Qatar, along with the UAE, has been upgraded from “frontier” to “emerging” market status by MSCI (an upgrade that is now in effect), which is among the criteria used by a large number of institutional investors and private equity funds to identify markets in which they can invest.
It has been reported that the upgrade may draw as much as US$500 million of new investment into Qatari and UAE securities with the entry of foreign institutional investors and passive or index-tracking investors.
In response to its upgrade, Qatar announced that it proposes to amend foreign ownership restriction rules imposed on companies listed on the Qatar Exchange.
Amendments to the foreign ownership restriction rules imposed on companies listed on the Qatar Exchange
On 27 May 2014, an Emiri direction was announced approving the amendment to existing regulation in connection with restrictions on foreign ownership in companies listed on the Qatar Exchange. Pursuant to the direction, the ceiling for non-Qatari ownership in companies listed on the Qatar Exchange was increased from 25% to 49%, subject to each company amending its memorandum and articles of association approving any proposed increase up to 49%. This replaces the requirement to obtain an exemption from the Council of Minister in connection with any increase above the 25% ownership threshold as set out under applicable laws in Qatar. The percentage of non-Qatari ownership will be calculated based on the total share capital and not the free float. Furthermore, it was announced that citizens of the countries comprising the Gulf Cooperation Council will be treated equally to Qatari citizens in connection with ownership of shares in companies listed on the Qatar Exchange. The announcement of this increase comes before the much anticipated MSCI Inc. upgrade for Qatar to an emerging market.
The QFMA issues its own rules on Mergers & Acquisitions
The Qatar Financial Markets Authority (QFMA) has issued five new regulations including its own set of rules in relation to the merger and acquisitions of companies listed on the Qatar Exchange (“M&A Rules”). It appears that the new M&A Rules are intended to complement existing merger and acquisitions regulations set out in Law No. (5) of 2002 Promulgating the Commercial Companies Law.
To find out more about Qatar’s MSCI upgrade and the impact on regional capital markets, click here.