A New Amendment to the Listing Rule

In another amendment to the Rules for Listing and Delisting of Securities on the Egyptian Stock Exchange (the “Listing Rules”), the Financial Regulatory Authority (“FRA”) issued a new decision to clarify some of the questionable provisions and to increase the grace period granted to listed companies to offer their securities at the stock exchange. It also added new provisions regarding mediums for publishing the disclosure reports in cases of spin-off, the conditions for listing foreign companies that are not listed in foreign stock exchanges, and the listing of companies that are not compliant with the 5^th and 8^th conditions for registering shares of Egyptian companies at the Egyptian Stock Exchange.

The Amendments

FRA has issued decision No. 32 of 2019[1] amending its decision No. 11 of 2014 regarding the Rules for Listing and Delisting of Securities. The following rules have been amended.

1. FRA increased the grace period provided to companies that listed their securities on the Stock Exchange prior to the effective date of FRA Decision No. 122 of 2017 and have not offered their securities on the Stock Exchange to date. Now, the grace period for offering their shares on the Stock Exchange has been extended to 30 September 2019 provided that the abovementioned companies submit a time plane for undertaking the offering by 30 April 2019 at the latest. If the company does not undertake the offering during the grace period, its listing will be automatically revoked.

2. FRA amended Article 7 of the Listing Rules, which states the conditions for listing shares of Egyptian companies. The amendment allows companies that cannot comply with the fifth condition (requiring the submission of financial statements for the two fiscal years preceding the date of the listing request provided they are prepared in accordance with the Egyptian Accounting Standards and audited in accordance with the Egyptian Auditing Standards and ratified by the general assembly) and/or the eighth condition (regarding the net profit percentage, and which was previously allowed to be disregarded in specific cases that are also determined in Article 7) to list their shares at the Stock Exchange in certain cases. FRA also added two new cases as follows:

• With respect to companies that are required to prepare consolidated financial statements, the FRA now allows these companies to submit their financial statements since their incorporation and the financial statements of their subsidiaries for the fiscal year directly preceding the date of the listing request provided other conditions regarding equity rights and net profit are also met.

• With respect to companies that are the product of restructuring through spin-off or merger of non-listed companies, they may submit their financial statements for a whole fiscal year (with respect to restructuring through spin-off) or for the period from the date of completion of the restructuring and until the submission date of the listing request (with respect to merger). The parent company of spun-off companies will also have to submit its latest annual financial statement while the merged company will also have to submit its financial statements for the last two fiscal years.

3. FRA now allows foreign companies that are listed in foreign exchanges to list their shares in the Egyptian Stock Exchange if more than 50% of its equity rights, assets and revenues are from Egyptian subsidiary companies. In the event of successful listing, FRA requires these companies to prepare their financial statements in accordance with the Egyptian Accounting Standards and to have them audited in accordance with the Egyptian Auditing Standards.

4. With respect to parent and spun-off companies, FRA has also amended their listing conditions (Article 24 of the Listing Rules) so that it now explicitly states that the information of the listed parent company is required to be amended in addition to the listing of the spun-off companies which are considered as an extension to the listed company. FRA has also amended this article to require the publication of the disclosure report (issued upon the spin-off) in mediums other than those currently required. The new mediums are the website dedicated for this purpose by FRA, the Stock Exchange screens, the company’s website as well as the publication of its brief in one Egyptian daily newspaper only in accordance with the template provided by FRA.

  [1] FRA Board of Directors Decision No. 32/2019 amending Decision No. 11/2014 on the rules for listing and delisting securities on the Egyptian Stock Exchange, available through this link (in Arabic).