The Securities and Commodities Authority issued a decision on the procedures for listed companies whose shares have accumulated losses of 20% or more of their capital, committing them to a plan to deal with the losses, while identifying four penalties for the violating companies, the maximum of which is to cancel the listing from the market.
The CMA's decision divided companies into two categories. The first relates to companies with accumulated losses of 20% to less than 50% of their issued capital, while the second category includes companies with accumulated losses of 50% or more of their capital.
The first category
The Securities and Commodities Authority required companies whose losses amount to 20% to less than 50% of their issued capital to include in their disclosure of their interim or annual financial statements a detailed analysis of the accumulated losses, their amount and percentage of capital, and the main reasons that led to these losses. Accumulated and actions to be taken to address them.
The Authority also obliged the local capital markets to add a yellow mark beside the company name on the trading screens, stating that the accumulated losses of the company reached this limit.
In the event that the accumulated losses fall below 20% of the capital, the decision obliged the company to include a detailed analysis of the accumulated losses, their amount and percentage of capital and the reasons that led to the decline, including the measures taken to remedy them, after which the market would be deleted. For the company's distinctive mark on the trading screens.
The second category
The Authority also obliged companies with accumulated losses of 50% or more to include a detailed analysis of the losses, their amount and their percentage to the capital, the reasons that led to the attainment of these losses, their history and the measures to be taken to remedy them.
The TRA also required the market to place a red mark beside the company name on trading screens indicating that losses have reached this limit.
The Authority pointed out that the shares of the listed company whose accumulated losses amounted to 50% or more of the capital can be suspended after consultation with the market until the company discloses the accumulated losses treatment plan for local public shareholding companies.
She explained that for local private joint stock companies or foreign companies, they must submit the procedures that they intend to take to modify their status, or provide proof of modification of their status or the approval of the general assembly or those of the general assembly for the foreign company regarding the continuation of its activities.
Continuation of the company
The Authority's recent decision obliged the board of directors of local shareholding companies, whose losses amounted to 50% or more of the capital, to call the general assembly of the company to convene within 30% of the date of disclosure of the losses, to take a special decision to continue the company to start its business or dissolve before the deadline.
He stressed that these companies should also include in the General Assembly call a plan to address the accumulated losses to make a special decision once a decision is taken to continue the company's activity.
In addition, the Authority obliged local shareholding companies whose losses amounted to 50% or more, relying on an entity with technical and financial expertise approved by the Authority to develop a plan to deal with such losses within a period not exceeding 30 days from the date of disclosure of their data. These companies demanded the formation of a committee to follow up the implementation of the accumulated losses treatment plan. The number of its members shall not be less than three, including one of the independent board members and the expert body approved by the Authority. The committee shall follow up the implementation of the plan and submit a periodic report to the board of directors. The company reported the development of the implementation plan. The Authority also required that company to disclose to the Authority and the Market on a monthly basis or at the request of the Authority and the Market, details of the implementation of the plan.
In the event that losses fall below 50% of its capital, the Authority obliged companies to publish in their disclosure the reason for the decrease and the procedures that led to this matter.
The CMA's decision included four penalties for companies violating the decision, such as warning the company, imposing a fine not exceeding the legally stipulated, suspending the trading of the company's shares, or canceling the company's listing.
The four penalties
■ Company alarm.
■ Imposition of a fine not exceeding the law.
■ Stop trading the company's shares.
■ De-listing the company.
• The Authority obliged companies in case their losses fall below 50% to publish in their disclosure the reason for the decline.