• CAPI Chapter 3 CAPI Chapter 3 Eligible capital

    Note for chapter 3

    This chapter sets out rules for determining a firm's total eligible capital for its minimum capital requirement under part 2.2.

    Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 3.1.1 What is eligible capital?

      Eligible capital of a firm that is a QFC captive insurer means an instrument or other asset that is included in calculating the firm's minimum capital requirement under part 2.2.

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 3.1.2 What is a firm's total eligible capital?

      (1) The total eligible capital of a firm is the amount of the firm's eligible capital, calculated in accordance with the following formula:

      Eligible capital — Required deduction

      where:

      eligible capital, of a firm, means the sum of;
      (a) the firm's permanent share capital;
      (b) the firm's share premium account;
      (c) the firm's retained earnings or losses; and
      (d) the following items (up to an amount not exceeding 50% of the sum of the amounts referred to in paragraphs (a), (b) and (c)):
      (i) qualifying letters of credits under rule 3.1.5;
      (ii) any other instrument allowed by the Regulatory Authority under subrule (2) (a).
      Required deduction, for a firm, means the sum of—
      (a) investments in subsidiaries and associates; and
      (b) intangible assets; and
      (c) inadmissible assets; and
      (d) any other asset that the Regulatory Authority directs, under subrule (2) (b), the firm to include.
      (2) For calculating the firm's total eligible capital, the Regulatory Authority may, by written notice, do any 1 or more of the following:
      (a) allow the firm to include an instrument as eligible capital;
      (b) direct the firm to include an asset as a required deduction;
      (c) allow the firm to exceed the 50% limit in paragraph (d) of the definition of eligible capital in subrule (1).
      (3) Permission under subrule (2) (a) or (c) may be given on application of the firm or on the Regulatory Authority's own initiative.

      Note The following table summarises the components for working out total eligible capital.

      item Components applicable rule (if any)
      Eligible capital    
      1.1 permanent share capital 3.1.3
      1.2 share premium account 3.1.4
      1.3 retained earnings or losses
      1.4 qualifying letter of credit 3.1.5
      1.5 instruments allowed by the Regulatory Authority 3.1.2 (2) (a)
      Required deductions    
      2.1 investments in subsidiaries and associates
      2.2 intangible assets 3.1.6
      2.3 inadmissible assets 3.1.7
      2.4 deductions that the Regulatory Authority directs the firm to include 3.1.2 (2) (b)

      Amended by QFCRA RM/2015-1 (as from 1st July 2015).

    • CAPI 3.1.3 What is permanent share capital?

      Permanent share capital of a firm that is a QFC captive insurer means ordinary paid-up share capital or members' equity or its equivalent (however called) that meets the following requirements:

      (a) it is fully paid up;
      (b) any dividends in relation to it are non-cumulative;
      (c) it is available to absorb losses on a going concern basis;
      (d) in case of winding up or insolvency of the firm, it ranks for repayment after all other debts and liabilities;
      (e) it is undated;
      (f) the proceeds of its issue are immediately and fully available to the firm;
      (g) the firm is not obliged to pay any dividend on it (except in the form of shares that themselves comply with this rule);
      (h) the firm does not have any other obligation or commitment to transfer any economic benefit in relation to it;
      (i) dividends and other charges on it can be paid only out of accumulated realised profits.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 3.1.4 What is share premium account?

      Share premium account is the difference between the nominal value of shares issued and the amount of money received for them (or, if the shares are not paid for in money, the fair value of the consideration received for them).

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 3.1.5 What are qualifying letters of credit?

      (1) A letter of credit is a qualifying letter of credit if—
      (a) it meets the requirements in subrule (2); and
      (b) the Regulatory Authority allows, under rule 3.1.2 (2) (a), that it be included as eligible capital.
      (2) A letter of credit meets the requirements of this subrule if—
      (a) it is unconditional and irrevocable; and
      (b) it does not contain a subordination clause; and
      (c) it is, under subrule (3), legally enforceable in the QFC, Qatar or a zone 1 country; and
      (d) it cannot be cancelled or amended without the consent of all parties; and
      (e) it is for a fixed amount; and
      (f) it is renewable annually; and
      (g) the terms of the agreement between the bank and the firm do not require the firm to give collateral to the bank for issuing the letter of credit; and

      Note Nothing in this paragraph prevents the parent entity of a firm from giving collateral to the bank for issuing the letter of credit.
      (h) the bank that provides the letter of credit is, at the time of issue, and afterwards—
      (i) rated at least BBB+ by Standard & Poor's or the equivalent by another rating agency; and
      (ii) regulated in Qatar or a zone 1 country.
      (3) For subrule (2) (c), a letter of credit is, or is taken to be, legally enforceable in the QFC, Qatar or a zone 1 country if—
      (a) it is issued by a bank regulated in Qatar; or
      (b) it is issued by a bank regulated in a zone 1 country and the firm has an appropriate legal opinion that the letter of credit is enforceable in the QFC, Qatar or that country.

      Note Under FSR, article 16, the Regulatory Authority may, in appropriate circumstances, waive or modify any or all of the requirements for qualifying letters of credit.
      (4) If a letter of credit ceases to be a qualifying letter of credit, the firm must—
      (a) immediately tell the Regulatory Authority in writing; and
      (b) take the necessary steps to ensure that the firm continues to meet its minimum capital requirement (for example, by obtaining replacement qualifying letters of credit).

      Note Writing is defined in the glossary.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 3.1.6 What are intangible assets?

      (1) Intangible assets of a firm include—
      (a) goodwill; and
      (b) capitalised development costs; and
      (c) brand names; and
      (d) trademarks and similar rights; and
      (e) licences.
      (2) The amount of deduction for intangible assets must be based on the full balance sheet value of the assets.
      Derived from QFCRA RM/2011-1 (as from 1st July 2011)

    • CAPI 3.1.7 What are inadmissible assets?

      Inadmissible assets of a firm include—

      (a) tangible fixed assets (including plant and equipment); and
      (b) deficiencies of net assets in subsidiaries; and
      (c) debts and other loans owed to the firm by counterparties if the obligation to pay is more than 180 days overdue; and
      (d) any investment by a subsidiary of the firm in the firm's shares; and
      (e) investments that are not readily realisable investments.

      Note Subsidiary is defined in the glossary.

      Derived from QFCRA RM/2011-1 (as from 1st July 2011)