SCA develops mechanism to facilitate share buybacks for listed companies

“The measures approved by SCA provide support and flexibility to domestic securities markets and promote investor confidence,” H.E. Sultan Al Mansoori The Securities and Commodities Authority (SCA) stressed, in a statement, that it has introduced exemptions for public joint-stock companies wanting to buy back their shares. The statement said that this is aimed at providing further support and flexibility to domestic securities markets without adversely affecting the trades taking place there.  H.E. Eng. Sultan bin Saeed Al Mansoori, Minister of Economy and Chairman of SCA, said that “ever since the latest developments related to the coronavirus outbreak started taking their toll on the world’s financial markets, SCA has been keen to remain in constant coordination and communication with financial market institutions and other regulatory authorities. It responded to the developments with a series of measures that aim to promote confidence and reassure investors in an effort to mitigate the impacts of the crisis and support the stability of financial markets being a pillar of financial stability and the backbone of the national economy”.  “SCA has approved a range of exemptions to facilitate share buybacks,” H.E. Al Mansoori said, adding that “the exemptions will remain in effect until June 30 and public joint-stock companies wanting to enjoy the exemptions should submit a request to SCA”. The exemptions, outlined in a circular sent to public joint-stock companies, include: First, exemption from the provisions of Article (1/Third/3), which states that: “A company shall not buyback its own shares within 15 days before and 3 days after the disclosure of its financial statements or any other material information that may affect the share price, driving it upwards or downwards” on the condition that no board member, executive director, or employee with insider information is party to the purchase or sale transaction, directly or indirectly. Second, exemption from the provisions of Article (1/Third/1), which reads: “Announce to the public the buyback transaction in two widely circulated local daily newspapers, at least one in Arabic. The period between the date of the announcement of the company’s buyback intention and the date of the actual buyback shall not be less than 14 days”.  Third, exemption from the provisions of Article (1/First/2), which states that: “The approval of the General Meeting of the company under a special resolution on the buyback for resale transaction …”.  SCA’s management also agreed to facilitate the disposition of the bought-back shares, under Article 219 of Federal Law No. 2 of 2015 on Commercial Companies concerning share buyback, in the following ways:1.To shareholders in exchange for cash dividends if the general meeting approves the distribution of treasury shares in exchange for cash dividends.  2.To shareholders wanting to make a purchase when the company offers them the shares.   3.To an investor or more in exchange for cash payment. 4.To company staff under the share incentive scheme.Public joint-stock companies that bought back their shares and want to dispose of them in any of the ways referred to above must contact SCA in this regard.  It is worth noting that these exemptions from some of the provisions of SCA’s Board of Directors’ Decision No. 40 of 2015 Concerning Controls and Procedures Related to Companies Buying Back Their Shares to Resell Them is part of a series of measures that SCA introduced lately, one of which was the 5% limit down cap.   

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