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Preliminary Listed Companies Exempt

Preliminary Listed Companies Exempt from Disclosure and Corporate Governance Requirements
Preliminary Listed Companies Exempt from Disclosure and Corporate Governance Requirements The Egyptian Financial Supervisory Authority (“EFSA”) issued decree No. 124 of 2015[1] adding a new provision to the rules and conditions governing the listing and delisting of securities on the Egyptian Stock Exchange (“EGX”), the most recent of which are issued by EFSA’s decree No. 11 of 2014 as amended by Decree No. 170 of 2014[2]. The present amendment exempts Egyptian companies that are granted a preliminary listing approval from the requirements related to disclosure, corporate governance and financial statements and treasury stock, as well as any amendments to the share capital or the bylaws of the company. However, this waiver applies in case some conditions detailed below are met. The Initial Decree In order to gain a full picture, it is necessary to revisit EFSA’s decree No. 11 of 2014. Article 10 of Presidential Decree No. 191 of 2009[3] authorizes EFSA’s Chairman to approve any decrees issued by the board of EGX in relation to rules governing EGX trading and listing, etc. Accordingly, decree No. 11 of 2014[4] was issued to set the rules and conditions governing the listing and delisting of securities on EGX (the “Listing Rules”). The Listing Rules apply to all listed securities as shares, bonds, financial instruments, investment funds notes, Egyptian depository certificates as well as other securities. The Listing Rules are divided into six chapters: (1) general provisions and definitions; (2) listing procedures; (3) disclosure requirements; (4) governance rules; (5) treasury stock and the amendment of the company’s share capital or bylaws; and (6) delisting procedures. Obligations of Companies with Preliminary Listing Approvals under the Listing Rules The recent decree, Decree No. 124 of 2015 adds Article 1 bis, which exempts companies with preliminary listing approvals from some obligations under the Listing Rules until completion of their listing requirements. Accordingly, these companies, provided they are complying with the Companies Law[5] and the Capital Markets Law[6], are exempt from the rules of the third, fourth and fifth chapters of the Listing Rules concerning disclosure, corporate governance and financial statement preparation and the provisions for treasury stock and the amendment of the company’s share capital or bylaws. This exemption applies until these companies fulfill the listing requirements and commence trading on their shares. Nevertheless, the legislator has excluded certain conditions from the above exemption; (1) paragraphs No. 1 and 2 of Article 7 governing the listing of Egyptian companies provide that 10% of the company’s listed shares must be traded while having not less than 300 shareholders taking into consideration the rules set out by EGX to monitor fraudulent offerings and (2) paragraphs No. 1 and 2 of Article 9 governing the listing of small and medium companies. These Articles stipulate that 20% of the company’s listed shares must be traded while having not less than 100 shareholders, taking into consideration the rules set out by ESE to monitor fraudulent offerings. Commentary Since the legislator treats fully listed companies in a different way from companies that have obtained preliminary listing approvals, it is only logical for companies with preliminary listing approvals to be subject to fewer obligations than fully listed ones. [1] Egyptian Supervisory Financial Authority Decree No. 124 for the Year 2015, Amendment of the EFSA Decree No. 11 of 2014 Provisions, Official Gazette, Issue 282, 13 December 2015. [2] Egyptian Supervisory Financial Authority Decree No. 170 for the Year 2014, Amendment of the EFSA Decree No. 11 of 2014 Provisions, Official Gazette, Issue 10, 15 January 2015. [3] Presidential Decree No. 191 for the Year 2009, Provisions Regulating the Egyptian Stock Exchange and its Financial Affairs, Official Gazette, Issue 24 (bis), 14 June 2009. [4] Egyptian Supervisory Financial Authority Decree No. 11 for the Year 2014, Rules of Listing and Writing-off of Securities in the Egyptian Stock Exchange, Official Gazette, Issue 21 continued (A), 28 January 2014. [5] Law No. 159 for the year 1981, Companies Law, Official Gazette, Issue 40, 1 October 1981. [6] Law No. 95 for the year 1992, Capital Markets Law, Official Gazette, Issue 25 (bis), 22 June 1992.
Preliminary Listed Companies Exempt from Disclosure and Corporate Governance Requirements The Egyptian Financial Supervisory Authority (“EFSA”) issued decree No. 124 of 2015[1] adding a new provision to the rules and conditions governing the listing and delisting of securities on the Egyptian Stock Exchange (“EGX”), the most recent of which are issued by EFSA’s decree No. 11 of 2014 as amended by Decree No. 170 of 2014[2]. The present amendment exempts Egyptian companies that are granted a preliminary listing approval from the requirements related to disclosure, corporate governance and financial statements and treasury stock, as well as any amendments to the share capital or the bylaws of the company. However, this waiver applies in case some conditions detailed below are met. The Initial Decree In order to gain a full picture, it is necessary to revisit EFSA’s decree No. 11 of 2014. Article 10 of Presidential Decree No. 191 of 2009[3] authorizes EFSA’s Chairman to approve any decrees issued by the board of EGX in relation to rules governing EGX trading and listing, etc. Accordingly, decree No. 11 of 2014[4] was issued to set the rules and conditions governing the listing and delisting of securities on EGX (the “Listing Rules”). The Listing Rules apply to all listed securities as shares, bonds, financial instruments, investment funds notes, Egyptian depository certificates as well as other securities. The Listing Rules are divided into six chapters: (1) general provisions and definitions; (2) listing procedures; (3) disclosure requirements; (4) governance rules; (5) treasury stock and the amendment of the company’s share capital or bylaws; and (6) delisting procedures. Obligations of Companies with Preliminary Listing Approvals under the Listing Rules The recent decree, Decree No. 124 of 2015 adds Article 1 bis, which exempts companies with preliminary listing approvals from some obligations under the Listing Rules until completion of their listing requirements. Accordingly, these companies, provided they are complying with the Companies Law[5] and the Capital Markets Law[6], are exempt from the rules of the third, fourth and fifth chapters of the Listing Rules concerning disclosure, corporate governance and financial statement preparation and the provisions for treasury stock and the amendment of the company’s share capital or bylaws. This exemption applies until these companies fulfill the listing requirements and commence trading on their shares. Nevertheless, the legislator has excluded certain conditions from the above exemption; (1) paragraphs No. 1 and 2 of Article 7 governing the listing of Egyptian companies provide that 10% of the company’s listed shares must be traded while having not less than 300 shareholders taking into consideration the rules set out by EGX to monitor fraudulent offerings and (2) paragraphs No. 1 and 2 of Article 9 governing the listing of small and medium companies. These Articles stipulate that 20% of the company’s listed shares must be traded while having not less than 100 shareholders, taking into consideration the rules set out by ESE to monitor fraudulent offerings. Commentary Since the legislator treats fully listed companies in a different way from companies that have obtained preliminary listing approvals, it is only logical for companies with preliminary listing approvals to be subject to fewer obligations than fully listed ones. [1] Egyptian Supervisory Financial Authority Decree No. 124 for the Year 2015, Amendment of the EFSA Decree No. 11 of 2014 Provisions, Official Gazette, Issue 282, 13 December 2015. [2] Egyptian Supervisory Financial Authority Decree No. 170 for the Year 2014, Amendment of the EFSA Decree No. 11 of 2014 Provisions, Official Gazette, Issue 10, 15 January 2015. [3] Presidential Decree No. 191 for the Year 2009, Provisions Regulating the Egyptian Stock Exchange and its Financial Affairs, Official Gazette, Issue 24 (bis), 14 June 2009. [4] Egyptian Supervisory Financial Authority Decree No. 11 for the Year 2014, Rules of Listing and Writing-off of Securities in the Egyptian Stock Exchange, Official Gazette, Issue 21 continued (A), 28 January 2014. [5] Law No. 159 for the year 1981, Companies Law, Official Gazette, Issue 40, 1 October 1981. [6] Law No. 95 for the year 1992, Capital Markets Law, Official Gazette, Issue 25 (bis), 22 June 1992.