FRA Issues New Publication Requirem

Following the amendment of Articles (4) and (6) of Capital Market Law No. 95 of 1992 (the “CML”) last March, the Financial Regulatory Authority (“FRA”) has issued a decision setting out the rules and means for publication by companies that have publicly offered their securities or listed them on the Egyptian Stock Exchange. According to these new rules, the relevant companies are required to publish initial public offering prospectuses and disclosure reports as well as annual and periodic financial statements on a website that will be designated by the FRA for that specific purpose. Only briefs of these documents may have to be published in a widely circulating newspaper.

Background

Prior to the amendment of the CML last March, Article (4) thereof required companies offering securities to the public to prepare a prospectus, have it approved from the FRA and then publish it in two widely circulating newspapers in accordance with the rules to be determined by the executive regulations of the CML. In March, this Article was amended so that (i) the prospectuses are in accordance with the templates issued by the FRA, which reflects the current practice; (ii) the publication of a summary of the prospectus or disclosure report through means to be determined by the board of directors of the FRA is required. The last two paragraphs of Article (6) of the CML were also amended to abolish the requirement to publish financial statements and a brief of material events in two widely circulating newspapers. Instead the amendment gave the FRA the power to determine publicizing rules that should be followed by companies subject to this FRA decision. In execution of the new wording of Articles (4) and (6) of the CML, the FRA issued decision No. 55 of 2018 on the rules and means of publishing to be followed by companies whose securities were publicly offered or listed on the Egyptian Stock Exchange (“Decision 55/2018”).[1]

The New Decision

The scope of application of Decision 55/2018 covers only companies that previously offered their securities to the public or are listed on the stock exchange. Hence, it does not apply to any other companies established in Egypt. With respect to prospectuses issued in the “issuance market”, these will have to be published in full on a website that will be designated by the FRA for that purpose starting from the day following the approval of the prospectus and until closing of subscription. Only a brief of these prospectuses will have to be published in one widely circulating daily newspaper. As to prospectuses issued in connection with the issuance of short term bonds and sukuks (2 years), these are required to be published only on the website designated by the FRA. With respect to prospectuses in the secondary market and disclosure reports issued in connection with the sale of securities or the commencement of trading, these will have to be published in full – starting from the date following their approval by the FRA until the commencement of trading – in three places: (1) the website to be designated by the FRA for that purpose; (2) the stock exchange; and (3) the website of the company. Only a brief thereof will have to be published in one widely circulating daily newspaper. As to prospectuses and disclosure reports issued by small and medium enterprises, these will have to be published in full on the website to be designated by the FRA. Annual and periodical financial statements will have to be published in full along with the auditor’s report on the website to be designated by the FRA. If the company is listed on the stock exchange, it is also required to publish these documents on the screens of the stock exchange as well as the company’s website until publication of the following statements. In all cases, a brief of these documents will have to be published in one widely circulating daily newspaper. With respect to the disclosure of material events, the new decision distinguishes between listed companies and companies that previously offered their securities to the public. The latter companies are required to publish a summary of the material events that may affect the business of the company or its financial position in one widely circulating daily newspaper, and to make available to the shareholders at the headquarters of the company all the information about such material events. As to listed companies, they are required to disclose such material events to the stock exchange and on their website. Finally, the FRA decision states that the Listing Rules shall be amended in accordance with this new decision and that all provisions in the Listing Rules that contradict it shall be revoked.

Conclusion

The new FRA decision is issued in execution of the provisions of the CML after amendment. Most significantly, it limits the requirement to publish prospectuses and similar documents to just a summary in one widely circulating daily newspaper while allowing the publishing of the full documents on an electronic medium, a matter which enhances transparency and cuts costs.   [1] FRA Board of Directors Decision No. 55/2018 on the rules and means of publishing to be followed by companies whose securities were publicly offered or listed on the Egyptian Stock Exchange, Egyptian Gazette, Issue No. 125, 31 May 2018.