QFMA sets new controls for buyback of shares; aims greater investor protection and market stability

The Qatar Financial Markets Authority (QFMA) has set a new 18-point control for a company's buyback of shares as part of a major step towards greater investor protection and market stability as well as enhancing corporate governance and the efficiency of the country's capital market.

These new controls – which stipulate that the company shall be committed to funding buyback transactions from the balance of its voluntary reserves and realised profits and shall be prohibited from funding the buybacks in any other manner – fall within the framework of the QFMAs endeavours to develop the Qatari capital market and bolster investor confidence.

"Hence, the authority affirms its commitment to protecting the rights of investors and ensuring a fair and transparent investment environment," it said.

The QFMA and the market shall be notified of the board of directors' resolution to buyback a maximum of 10% of the fully-paid issued shares or to purchase the shares in excess of the ownership limit stipulated in the company's Articles of Association within two days as of the date of the issuance of the board of directors' resolution approving the buyback transaction, whilst attaching the documents required by the QFMA to finalise the transaction thereof.

The QFMA shall issue its decision regarding the application within 15 days as of the date of submitting it in a manner fulfilling the prescribed conditions and requirements. The lapse of this period without the issuance of a decision by the authority shall be construed as an implicit rejection thereof.

The company should notify the market of the QFMA's approval immediately upon its issuance, provided that the market announces the approval as per its prescribed procedures, it said, adding the company shall disclose the QFMA approval on its website, and in at least two local daily newspapers, one of which is published in English, within two business days as of the date of notifying it of the approval.

The company should complete the execution of the buyback transaction within a period not exceeding six months as of the date of the authority's approval. In case the transaction is not completed, the company shall be committed to justifying the same to the QFMA during the first business day following the end of prescribed period.

The company would be prohibited from engaging in any selling transaction in the midst of a buyback process, and, likewise, it would be prohibited from making any buybacks in the midst of a selling process.

The company would also be prohibited from issuing any new shares under any name before completing the selling process of the repurchased shares.

The company shall be prohibited from selling the repurchased shares before the lapse of six months as of the date of the last buyback transaction and that the repurchased shares shall lose all rights and obligations legally due thereto until the company sells them.

The company shall sell the repurchased shares after the lapse of the prohibition period and no later than 24 months as of the date of the last buyback. If the selling transaction is not executed within the aforementioned period, the matter shall be presented to the authority to take appropriate measures thereof.

The purchasing and selling orders shall be executed through the market in accordance with the regulations and trading procedures enforced therein, and provided that the company shall be committed to collaborate with the financial services company executing the order according to specific terms.

The company shall be prohibited from buying back or selling its own shares within a period of 15 days before announcing its financial statements or any material information impacting the share price.

The market shall make a subsequent disclosure of the buyback and selling transactions according to the procedures in force therein and the company shall disclose the buyback or selling transactions of its own shares in the financial reports issued by it.