QFMA Issues Controls for Company’s Buyback of Its Own Shares for Purpose of Selling

Doha, Qatar: The Qatar Financial Markets Authority issued new controls for a company’s buyback of its own shares with the intention of selling. These new controls fall within the framework of the Authority’s endeavors 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.

Set out hereinafter are the most significant provisions of the new controls:

Whereas a company may buyback a percentage of its own shares with the intention of selling, pending the approval of the Authority, this activity shall be carried out in accordance with the following controls and procedures outlined by the Authority:

- The Authority and the Market shall be notified of the Board of Directors’ resolution to buyback a percentage of the company’s shares immediately upon its issuance.

- The application shall be submitted to the Authority by using the approved form to purchase 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 Authority to finalize the transaction thereof.

- The Authority shall issue its decision regarding the application within fifteen 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 shall notify the Market of the Authority’s approval decision immediately upon its issuance, provided that the Market announces the approval as per its prescribed procedures.

- The company shall disclose the Authority’s 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 shall be prohibited from initiating the stock buyback process before the lapse of three working days as of the date of disclosing the Authority’s approval in accordance with the previous clause herein.

- The company shall 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 justify the same to the Authority during the first business day following the end of prescribed period.

- The company shall be committed to fund buyback transactions from the balance of its voluntary reserves and realized profits; and shall be prohibited from funding the buybacks in any other manner.

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

- The company shall 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.

- 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.

- 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 notify the Authority and the Market of the selling decision using the form approved by the Authority.

- The company shall be prohibited from buying back or selling its own shares within a period of fifteen 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.

- The company shall disclose the buyback or selling transactions of its own shares in the financial reports issued by it.

The Qatar Financial Markets Authority confirmed that these new controls represent a major step towards enhancing investor protection and ensuring market stability. This, in turn, will enhance corporate governance as well as the efficiency of the Qatari capital market.