• COLL Part 12.3 COLL Part 12.3 Custody, joint ownership and intermediate holding vehicles—QFC retail property funds

    Inserted by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 12.3.1 Operator may make alternative custody arrangements for immovables in certain jurisdictions—QFC retail property funds

      (1) For the purpose of meeting legal requirements in relation to the ownership of an immovable in the jurisdiction where the immovable is located, the operator of a QFC retail property fund may make alternative arrangements for the custody of the immovable.

      Example

      This rule may apply if legal title to an immovable cannot be held in Qatar or another GCC country because of the law of another jurisdiction. In such a situation, custody of the immovable by the independent entity may not be possible, and arrangements for declarations of trust, indemnities and resolutions relating to the transfer of custody may have to be made.
      (2) The arrangements must not give the operator unfettered control over the scheme property. If the arrangements involve joint ownership or the use of intermediate holding vehicles, the arrangements must be in accordance with whichever of rules 12.3.2 to 12.3.6 apply.
      (3) The operator must satisfy the Regulatory Authority that the arrangements:
      (a) are for the purpose stated in subrule (1);
      (b) comply with subrule (2); and
      (c) are legally effective in the QFC and in the jurisdiction where the immovable is located.

      Note Under rule 4.2.6 (6) (a), the independent entity of a property fund is not responsible in relation to an immovable that is subject to alternative arrangements in accordance with this rule.
      Inserted by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 12.3.2 Joint ownership arrangements—QFC retail property funds

      (1) A QFC retail property fund may enter into an arrangement for the joint ownership of an immovable in accordance with this rule (joint ownership arrangement).
      (2) Before a QFC retail property fund enters into a joint ownership arrangement, the operator of the fund:
      (a) must be able to demonstrate that the arrangement is in the interests of the unitholders;
      (b) must ensure that, under the arrangement:
      (i) the fund has a majority stake or holding in relation to the arrangement;
      (ii) the fund has, at all times, more than 50% ownership and control of each immovable subject to the arrangement;
      (iii) the fund has the freedom to dispose of its interest in each immovable; and
      (iv) the liability of the fund does not exceed the percentage of its interest in the arrangement;
      (c) must ensure that due diligence is conducted to identify restrictions and constraints that may limit the fund's direct ownership of a 100% interest in any immovable subject to the arrangement; and
      (d) must obtain a legal opinion about the arrangement.
      (3) An investment in an intermediate holding vehicle for the purpose of holding an immovable (whether wholly or through a joint ownership arrangement) must be treated as if it were a direct investment in the immovable. The investment must be valued as an immovable under rule 12.5.6.
      (4) Despite subrule (2) (b) (i), the Regulatory Authority may permit a QFC retail property fund to enter into a joint ownership arrangement in which the fund does not have a majority stake or holding if:
      (a) the authority is satisfied that the interests of the unitholders are adequately protected (for example, the other joint owner of the property is a public sector entity in Qatar); or
      (b) the law of the jurisdiction where the immovable is located requires local ownership or control of 51% or more.
      (5) Despite subrule (2) (b) (ii), the Regulatory Authority may permit a QFC retail property fund to hold title to an immovable under a joint ownership arrangement, but without holding more than 50% ownership and control of the immovable, if the authority is satisfied that the interests of the unitholders are adequately protected.
      (6) For subrule (2) (d), the legal opinion must include:
      (a) a description of the significant terms of the arrangement;
      (b) a statement whether the fund will have good marketable legal and beneficial title in each immovable subject to the arrangement;
      (c) a description of the equity and profit-sharing arrangements of the parties to the contract;
      (d) a statement that the contract and joint ownership arrangements are legal, valid, binding and enforceable under applicable law;
      (e) a statement that all necessary licences and consents required in the jurisdiction where the immovable is located have been obtained;
      (f) any restriction on the fund disposing of its interest, in whole or in part, in the immovable; and
      (g) if relevant, the implication of any foreign law that may limit the fund's direct ownership of a 100% interest in the immovable.
      Inserted by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 12.3.3 Information about joint ownership arrangements—QFC retail property funds

      The operator of a QFC retail property fund that has entered into a joint ownership arrangement in an immovable must include in the next operator's report under rule 5.6.13:

      (a) the ownership structure of the fund's interest and the material terms of the arrangements, including:
      (i) restrictions on the fund disposing of its interest; and
      (ii) the effect of the restrictions on the value of the interest;
      (b) the identity, background and ownership of the other legal and beneficial owners of the immovable;
      (c) any previous transactions by the other owners with the fund in relation to the immovable;
      (d) agreements for remuneration, fee-sharing and other financial matters that have been, or will be, entered into between the fund and the other owners or their associates;
      (e) a summary of the legal opinion required by rule 12.3.2 (2) (d) in relation to the immovable;
      (f) if there are any restrictions on foreign ownership of the immovable subject to the arrangement:
      (i) the nature and duration of the restrictions;
      (ii) the effect of the restrictions on the operations and financial position of the fund as a whole; and
      (iii) the standing independent valuer's opinion and evaluation of the effect of the restrictions on the value of the immovable; and
      (g) any other information that the unitholders may reasonably require to make an informed judgment about the arrangements.
      Inserted by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 12.3.4 Use of intermediate holding vehicles to hold immovables—QFC retail property funds

      (1) Subject to subrule (2), an immovable may be held by a QFC retail property fund through 1 or 2 intermediate holding vehicles, if:
      (a) the purpose of each vehicle is to enable the fund to hold immovables; and
      (b) either:
      (i) the vehicle or each vehicle is majority-owned or majority-held by the fund; or
      (ii) an intermediate holding vehicle that is majority-owned or majority-held by the fund (the first vehicle) holds the immovable through another intermediate holding vehicle (the second vehicle) for the sole purpose of directly holding the immovable for the fund (or arranging financing for the fund) and the second vehicle is majority-owned or majority-held by the first.

      Note An investment in an intermediate holding vehicle for the purpose of holding an immovable must be treated as if were a direct investment in the immovable, see rule 12.3.2 (3).
      (2) The Regulatory Authority may permit a QFC retail property fund to hold an immovable through a series of more than 2 intermediate holding vehicles if the operator of the fund satisfies the authority that it is necessary to do so (for example when it is necessary for the fund to meet a legal or regulatory requirement in another jurisdiction).

      Guidance

      In giving permission for a fund to have more than 2 intermediate holding vehicles, the Regulatory Authority would be guided by, among others, the structure of the fund and whether the structure is clear, easily understood and transparent to retail investors.
      (3) If practicable, an intermediate holding vehicle of a QFC retail property fund must have the same auditor and accounting reference date as the fund.
      (4) The accounts of any intermediate holding vehicle of a QFC retail property fund must be consolidated into the annual and half-yearly reports of the fund.
      (5) Despite subrule (1) (b), the Regulatory Authority may permit a QFC retail property fund (or the first intermediate holding vehicle) to hold an immovable through an intermediate holding vehicle even if the fund or vehicle does not have a majority ownership or holding if the authority is satisfied that less than majority ownership or holding is reasonable in the circumstances and the interests of the unitholders are adequately protected.
      Inserted by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 12.3.5 Duty of operator in relation to intermediate holding vehicles

      (1) The operator of a QFC retail property fund that uses an intermediate holding vehicle or vehicles to hold immovables must ensure that:
      (a) neither the constitution of the intermediate holding vehicle or vehicles nor the organisation, transactions or activities of any of the vehicles contravenes a requirement of this Chapter;
      (b) subject to subrule (3), the governing body of each of the vehicles is appointed by the operator with the approval of the fund's independent entity and investment committee (if any);
      (c) each of the vehicles undertakes the purchase, sale and management of immovables on behalf of the fund in accordance with the fund's investment objectives, strategies and policy; and
      (d) the interests of the unitholders are otherwise adequately protected.
      (2) The operator of a QFC retail property fund may, by the use of inter-company debt, transfer capital and income between the fund and an intermediate holding vehicle of the fund if:
      (a) the purpose of the transfer is for investment in immovables or the repatriation of income generated by such an investment;
      (b) a record of inter-company debt is kept to provide an accurate audit trail; and
      (c) interest paid out on the debt instruments that gave rise to the inter-company debt is equivalent to the net rental income earned from the immovables less the intermediate holding vehicle's reasonable running costs (including tax).
      (3) Subrule (1) (b) does not apply to an intermediate holding vehicle if:
      (a) the vehicle does not have a majority stake or holding in relation to a joint ownership arrangement over the immovable; or
      (b) the vehicle, at the time the immovable was acquired, was al established in another jurisdiction.
      Inserted by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 12.3.6 Report on use of intermediate holding vehicles to purchase immovables—QFC retail property funds

      (1) If a QFC retail property fund purchases an immovable through the acquisition of an intermediate holding vehicle, the operator of the fund must ensure that a report is prepared on:
      (a) the profit and loss of the vehicle for each of the 3 years preceding the transaction (or any shorter period for which the intermediate holding vehicle was in existence); and
      (b) the assets and liabilities of the vehicle as at a date that is not earlier than 6 months from the date of the report.
      (2) Despite subrule (1) (b), the Regulatory Authority may require that the report on the assets and liabilities of the vehicle be as at a date closer to the date of the report.

      Example

      The Regulatory Authority may require (generally or for a particular case) a different date if an intervening event has made the date used, or proposed to be used, unreliable.
      (3) The report may be prepared by the fund's auditor or another QFC approved auditor. The report may also be prepared by an auditor from a jurisdiction which registers and regulates auditors in a way comparable to QFC approved auditors, but only if the operator of the fund notifies the Regulatory Authority of the auditor's name and address before the report is prepared.
      (4) The report:
      (a) must state how the profits and losses of the vehicle would have affected the fund if the fund had, at all material times, held the shares proposed to be acquired; and
      (b) if the intermediate holding vehicle has subsidiaries—must deal with the profits or losses and the assets and liabilities of the vehicle and its subsidiaries (whether jointly or separately).
      (5) The operator must also ensure that a valuation report for the intermediate holding vehicle's interest in immovables is prepared in accordance with rules 12.4.3, 12.5.6 and 12.5.7.
      Inserted by QFCRA RM/2016-1 (as from 19th September 2016)