The Securities and Commodities Authority has stated that there are seven basic steps and conditions for approving the request to reduce the capital of public joint-stock companies, explained in an awareness leaflet, «Emirates Today» obtained a copy of it, that approval of the request for the reduction requires three basic steps, the first: approval Initial, which includes submitting a request to the authority for an initial approval to reduce the company's capital, accompanied by the required documents, and completing the procedures for holding the company's general assembly meeting.
Announcement of creditors
With the second step regarding the creditors announcement, it is required to submit an application for approval to publish the creditors announcement in the daily newspapers with all the documents attached, and the company publishes the creditors announcement in two local daily newspapers, issued in Arabic 30 days before the date when the capital reduction is scheduled, and the creditors must: They shall provide the company with documents confirming their debts within 30 days from the date of publication of the advertisement.
In its awareness-raising bulletin, the authority added that the third step is to reduce the company's capital, in which the company will, within 30 days of the expiry of the creditors ’deadline, submit all the necessary documents, then the company will publish a certificate of approval for the company's articles of association in the Official Gazette and provide the authority with proof of that.
Requirements and conditions
The Authority indicated that there are four requirements and conditions that must be met to agree to the request to reduce the capital of the public shareholding company, which is the inadmissibility of reducing the capital, unless the company suffers losses that are not likely to be compensated by future profits, and if the capital exceeds the need of the company.
She also added that one of the conditions is that the company's capital decrease be in one of three ways: reducing the nominal value of shares, canceling a number of shares, or buying and destroying a number of shares.
She stressed that when reducing the capital of the company, the company must take into account that the nominal value does not fall below one dirham, and that the minimum legally prescribed capital of 30 million dirhams, and that the share of bonds and bonds convertible into shares be calculated among the shareholders whose share number is to be reduced upon reduction due to Losses, and equality between shareholders in the proportion and proportion of the reduction of their shares in the capital of the company, and that the reduction does not result in depriving a shareholder of his contribution to the capital of the company.
In its awareness leaflet, the Authority detailed the documents required for each step of the service, stating that the first step represented in the initial approvals requires the availability of several documents, the most prominent of which is a request directed to the Authority to agree to reduce the company's capital, and it is explained by the justifications for the reduction and approved by the Chairman of the Board of Directors. And a copy of the company's board of directors decision in which the proposal to reduce the company's capital was approved, indicating the amount and how to reduce and the approvals of the competent authorities and authority to reduce the capital (the central bank for banks and finance and financial investment companies, and the insurance agency for insurance companies).
The bulletin continued that the second step related to announcing creditors requires two documents, which is a copy of the minutes of the general assembly meeting that decided to reduce the capital and a draft announcement of the creditors ’invitation in accordance with the form prescribed by the authority.
The Securities and Commodities Authority has confirmed that the third step documents for reducing the capital of the company include an application addressed to the Authority to obtain a certificate of approval to amend the articles of association, along with the following documents:
1- Evidence of publication of the creditors announcement in two local daily newspapers published in Arabic.
2- A commitment signed by the majority of the company’s Board of Directors according to form (AR-D2) stating one of the following two options:
- that the company is able to pay its debts on that date or that all of the company's creditors have agreed to the reduction.
- Acknowledgment by the Chairman of the Board of Directors that the creditors who applied during the legal period after the date of publication have fulfilled their outstanding debts, as well as evidence of deferred debt guarantee.
3- A certificate from the auditor confirming that the reduction has been accomplished and a description of the manner in which the capital was carried out, including before and after the reduction and the number of shares canceled.
4- A statement of payment of the fees determined by the Authority within 30 days of the expiry of the creditors ’deadline.
5- Formulating the articles to be modified from the articles of association according to the capital reduction before and after the amendment.
6- The approval of the competent local authority to reduce the capital.