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Separating CEO and Chairman positions within listed companies in accordance with principles of good corporate governance – Monday 20/4/2020

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Dr. Omran: Listed companies shall legalize their status within a year or by the date of the first election of directors

Dr. Mohammed Omran – FRA’s Chairman disclosed that FRA’s BOD approved an amendment to listing and delisting rules by adding a new regulation for the general conditions of listing securities at the Stock Exchanges. The said amendment separated the position of the chairman and the position of the CEO of the company. This is based on best international practices of corporate governance discussed in a working paper presented by the Egyptian Institute of Directors (EIoD).

Dr. Omran said that the Board of Directors decision no. 47 of 2020 was issued within the framework of applying the best rules and principles of governance through separating the executive function of the CEO from the supervisory and regulatory function of the company’s Chairman. Dr. Omran added that this will help in assessing the performance of the executive management objectively. Also, this amendment will avoid focusing on short-term objectives to achieve quick benefits for operational management without regard to long-term objectives of interest to all stakeholders.

FRA’s Chairman stressed that separating the two roles which is applied in accordance with international best practices as stipulated in FRA’s BOD decision no.  47 of 2020 would have many advantages for the company. These advantages include:  enhancing the company’s control environment , reducing harmful practices, avoiding conflicts of interest as well as focusing on long-term goals that serve the interests of all corporate shareholders. That is in addition to the World Bank’s methodology which stressed on the necessity to separate the positions of the Chairman of the Board from the Chief Executive or Managing Director at the protecting minority investors indicator in the Doing Business Report.

In the same context, Dr. Omran noted that periodical memo  No. 9 issued on 19th  of this month clarified that listed companies shall legalize their status within a year starting from  the date of publishing the Board’s decision at the Egyptian Gazette( issue 92) or by the date of the first election of directors. It is worth mentioning that the number of listed companies which apply separation between the two positions reaches about 115 companies.

It should be noted that companies subjected to the Authority’s supervision are obliged to apply corporate governance executive rules pursuant to FRA’s BOD decision that includes separating the Chairman and CEO roles as it is the case in the capital market activity where the Companies undertake many activities under Law No. 95 of 1992. Also, more than 85% of financial leasing, mortgage finance, factoring and microfinance companies apply governance rules and will be applied to companies that are authorized to engage in consumer finance activity.

Listing and delisting rules are the legal framework governing listing and delisting at the Stock Exchange in accordance with Article 16 of the Capital Market Law. These rules regulate all matters related to companies and parties wishing to be listed at the Stock Exchange Whether Egyptian or foreign, starting from clarifying listing conditions, procedures and conditions to be listed at FRA’s registry,  companies’  commitments  during listing period  including disclosures ,  corporate  governance requirements , protection of minority rights, treasury shares provisions  and  capital adjustment controls ending with identifying delisting  cases whether voluntary or compulsory delisting.

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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