Aggregated News From Investment Management Regulators

FRA holds a workshop to raise awareness of the cumulative voting system and proportional representation


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• Dr. Omran: We push towards activating the participation of small investors by using the cumulative voting system in elections of the board members of listed companies and other companies operating in non-banking financial activities.
• Dr. Omran: Setting a minimum limit of proportional representation in companies’ board of directors.

Within the framework of FRA’s keenness to protect the rights of dealers and small investors in listed companies and other companies operating in non-banking   financial activities, the Authority held a workshop over two consecutive days for representatives of nearly 100 companies listed at  the Egyptian Stock Exchange to explain the concept of cumulative voting and proportional representation of capital in the board of directors of those companies.

Dr. Mohammed Omran, FRA’s Chairman stressed the keenness of the Authority to perform its role in the field of spreading financial culture and awareness of non-banking financial services. The workshop was organized to inform the representatives of the listed companies with the amendments to listing and delisting rules on the Egyptian Stock Exchange in order to expand the base of the electors to select the members of the Board of Directors so as to allow small shareholders to enter the Board of Directors and actively participate and contribute to the company’s management.

The Chairman of the Authority said that FRA’s  Board  decision no. 92 of  2018 issued on 25/6/2018 regarding  the amendments  to listing and delisting rules , added two new conditions to the general conditions  set for  listing  securities on the Egyptian Stock Exchange in a manner that obliges the listed companies and companies operating in non-banking  financial activities  to use  the cumulative voting system in the board of directors’ elections and there shall be a minimum of proportional representation of capital in the company’s  board of directors.

He added that this comes as a qualitative step to keep up with the best international practices in the field of corporate governance, in accordance with the principles of transparency, integrity and neutrality, noting that this will maintain fairness and good governance by taking into account  striking a balance upon choosing the board of directors due to the fact that  the board of directors of the joint stock company has legal, financial and administrative powers  which grant  it the opportunity to lead  the company in a way that achieves the interests of its shareholders.

Dr. Omran pointed out  that the  Authority  obliged companies to provide in their statutes the cumulative voting mechanism for the election of the  Board members  in order to allow small investors to be represented in the board of directors of these companies and then actively participate in managing them in a way that serves the interests of shareholders ,  achieving the desired balance in the company’s  management  , maintaining   stability desired in the financial markets  and  settling  related disputes.

It should be noted that the cumulative vote is an updated system introduced by the Egyptian legislator under Law No. 4 of 2018 allowing the shareholder to grant the voting block represented by the shares owned by him in the company’s capital to one candidate or distributed to more than one candidate. In addition, small shareholders can also form alliances among themselves to obtain one or more seats in the Company’s Board of Directors during the election of the Board members of the company’s General Assembly.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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