The decision by the Securities and Commodities Authority on the accumulated losses of listed companies is in the interest of investors and increases the efficiency of local capital markets, analysts said.

The «Securities» issued a decision, the day before yesterday, requiring companies listed shares in the local capital markets, which accumulated losses of 20% or more of its capital, to take measures, including a plan to address losses, while identifying four penalties for violating companies, the maximum Cancellation of listing.

Talal Touqan, head of investment in BH Mubasher Financial Services, said: “Deciding the fate of some losing companies, moving towards restructuring and reviving their production or merger capabilities, or even resorting to bankruptcy and liquidation, is an urgent necessity. The delay has extended to a large number of individuals and companies, and many related entities, both in terms of dealers and employees' rights, or their financial obligations towards suppliers and lenders, thus slowing the rate of cash turnover in the economy.

He added that «achieving losses leads to control uncertainty, affect the morale of investors and consumer confidence in general, especially when the losses are due to weak governance, and the inaction of the management of some companies».

He stressed that the implementation of these measures during the current period is important and vital, especially as the coming period carries with it distinctive opportunities for growth in the UAE economy, which embraces incentives to establish entrepreneurship and encourage existing institutions.

He called for encouraging and stimulating the establishment of more private equity funds, specifically those specialized in innovative solutions to seize the opportunities of restructuring, and push the wave of mergers led by banks to expand, where other sectors still need such as insurance, construction and building materials, as well as trade Retail and consumer goods.

Mohammed Ali Yassin, Chief Executive, Strategies and Clients at Al Dhabi Capital, said: “The measures taken by the Authority are aimed at protecting the investor who may not be familiar with the financial statements.” This will increase the level of credibility in the market. The decision also shows companies with problems, alerting investors to deal with them differently.

He said that these decisions will serve as a tool in the hands of investors to monitor the management of companies and show how they maintain the investments of their shareholders.

Yassin pointed out that the next step to be taken is to withdraw companies that have losses of 50% or more of capital from local market indices, stressing that these companies do not deserve to be included in the index, because they benefit from some advantages of this listing, should not That benefit them, such as attracting liquidity to their shares.

He explained that the obligation of companies to develop an action plan to address their losses, will be in the interest of investors, because they will have the ability to hold accountable management of shareholders companies, and said that the decisions issued by the Authority, aimed at protecting investors and raise the efficiency of markets.

Wadah Al Taha, a member of the National Advisory Council of the British Institute of Investments and Securities in the UAE, said: “The measures taken by the Authority are preventive, protective and precautionary measures aimed at educating investors and giving them early warning about their investments in some companies that may face problems in the future”. .

He explained that the main objective is to increase the efficiency of the market, through those mechanisms that put conditions on the losing companies.

He pointed out that the easiest way for some companies to deal with losses, is to reduce capital to absorb accumulated losses, and some others resort to restructuring in general.

Accumulated losses

Talal Touqan, head of investment in BH Mubasher Financial Services, confirmed that a number of companies have accumulated losses, and have begun a phase of financial restructuring that usually begins by amortizing accumulated losses and negotiating with creditors and lenders.