FRA Amends Disclosure Requirements

Last month, the Financial Regulatory Authority (“FRA”) amended yet again the rules for listing and delisting of securities on the Egyptian Stock Exchange (the “Listing and Delisting Rules”)[1] that were published in 2014, this time by requiring listed companies to publish both complete and succinct annual financial statements in addition to publishing periodic ones on Stock Exchange screens and the companies’ websites.[2] The amendment also adds a new provision regarding the disclosure of any conflicts of interest in board of directors’ reports that are to be presented to the general assembly; these are to be published in full detail on Stock Exchange screens and the companies’ websites as well.

1. Financial Statements

• Annual Financial Statements: Complete and Summarized Publications

As per the Listing and Delisting Rules prior to the January 2020 amendment, a listed company must submit to FRA its annual financial statements and its auditor’s report a month prior to its general assembly’s convening for possible inspection. Following this and at least 21 days before the assembly’s convening, the company must publish “a comprehensive summary” of its board of directors’ report, the annual financial statements and the complementary explanations thereof, the auditor’s report, and the FRA’s post-inspection notes (if any) in two widely circulated Egyptian daily newspapers, at least one of which is in Arabic. The new January 2020 amendment changes the content and medium of publication in addition to specifying the time period of such publication. FRA now requires listed companies to publish complete annual financial statements, the complementary explanations thereof, and the auditors’ reports thereon (rather than their comprehensive summaries) – in addition to the aforementioned summarized board of directors’ reports and the FRA notes – on Stock Exchange screens and the companies’ websites (rather than in daily newspapers). These are to remain published until the publication of the following annual financial statements. However, in addition to the complete statements and reports, listed companies are also still required to publish the summarized annual financial statements and their complementary explanations and the auditors’ reports on them in a widely circulated, Arabic-language Egyptian daily.

• Periodic Financial Statements

As for periodic financial statements, the pre-January 2020 Listing and Delisting Rules had specified that quarterly financial statements and their related reports are to be published for at least three days on the Stock Exchange’s website. The Rules had also required companies undertaking periodic distributions to publish their periodic financial statements that were taken as a basis for the distributions in two widely circulated Egyptian daily newspapers, at least one of which is in Arabic. The latest amendment removes the previous specification of quarterly financial statements. Instead, it now requires companies to publish periodic financial statements – regardless of the intervals – and their related reports, including periodic financial statements taken as a basis for distributions, on Stock Exchange screens and the companies’ websites. These are to remain published until the publication of the following periodic financial statements.

2. Conflicts of Interest Disclosure

The latest amendment also touches on governance principles and the protection of minority rights by adding a new provision to the article on the reports of the board of directors that are presented to the general assembly. As per the amendment, said reports must include a statement of the commitment of the insiders (including board members, majority shareholders, and managers) and their related parties to disclose to the board all information and data regarding any conflict of interest and to disclose material interests or transactions that would affect the company’s activity or interests. This includes disclosing cases of conflict of interest that benefit the aforementioned individuals either directly or indirectly and the types and values of transactions that affect the company’s activity/interests. Summaries of these board reports, however, must include the complete disclosures of these conflicts of interest, and they are to be published on the Stock Exchange screens and the company’s website.   [1] FRA Board of Directors Decision No. 11/2014 on the rules for listing and delisting of securities on the Egyptian Stock Exchange, Egyptian Gazette, Issue 21 (contd.) (a), 28 January 2014. [2] FRA Board of Directors Decision No. 1/2020 amending its Decision No. 11/2014 on the rules for listing and delisting of securities on the Egyptian Stock Exchange, available through this link (in Arabic).