Doing Business Right: Links Group Founding Partner John Martin St. Valery
"Links Group was established in 2002 to simplify the process or market entrance for foreign companies– we worked on changing the partnership structure and establishing practices that simplified the process, ensuring they would have beneficial ownership of their company, despite the ownership laws,” says John Martin St. Valery, Founding Partner of Links Group. St. Valery explains how at the end of the 1990s and early years of the millennium, Dubai was yet to undergo the kind of large-scale development which is visible today. “Being an entrepreneur was an exciting experience– everybody was talking about the potential for future projects, from property markets to free zones. Before the introduction of free zones, all foreign businesses were required to have a local partner who held at least 51% of the company’s capital.” He further adds how this was a concern for business owners keen to enter the market, although, not willing to hand over the majority of their company shares.
After four years of operations in Dubai, in 2006, Links Group expanded to Qatar. The fast evolution of the Qatari market acted as a motivator, and the decision was made to launch operations in Doha. “With one of the most promising project markets and under the pressure of an immovable deadline to be ready for the 2022 FIFA World Cup, the country is currently in the midst of a construction boom and taking great strides to attract foreign investment and expertise to support its economic diversification in accordance with its National Vision 2030 economic strategy,” says St. Valery.
While Qatar is one of the smaller Gulf states in terms of population and geographical area, it boasts of the third largest natural gas reserves in the world. “This abundance of natural resources coupled with recent legal liberalization, economic diversification and a burgeoning economy mean that there are many opportunities for investment in Qatar. These opportunities have been greatly enhanced by Qatar being chosen to host the FIFA World Cup in 2022.” Foreign investors are welcomed and various incentives are available to attract foreign capital, including tax and customs duty exemptions. In addition, St. Valery highlights the Commercial Companies Law, which came into effect in August of last year, and removed the previous requirement of a Qatar incorporated Limited Liability Company (LLC) to have a minimum share capital of QAR200,000. In other words, with the country’s pro-business environment, fast-growing economy and geographical proximity to the rest of the world, Qatar presents attractive opportunities for business wanting to stimulate their home markets.
“As the country’s legislative environment becomes more efficient and aligned with international arbitration standards, we expect investment flow into the country will gather significant momentum over the next few years,” says St. Valery. Nonetheless, Links Group also faced some challenges prior to setting up an office in Doha. St. Valery recalls how the rapid rate of growth in Qatar has outpaced the advancement of regulations and administrative systems. “This has probably been the biggest challenge as the systems we had become accustomed to in the UAE were not yet present in Qatar. This being the case, I think we also have to recognize the improvements Qatar is making.” For instance, e-gov services, which is the need to be more efficient with company formation enticing entrants; Enterprise Qatar, a government entity, which provides financial support and advice to the small medium enterprise market; and Qatar Development Bank (QDB), financial assistance for startups requiring credit facilities whereby QDB may act as the benefactor. That’s all “in addition to Eco Zones- although we do not yet know the full details of this proposition, it is expected to follow a similar free zone model as the UAE.”
Advice For Potential Investors In The Qatari Market
According to St. Valery, Links Group partners, protects and enables foreign companies to enter the market while safeguarding their status as business owners. In addition to combining business acumen with robust legal counsel, as the Links Group’s team ensures clients are protected at all times, and can build a business, which they own and control. “As a company formation specialist, we offer beneficial ownership protection to foreign companies and advise corporations and individuals on how best to structure a legal commercial presence in the Middle East that protects their ownership interests and affords clear succession planning,” says St. Valery. Specifically, he explains the Links Group corporate nominee partnership structure, which was pioneered by the Links Group team 12 years ago with the support of the Dubai Foreign Direct Investment Office (Dubai FDI), which allows foreign-owned companies to work with a highly structured board as a local partner, as opposed to an unknown individual.
As a result, this structure provides foreign businesses with a corporate entity to act as their 51% nominee, local partner, shareholder or sponsor, thereby minimizing the risks associated with appointing an unknown individual nominee, and at the same time satisfies corporate governance requirements. However, as in any other country in the region, St. Valery highlights how are there a few barriers and pitfalls investors should be wary of before setting up a business in Qatar. For instance, the Companies Law provides for a “proxy” position, whereby it is not possible to have “silent” local partners. “This law is meant to ensure that nationals incorporate businesses through the correct vehicles, and the Proxy Business Monitoring Committee can fine or jail foreigners running companies in the name of nationals.”
In addition, the share capital requirement for businesses incorporating a local entity under the Commercial Companies Law can present a challenge for foreign investors. “At the moment, bank finance is rarely available in Qatar for startup operations, although some lenders will assist those firms operating in government-sanctioned priority sectors, such as oil and gas.” For this reason, St. Valery suggests that angel investment is an option worth exploring, along with private investment from venture capital firms and self-funding. “Personal savings or loans from friends and family can be the most cost-efficient and hasslefree forms of financing, especially considering you are able to draw on these funds once the company is registered.” Another important consideration is to ensure to have the right agreements in place between the entity and the local partner. “In the event that anything should happen to your local partner, you have to ensure the business is protected through appropriate succession planning, allowing the transfer of the partner’s responsibilities via irrevocable power-of-attorney arrangements,” adds St. Valery. Furthermore, for foreign companies looking to enter the region, mitigating risk and maximizing protection of assets is the first challenge, and should be the priority for their legal counsel. “They need to understand where the business intends to operate, expansion plans and ultimately exit plans to guide them through the best structure and statutory requirements needed for company incorporation.”
Along the same vein, St. Valery says that important factors to consider if planning to develop a business based in Qatar include corporate structure and legal know-how. For instance, the most important decision is choosing the right legal presence of one’s business. “Qatar commercial licensing is somewhat complex and distinctive in its makeup, differing from the models to which most international businesses are accustomed. For this reason, it is best to engage a commercial facilitation and advisory service to uncover all the facts, establish your corporate structure, and ensure no stone is left unturned. Once you have found the best structure for your company, the next step is to appoint a lawyer to incorporate your business and become legally registered.”
He further adds how for those already familiar with the region, it goes without saying that an essential virtue for success in the Arab world is patience. With patience, flexibility and due diligence, there is opportunity aplenty to capitalize on the lucrative prospects Qatar has to offer. “To maximize your success, be sure to develop a wellresearched business plan, maintain the appropriate legal structure, allow for shifting time frames for your company formation, and be aware that you will need to engage the on-going services of a Public Relations Officer (PRO) to assist you with government renewals and approvals such as your company Immigration Card,” continues St. Valery. “Keep up to date with business tax requirements, and most importantly, select your Qatari business partner carefully. By embracing the Arabian culture of Qatar, you will no doubt begin to reap the rewards of doing business with this dynamic, proud and enterprising nation.” In Qatar, most foreign companies require a Qatari national to hold a minimum of 51% share in the Qatari entity. “Establishing a commercial presence through the implementation of the corporate nominee partnership structure for onshore trade licenses, as pioneered by Links Group, will keep businesses’ ownership protected, succession planning clear, and its 49% shareholding secure through the establishment of an offshore entity.”
In other words, the model allows international companies full financial, operational and management control over the entity normally via a power of attorney granted to the General Manager. “By navigating and mastering the region’s laws, legal counsel can help businesses retain beneficial ownership and control with the ability to terminate arrangements without penalty,” says St. Valery. In summary, he further explains how the commercial companies’ laws are very similar in both the UAE and Qatar. “The commercial companies’ laws are very similar in both jurisdictions. Namely that a majority local partner is required to operate a limited liability company which is the most common structure in the State of Qatar. A branch of a foreign company in Qatar, however, is restricted to government projects only and only one project under each branch license.” As a result, Links Group mission is simple: to partner, protect and enable companies to have beneficial ownership and control of their business in the Gulf Region. “We want to be recognized by our clients, potential clients, employees and competitors as the best in our field.”