commission and profit rates that QCB sees appropriate.

1.2- The kinds and terms of credits allowed to the investment companies to grant to their customers.

1.3- The maximum volume of credit that a company can grant to a person, whether natural or corporate, regarding the shareholders equity.

1.4- The maximum of what the company can offer of credit to the member of the board of directors or the senior officers, in addition to the kinds and rates of the required guarantees.

1.5- The adequacy ratio and the way of its calculation.

1.6- Determine the maximum amount of the funds borrowed directly from banks and financial institutions or funds borrowed indirectly through issuing bonds or other sources of borrowing allowed by QCB.

1.7- Any other rates considered by QCB necessary for the monetary policy, the protection of the creditors rights and the preservation of the financial statement of the company.

2- The instructions issued by item (1) are applied on all the companies and have effective force thirty days after the date of notification in writing.

3- Any company has to have the prior approval of QCB to any amendment in its legal form or charter.

4- The company has to provide QCB from time to time with the list of banks or financial institutions that it wishes to deal with, whether in deposits, investments or circulating a part of its assets. In case QCB objects, the company may not deal in any of the previous.

5- The company has to abide to the instructions issued by QCB regarding the use of the company’s funds with the parties dealt with. QCB is to be notified with the signatures of the persons in charge 48 hours after their issue.

6- No company may open or close a branch or change its location without obtaining the prior approval of QCB.

7- No licensed company has the right to coalesce or merge with any financial or commercial institution or company or any bank without obtaining the prior approval of QCB.

8- After obtaining the approval of QCB, the companies determine the hours of dealing with the public. In exceptional conditions, QCB may issue a declaration stopping the companies from operating for a period to be determined in the Declaration.

9- Each company has to provide QCB with any information or documents that are necessary for its work in the way and time QCB determines.

10- QCB may publish the information provided by the companies partly or completely, provided that it does not include financial affairs of any customer, unless the company and the customer agree upon it.

11- The company undertakes to keep organized files and accounting books, conforming to the accounting laws and customs. The company should also set accounting policies and procedures that would match the International Standards of Accounting and Disclosure.

12- QCB may at any time inspect any company if necessity calls, to check the soundness of its financial statement and its abidance to the provisions of this Resolution and its executive instructions and any instructions issued afterwards by QCB regulating the companies business.

13- Any company has to show the inspector appointed by QCB all the books, accounts and documents related to its business in Qatar and abroad, and provide him with the information related to this business upon his request and on the dates he determines.

14- QCB may request the company to provide it with a copy of the reports submitted by the auditor.

15- If QCB finds out that the business of a company is illegal, that its liquidity and adequacy is subject to a danger that might damage the rights of the investors and customers, or that it is repeatedly violating its instructions, QCB may request the company to take the necessary procedures that it determines to adjust the situation. QCB may also take directly one procedure or more of the following:

15.1- Forbid the company from performing certain operations or put restrictions on its business.

15.2- Suspend any member of the board of directors or any of the senior officers of the administration.

15.3- Issue guidelines to the company to adjust its situation through appointing one auditor or more at its own expenses.

15.4- Take in charge the management of the company for a determined period – may be extended – in the way that it sees appropriate. QCB decides thus if the company may undertake the management of its business by itself or recommend the cancellation of its license and its liquidation conforming to the provisions of article (46) of Decree Law No.(15) of year 1993, establishing the Qatar Central Bank or article (3), item (6) of this Resolution.

16- Financial fines: Any company violating the following items of article (6) will be penalized with financial fines: Provisions of item (1): Pay a fine of not more than five thousand Qatari riyals for every day that the violation continues. Are effective in this regard the provisions of paragraph (6) article (39) of the Decree Law No.(15) of year 1993 establishing Qatar Central Bank. Provisions of items (4, 5 & 7): Pay a fine of not less than ten thousand Qatari riyals.

Article (7)

The Auditor

1-Every company has one legal auditor or more, chartered in Qatar, to be appointed yearly with the approval of QCB. The auditor has to submit a report for the shareholders about the balance sheet, the “Profit and Loss Account” at the end of every fiscal year. He has to include in the report his opinion about the financial situation of the company, whether its financial statements are sound in comparison with the International Standards of Accounting and Disclosure, whether he had access to the statements and information necessary for the performance of his task, and whether the business of the company abide to the provisions of the Commercial Companies Law, the company’s charter, QCB law and its executive Resolutions and regulations.

2-The auditor’s report should be included with the company’s board of directors during the annual assembly of the shareholders, and a copy should be presented to QCB.

3-If the company does not appoint an auditor approved by QCB, the QCB may do so and evaluate its fees that the company settles.

4-The auditor may not be a member of the board of directors of the company he is appointed in, or one of its employees or a permanent consultant of its own.

5-The auditor may not take any loans or guarantees from the company of which accounts he is reviewing.

Article (8)

The Fiscal Year

The fiscal year of the company begins on the first of January and ends on the thirty-first of December of each year.

Article (9)

Relation with QCB

1-QCB may grant non-fully covered loans or covered by the assets of the company when the loans are necessary to impede the bankruptcy of the indebted company, to ensure the repayment of its liabilities, or in the case of emergency conforming to the conditions set by the board, in accordance with the Council of Ministers approval, the offer of the Minister of Finance, Economics and Trade; in coordination with the Governor.

2-When QCB is managing the company, no seizure signing is allowed nor signing privileged rights on the assets and funds of the company.

Article (10)

Banking Secrecy

1-The members of the Board of the company nor its employees nor its auditors nor its consultants are allowed to reveal any information related to any customer unless with a prior written approval from him, conforming to a law provision or to a court judgment or decision. The company has to notify the customer as soon as any information is revealed, clarifying the party that received it. This prohibition remains effective even after the persons above mentioned are off duty.

2-The prohibition of the previous item has also effective force on the persons that were off-duty before the issuance of this law.

3-Without prejudice to any severer sanction stated in any other law, any person violating this prohibition is sanctioned by not more than one year imprisonment and by a fine not more than ten thousand riyals or by one of these two sanctions.

Article (11)

Other Provisions

1-Every company has to publish in one daily newspaper its balance sheet and its “Profit and Loss Account” ratified by the auditor, during four months after the end of its fiscal year. A copy must be submitted to QCB. Every company violating this item is to pay a fine of ten thousand riyals.

2-Companies may borrow directly from banks and financial institutions, or borrow indirectly through other means, such as issuing bonds as sources of borrowed funds for the company.

3-Companies may invest for their own account in securities and other investment instruments.

4-Companies might cooperate with the foreign investment institutions, companies and banks in management and finance, offer consultancies and exchange experience in order to achieve their objectives.

5-All companies are prohibited from owning real estates, except for its fixed assets, unless it has the approval of QCB. As for the real estates the company owns as a settlement for its debts, it has to sell them within three years after the date of their ownership. This period may be extended upon a decision taken by the Governor.

6-A foreign investor may hold shares in the company conforming to the provisions of the Commercial Code and the Investment Code of Qatar, provided that he guarantees his share in the company. All the laws and rules that apply to the members of the board of directors apply also to the representatives of the foreign parties.

7-The company has to find the appropriate legal formula for contracts signed with the customers in a way to preserve the company’s rights.

8-The company has to keep record of all files and documents related to its business in the appropriate place inside the state, for the period defined by the law or the instructions.

9-All the stationary must include the full name of the company, the license number, the legal form, the approved and paid-up capital, the address, the phone numbers and any other way of communication.

10-The Commercial Register of the company should not include any other activities than those stated in this Resolution.

11-The companies should have the technical and administrative abilities to perform their business.

12-The company has to keep the insurance policy at all times. The insurance company has to be licensed in Qatar.

13-QCB has the right to explain the provisions of the bylaws.

Chapter 2

Executive Instructions for Finance Companies

First: Conditions of Licensing

The license applicants have to abide to the following:

1-Fill in the application form[1] including the following:

1.1-Names of the applicants.

1.2-Nationality, date of birth and residence of the applicants.

1.3-The suggested name of the company and its suggested address.

1.4-The capital of the company: the paid-up capital shouldn’t be less than twenty million Qatari riyals.

1.5-The kind of activity:

1.5.1- Islamic

1.5.2- Traditional

1.6-The legal form of the company: it should not be a joint-stock company, and should abide to the following requirements.

1.6.1-The shareholders’ number should not be less than ten persons approved by QCB. No shareholder may own more than 10% of the total shares either directly or indirectly, and the shareholders should not be more than five. The contribution of the first-degree kins should not be more than 20% of the total shares.

1.6.2-Foreign contribution is allowed provided that it abides to the provisions of the paragraph (1.6.1). This contribution should not exceed 49%.

1.6.3-Any exemption from the provisions of paragraphs (1.6.1) and (1.6.2), must obtain the approval of QCB.

1.7-A statement of the founders’ names, the share of each one of them, their nationality and their curriculum vitae.

2- The license applicants shall not be under 21 years old.

3- The license applicants shall not have any doubtful debts at banks or financial institutions.

4-The applicants shall sign a warranty undertaking to abide to the license conditions, laws, rules and instructions applied in Qatar.

5-The applicants shall commit to abide to all QCB requirements

6-The applicants shall attach a copy of the suggested articles of partnership and the charter of the company.

7-The applicants shall send a copy of the economic feasibility study of the company.

8-The applicants shall send the license fees, i.e. five thousand QR, non-refundable.

The applicants shall send any other information required by QCB.

Second: The Finance Companies Business.

According to the supervision rules, these companies may practice the following activities:

1-Grant consumption loans: They are financing operations or loans granted for consumption purposes, in addition to any other loans or financing operations approved by QCB as of the finance companies business. When granting them, the following should be taken into consideration:

1.1-The credit granted to the customer should not exceed 10% of the company’s capital and reserves, regardless of it being an individual, a company, an institution or a credit group. The number of the customers having each a loan or a financing contract of 10% of the company’s capital and reserves should not exceed twenty.

1.2-The term of each loan or financing contract should not exceed 8 years including the period of grace.

1.3-The members of the board of directors and the employees of the company shall not benefit from the credit offered by the company, unless what is stated in the company’s list of personal loans granted to the employees, conforming to its rules.

1.4- The company has to abide to a credit policy and written executive procedures adopted by the board of directors, defining the rules, terms, guarantees, documents and necessary contracts for granting credit.

2-Financial investments: Companies may invest for their own account in all kinds of securities and investment portfolios and funds, inside and outside Qatar, provided they abide to the following:

2.1-The total of these investments should not exceed 25% of the company’s capital and reserves.

2.2- Investment in one company, fund or portfolio should not exceed 10% of the company’s capital and reserves.

2.3- The company must get documents from the party invested in stating the amount of the contribution and the terms of its liquidation. In addition to documents proving that it is not pledged to any other party.

3-Depositing at local and offshore banks: All kinds of current, on call and long-term deposits at the local and offshore banks on these conditions:

3.1-The total deposits of the company at one bank and all its branches shall not exceed 25% of the company’s total capital and reserves.

3.2-A written policy should be set by the board of directors in order to determine the linking period between these banks.