The Qatar Financial Markets Authority (“QFMA”) has issued new controls for a company’s buyback of its stock to resell. The controls are part of the QFMA’s continuing efforts to develop the Qatari capital markets sector.
According to the new controls, companies seeking to buyback a percentage of their stocks with the intention of reselling must comply with the following requirements:
- The company must immediately notify the QFMA and the market immediately after its issuance of its Board of Directors’ (“BOD”) resolution to buyback a percentage of the company’s shares.
- Within two days of the BOD resolution, an application must be submitted to the QFMA using the approved form requesting 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.
- The QFMA must then issue its decision regarding a complete application within fifteen days of the application date. If no decision is issued by the QFMA within fifteen days, the application is considered rejected.
- The company must immediately notify the market of the QFMA’s decision, which in turn will make an announcement of its own.
- If the application is approved, within two days of receiving such approval the company must disclose the QFMA’s approval on its website, and in at least two local daily newspapers, one of which must be published in English.
- The company is prohibited from initiating the stock buyback process until three days after publishing the approval as required by the preceding item.
- Once initiated, the company must complete the buyback transactions within six months from the date of the QFMA’s approval. If the transactions are not completed within this time limit, the company must notify the QFMA within one business day of the expiration period.
- Buyback transactions must be funded from the balance of a company’s voluntary reserves and realised profits. No other funding source may be used to fund the buyback transactions.
- During the buyback transaction period, the company is prohibited from selling any bought-back stock. Equally, once the selling process has begun, the company may no longer buyback its stock.
- Further, the company will be prohibited from issuing new stocks under any name until the selling process of the repurchased shares has been completed.
- The company is prohibited from selling the repurchased shares after six months from the date of the last buyback transaction.
- Any repurchased shares lose the rights and obligations associated with them until they are sold.
- Once the sale prohibition period (six months from the last buyback transaction) has expired, the company must sell the repurchased stock no later than 24 months from the date of the last buyback transaction. Failure to complete the sales requires the company to notify the QFMA for further action.
- Purchasing and selling orders shall be executed in the market as per the regulations and trading procedures applicable to the sale and purchase of stocks.
- A company may not buyback or sell its own shares for a period of fifteen days before announcing its financial statements or any material information impacting the share price.
These new controls represent a major step forward by the QFMA to enhance investor protection and market stability.
