CMA is amending the procedures for losing companies to be in line with Article 150 of the new Companies Law

​The Capital Market Authority announced that it is working on amending the Instructions and Procedures Related to Companies Listed on the Saudi Stock Exchange with Accumulated Losses of %50 or more of its Capital, in light of the new Companies Law issued by Royal Decree No. (M/3) and dated 28/1/1437 H. which will take effect on the second of May 2016. CMA stated that it is coordinating with the Ministry of Commerce and Industry in this matter. The amended instructions and procedures will be announced once they are approved by the CMA Board.

CMA insured that applying Article (150) of the new Companies Law and amending the mentioned Instructions and Procedures will take into account the rights of shareholders and investors in these companies, and the promotion of transparency and disclosure in the Capital Market, in addition to increasing the efficiency and fairness of trading the shares of listed companies.

Article (150) of the new Companies Law included the procedures that must be followed by companies with accumulated losses of %50 or more of its paid capital. The procedures are as follows:

  1. Any company official or the auditor must inform the Chairman of the Board of Directors once he knows that the company's accumulated losses reached %50 of its paid capital.
  2. The Chairman must inform the Board members immediately.
  3. Within 15 days of the Board's knowledge of such losses, the Board must call for  convening of the extraordinary general assembly within 45 days from the date of their knowledge of the losses.
  4. The extraordinary general assembly must decide to either increase or decrease the company's capital – in accordance with the Companies Law and other related laws and regulations- to the degree where the percentage of losses would decrease to be below %50 of the paid capital, or to dissolve the company before the prescribed date in its articles of association.

The company will be deemed dissolved by force of law in any of the following cases:

  • If the extraordinary general assembly does not convene during the specified period above.
  • If a meeting was held but failed to issue a resolution on the matter, if it decided to increase the capital in accordance with the above but not all capital increase was subscribed for within ninety days from the extraordinary General Assembly's resolution to increase the capital.