The Capital Market Authority's board approved today the Regulatory Rules and Procedures pursuant to the Companies Law Relating to Listed Joint Stock Company which was effective on 25 Rajab 1437 corresponding to May 2nd 2016. The regulatory Rules and Procedures aim to apply the provisions of the Law regarding listed companies on the Stock Exchange so as to achieve the requirements of the Law. This is part of CMA efforts to enhance governance and disclosure in listed companies.
In addition, the CMA board has issued the guidance note for these Regulatory Rules and Procedures which is intended to assist listed joint stock companies and its boards of directors; shareholders; and any related party in implementing the Regulatory Rules and Procedures, and should help them in achieving a higher degree of compliance with the requirements of these Regulatory Rules and Procedures as well as the related provisions of the Companies Law.
The CMA mentioned that the best relevant international practices as well as concerned and interested parties' comments were taken into account when drafting these Rules and Procedures, as to achieve the desired objectives. Additionally, several workshops were held in cooperation with the Ministry of Commerce and Investment with the attendance of many if the listed companies representatives, in order to receive their comments and observations regarding those Rules and Procedures.
The Rules and Procedures include: remuneration of Board members in joint stock companies, holding of general and special assemblies' meetings and shareholders participation therein through contemporary technology, sale, pledge and buy-back of shares, pledge of joint stock companies' shares, issuance , buy-back and conversion of preferred shares by joint stock companies, sale of shares through the exchange in case of failure of shareholder to pay the value of the shares on time, dividend distribution to shareholders of the company, issuance and sale of pre-imptive rights resulting from capital increase, and proxy procedures for attending general or private assemblies. The Rules and Procedures can be viewed on CMA's website on the following link:
Regulatory Rules and Procedures issued pursuant to the Companies Law relating to Listed Joint Stock Companies
In regard to the remuneration of Board members of joint stock companies, the Rules and Procedures require that the Board takes into account the Companies Law and the Corporate Governance Regulations when determining and paying Remunerations of each Board member. In addition, the remuneration must be and proportionate to the Board member’s experience, expertise and independence, the activities carried out and responsibilities borne by each Board member. It should be reasonably sufficient to attract and retain highly qualified and experienced Board members. The Rules and Procedures state that the Board members shall not vote on the agenda item relating to the remuneration of Board members at the general assembly’s meeting.
Furthermore, the Rules and Procedures include the terms, conditions and cases for the buy-back of joint stock companies' shares and whether it is to reduce the company's capital, to acquire treasury shares or to allocate the shares to the company's employees. The company cannot buy-back unless it has the general assembly's approval specifying the maximum number of shares subject of the buy-back and its purposes.
In addition, the Rules and Procedures state that the company's Board of directors should implement the decision by the general assembly in regard to the dividends distribution on the registered shareholders in 15 days from the maturity date. A company with good and systematic profitability, have reasonable liquidity and can reasonably predict its profits can have interim dividends distribution to its shareholders on a semi-annual or quarterly basis.
The issuance of such Rules and Procedures comes after coordination and cooperation between the CMA and the Ministry of Commerce and Investment to make sure of applying the Companies Law in a way that would reflect positively on all parties involved and achieve the wanted objectives. CMA and MCI both prepared joint press releases on this matter including the press release on April 17th regarding the mechanism to apply the Law and announcing the deadline to apply Article 150 for companies. The Authority and the Ministry held also several meetings and discussions in order to cooperate and coordinate the policies and procedures to apply the Law in order to achieve integration and harmony in the implementation of its objectives.
These Rules and Procedures are part of the CMA's continues efforts to facilitate the listed companies procedures, as to enhance the capital market, and help to achieve the Kingdom vision of 2030.
