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Important amendments to listing rules in the first session of FRA’s Board of Directors

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• Dr. Omran: Increase the liquidity of traded securities by increasing the rates of offered shares and free stock trading
• Dr. Omran: Amend the definition of small and medium enterprises to be companies whose issued and paid capital is less than 100 million pounds upon submitting listing request for the first time
• Dr. Omran: FRA’s Board of Directors takes decisions to protect minority rights and further commitments to achieve good governance

In the first meeting of FRA’s Board of Directors in its new formation, many regulatory and supervisory issues related to non-banking financial services were discussed. Among the topics discussed and approved by the Board yesterday were several important amendments to listing and delisting rules to increase the rates of the offered shares, improve levels of disclosure and transparency in the market, apply the rules of governance and enhance protection of minority, the amendments included the following:

First: In the field of  offering ratios for new companies and free stock trading:

In the framework to increase the liquidity of the traded securities, FRA’s Board of Directors decided to increase the ratio of offered shares and the minimum   limit of free stock trading. The amendments approved by the Board of Directors included an increase in the offering rate  needed to list the shares of the new companies in the Stock Exchange to be  25% of the company’s shares or a quarter of a thousand of the free market capital representing at least 10% of the company’s shares . The amendments also amend the ratio of free stock trading (whether currently listed or new ones), so that the ratio of free shares shall not be less than 10% of the company’s capital or 1/8 per thousand of the capital and 5% of the company’s shares, giving a deadline for the companies currently listed to adjust their positions according to the ratio of free stock trading until the end of 2019.

Second: In the field of encouraging companies to be listed at the Egyptian Stock Exchange:

In the framework of encouraging SMEs to be listed at the Egyptian Stock Exchange, the Board approved to amend the definition of small and medium enterprises where the issued and paid up capital of the company shall not be less than 100 million pounds upon requesting listing at the Exchange (instead of 50 million EGP) and the maximum limit is 200 million EGP (instead of 100 million). The amendments also facilitate the transfer of listed companies to and from the main table as long as it meets their requirements.
 Within the context of facilitating listing of companies operating in securities ,  the amendment included the cancellation of the condition which stated that Executive Board members shall own 10% of the  company’s  shares in accordance with FRA’s BOD decision no.143 of  2010 and to leave the percentages of  the shares  to be kept to listing rules applied on  other companies.
As for the companies that have been listed on the Stock Exchange and do not submit the offering up till this date, the Board approved a one-year period for these companies to execute the offering.

Third:  In the field of Disclosure, Governance and Protection of Minority Rights:

The amendments approved by the board of directors included the commitment of the major shareholders and the board of directors of the listed companies to disclose their direct and indirect ownership in the listed companies. The amendments also included the necessity of complying with the provisions of Article (66) of Companies Law No. 159 of 1981 and Article (220) of its Executive Regulations which obligates the  companies – annually – to be  placed  at the disposal of  the shareholders for their special consideration in the General Assembly meeting which is held to review the Board’s report  before three days at least at the Company’s headquarters and at the headquarters of the meeting . The said report shall include a detailed disclosure that shows in particular all amounts received by the Chairman of the Company’s Board of Directors and each member of the Board of Directors, including salaries, bonuses and all other material benefits.
The amendments also stated that the listed companies shall disclose how far do the decisions related to the capital increase is applied on a semi-annual basis and the measures taken in this regard and how far do the listed companies abide by the nominal value in case of capital increase through a  disclosure submitted by old shareholders of the fair value prepared by an independent advisor in the following two cases:
• If the company has suffered losses according to the last approved financial statements, equal or exceed 50% of the equity and the value of the increase exceeded 10% of the capital by not less than “5” million pounds.
• If the increase equals or exceeds the issued capital or the equity in accordance with the latest approved financial statements.
In the field of protection of minority rights, the amendments add a commitment to the company requesting listing  to amend its statute regulation  if it includes the allocation of certain seats to specific parties or shareholders to comply with the result of the offering and the entry of new shareholders, and allow listed companies in cases of delisting  to open an account called “delisting  account” which will  be codified in the Egyptian stock exchange to buy shares of shareholders affected by delisting.
The amendments approved by the Board in the field of corporate governance also included the preparation of an annual report on compliance with the principles of corporate governance according to the model prepared by the Authority to be presented to the General Assembly at its annual meeting. This shall be applied by the fiscal year ends on 31 December and by the end of fiscal year 2019 for companies whose fiscal year ends on 30 June.
 

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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