FRA Amends Voluntary Delisting Rule

The Board of Directors of the Financial Regulatory Authority (“FRA”) recently published decision No. 43 of 2019 (the “Decision”)[1] on its website, amending the rules for the listing and delisting of securities on the Egyptian Stock Exchange originally issued in 2014 (the “Listing and Delisting Rules”). The new Decision adds a provision to the rules on the voluntary delisting of securities in cases of “conflict of interests” and “material events.” As per the new Decision, FRA can, in cases of conflict of interest, limit the voting on the voluntary delisting decision in the extraordinary general assembly to minority shareholders only (holders of free-floating shares), thus barring majority shareholders and their related parties from voting on the delisting. In cases of material events, or transactions preceding the invitation to convene the general assembly which affect company value, FRA can request that the shares of those opposing the delisting are purchased at the fair value of the securities as determined by an FRA-registered independent financial advisor. With the stated aim of protecting minority shareholders and subsequently improving competitiveness in the market,[2] the Decision follows a recent incident in which FRA limited the extraordinary general assembly voting on the voluntary delisting of Amer Group to the minority shareholders of the company.[3] However, further clarifications and policies related to the rules on voluntary delisting might be in need, including an elaboration on the conditions that would warrant FRA’s opting for exercising its new powers or the procedures to be followed to implement these powers. This could help in ensuring that delisting would be fair and reasonable to all while simultaneously striking a balance between business needs and the protection of the rights of all shareholders.[4]   [1] FRA Board of Directors Decision No. 43/2019 amending Decision No. 11/2014 on the rules of listing and delisting of securities on the Egyptian Stock Exchange, available through this link (in Arabic). [2] Financial Regulatory Authority, “FRA’s board of directors amends the rules for listing and delisting securities on the Egyptian Stock Exchange to provide more protection to minority shareholders”, 26 March 2019, available through this link (in Arabic). [3] FRA’s statement on the voluntary delisting of Amer Group, 3 March 2019, available through this link (in Arabic). [4] withersworldwide, “Minority Shareholder Protection in Delistings: Striking a Balance”, by Leong Chuo Ming, 28 November 2018, available through this link.