The mechanism sorts suspended companies into two categories, i.e first category and second category, and outlines procedures of transferring the listing of the company shares between them.

Procedures for regularizing the status of companies placed on the Watch List in the second category to assess their compliance with the disclosure and listing requirements

 The board of the Securities and Commodities Authority (SCA), chaired by Minister of Economy H.E. Eng. /Sultan bin Saeed Al Mansoori, approved a decision on a mechanism to deal with public joint-stock companies suspended from trading. The decision sorts listed companies into two listing categories: first category and second category.

It outlines the procedures for transferring the listing of the company shares between these categories as well as the standards for trading in the shares of companies suspended from trading after being transferred to the second category.  

The decision also introduces procedures for monitoring companies placed on the Watch List within the second category to assess their compliance with the disclosure and listing requirements and whether they have taken the necessary actions to regularize their status in line with the applicable legislation and within a specified timeframe. The decision details the procedures of providing proper exiting alternatives by the markets to the shareholders if it is decided to delist the company suspended from trading.  

Under Article 1 of the decision approved by the board of directors, the listing of the company shares shall be transferred from the first to the second category if the company is suspended from trading for six months or more or if its audited annual financial statements reveal accumulated losses of 50% or more of the capital.  Article 2 of the decision outlines the procedures for transferring the listing of shares between the two categories, as follows:

1.  The concerned market shall divide the shares of the companies listed therewith between the first and second categories according to the conditions specified in Article 1 above, based on the last audited annual financial statements (the 2019 financial statements) once the conditions are approved by the SCA Board. 
2. Without prejudice to the provisions of Article 2 (1) above, the market shall transfer the listing of the company shares from the first to the second category, or from the second to the first category, once a year after the company provides the market with its audited financial statements as at the end of their fiscal year. 
3. As an exception from Article 2(2) above, the market shall transfer the listing of the company shares from the first to the second category immediately if the suspension period lasts six months or more, and from the second to the first category in line with the provisions of Article 4(4) below.
4. Following SCA’s approval, the market may choose not to transfer the listing of the company shares from the second to the first category if the company subjected to penalties in the last fiscal year preceding the transfer for failing to comply with SCA’s or the market’s regulations. 
5. The concerned market shall announce the transfer of the listing of the company shares on its website in line with the provisions of this article. 

Article 3 of the decision outlines the standards for trading in the companies following being transferred from the first to the second category, as follows:

1. The company suspended from trading for six months or more may trade again when the listing of shares is transferred from the first to the second category.  
2. Upon trading or re-trading, as the case may be, in the shares of a company whose listing was transferred from the first to the second category, the market must:

•  Provide two separate trading screens for the trading of each listed company category, so that the details of companies transferred to the second category are shown on the second-category screen.  
• Have the name of the listed company written next to its listing category (second category). 
• Add a distinctive mark next to the name of the company, in line with the SCA Board of Director’s Decision No. (32/R.M.) on the Procedures Concerning Companies Whose Shares Are Listed in the Market. 
• Announce the trading or the re-trading, as the case may be, of the company in the second category. The announcement must include a brief description of trading within the second category, the Watch List requirements, as well as the company’s current status and financial position. It must also include the risks associated with investing in the company and any other details the market deems necessary to protect securities investors.
• Any other standards proposed by the market and approved by SCA concerning the company trading within the second category.  

In addition to the above, Article 4 of the decision outlines procedures for monitoring the conditions of companies listed within the second category, as follows: 

1. Upon a decision by SCA’s CEO, a joint committee shall be formed, including SCA (as member and chair), the concerned market, and the relevant supervisory authorities assigned with monitoring the companies placed on the Watch List to assess their compliance with the disclosure and listing requirements and whether they have taken the necessary actions to regularize their status in line with the applicable legislation within a one-year period, extendable to three years. The period commences on the date of the listing transfer to the second category.  
2. The company must provide SCA and the market with an action plan for regularizing its status. The plan must be approved by the board of the company and by an entity with financial and technical expertise. The entity must also be approved by SCA.  
3. The company must disclose the details of the implementation of its action plan to SCA and the market, every three months or upon a request by SCA or the market. It must also disclose details relating to whether it has satisfied the Watch List requirements and the disclosure and listing requirements and conditions.  
4. If the joint committee is of the opinion that the company is able to regularize its status within the period specified under Article 4(1) and to meet the required conditions to resume trading within the first category, then it must take the following actions:

•  Make a recommendation to SCA and the concerned market to transfer the listing of shares to the first category. 
• After consultation with the SCA, the concerned market shall transfer the listing of the company shares to the first category, and shall post an announcement about the transfer on its website.  

2. If the joint committee is of the opinion that the company is unable to regularize its status within the period specified under Article 4(1) and to meet the required conditions to resume trading within the first category, then it must take the following actions: 

• Make a recommendation to SCA and the concerned market to delist the troubled company. 
• After consulting with the market, SCA shall notify the company, by means of an official letter, of its delisting within a period of 30 days. 
• The concerned market shall post an announcement on its website of its decision to delist the shares of the company within 30 days, clarifying that there will be an exiting mechanism for the wishing shareholders.  

As to the procedures for providing a proper exiting alternative to shareholders if it is decided to delist the company suspended from trading, the markets shall take the necessary actions to permit the wishing shareholders to exit from the shares of the delisted company (over the counter) in line with the trading mechanism and the technical and operational controls set by the markets and approved by SCA.