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Approval of the application for reducing the capital of public joint-stock companies

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Service Description

.Approval of reducing the capital of public joint-stock companies after meeting the requirements and conditions set forth in Federal Law No. 2 of 2015 on Commercial Companies
  • Department Issuance and Registration Department
  • Service Audience .Local public joint-stock companies
  • Service Fees Articles of association amendment fee of AED (2000).
  • Service Duration 14 working days

Service steps & procedures

  • Initial approval
    • Apply to the Authority for obtaining initial approval to reduce the company capital, accompanying the required documents. 
    • Complete the procedures for holding the company general assembly meeting. 
  • Announcement of creditors
    • Apply for approval of publishing the announcement of creditors in the daily newspapers, accompanying all documents. 
    • The company shall publish the announcement of creditors in two local daily newspapers issued in Arabic, (30) thirty days before the date on which the capital reduction is scheduled.
    • Creditors must submit documents proving their debts to the company within (30) thirty days from the date of publication of the announcement.
  • Reducing of the Company Capital
    • The company shall, within (30) thirty days from the expiry of the creditors’ grace period, submit all necessary documents.
    • The company shall publish an approval certificate of amendments to the company articles of association in the official gazette and provide the Authority with proof of on the same.
    • The company shall register the reduction decision with the competent authority and the registrar within five working days from the date of publication in the Official Gazette.
    • The company shall coordinate with the concerned market to determine the completion date of the reduction process and the related disclosure procedures.

Requirements & Documents

Requirements / Conditions

  • The capital shall not be reduced except in one of the following two cases:
    • If the company suffers losses that are not likely to be compensated by future profits.
    • If the capital exceeds the company need
  • The reduction of the company capital shall be in one of the following ways:
    • Reducing the nominal value of shares
    • Writing  off  a number of shares
    • Purchasing and damaging a number of shares.
  • The company must observe the following when reducing the company capital:
    • The nominal value shall not be less than 1 UAE dirham
    • The minimum legally prescribed capital shall be AED 30 million 
    • Holders of bonds and sukuk convertible into shares shall be calculated among the shareholders, whose shares are to be reduced upon reduction due to losses.
    • Shareholders must be equal in reduction of their shares in pro rata basis.
    • The reduction shall not result in depriving a shareholder of its contribution to the company capital
    • All shareholders shall be invited to offer their shares for sale, in the case of public subscription provisions, in the event that the capital is reduced by purchasing and damaging a number of its shares.
    • The reduction shall not be invoked before the creditors who submitted their requests within (30) thirty days from the date of publication of the creditors’ announcement, unless these creditors are paid their debts or have obtained guarantees that they will paid their outstanding dues, in the event that the capital reduction is made by returning part of the nominal value of the shares to the shareholders or by clearing them of the unpaid amount of the value of the shares or part thereof.
  • Any other requirements issued by a decision of the SCA

Required Documents

  • Initial approvals
    • An application addressed to the Authority to approve the company capital reduction, explaining the justification for the reduction, approved by the Chairman of the Board of Directors.
    • A photocopy of the company board of directors decision, in which the proposal to reduce the company capital was approved, indicating the amount and how it should be reduced.
    • The approval of the competent entities and authorities to reduce the capital (Central Bank for banks, finance and financial investment companies, and the Insurance Authority for insurance companies).
    • The wording of the company capital reduction clause, which will be presented to the general assembly.
    • Any auditor report prepared for being presented to the general assembly on the justification for the reduction. In the event of losses, the opinion shall include the reasons and date of the losses and their audit position.
    • A photocopy of the report of the Board of Directors, which will be presented to the general assembly regarding the justifications for the capital reducing.
    • The company balance sheet for the fascial year ended before the decision of the general assembly to reduce the capital.
    • A statement of the bonds and sukuk convertible into shares, issued by the company and still exist.
    • A draft invitation to be sent to shareholders to offer their shares for sale in the event the company purchasing and destroying of its shares.
  • Announcement of creditors
    • A photocopy of the minutes of the general assembly meeting that decided to reduce the capital.
    • Draft of creditors' announcement in accordance with the form (EN-D1).
  • Reducing of the company capital
    • An application directed to the Authority  to obtain a certificate approving the amendment of the articles of association along with the following documents:
      • Evidence that the creditors' announcement is published in two local daily newspapers published in Arabic.
      • A pledge signed by the majority of the company Board of Directors according to form (EN-D2) stating one of the following options:
        • The company is able to repay its debts on that date; or
        • All of the company creditors have agreed to the reduction.
      • Acknowledgment by the Chairman of the Board of Directors that the creditors applying during the legal period after the date of publication have been paid their due debts, as well as evidence of deferred debt guarantee. 
      • A certificate prepared by the auditor confirming that the reduction has been accomplished and stating a description of the reduction method, including the capital before and after the reduction and the number of shares canceled.
      • Proof of payment of the fees determined by the Authority within (30) days of the expiry of the creditors' grace period.
      • Wording of the articles to be modified in the articles of association according to the capital reduction before and after the amendment.
      • The approval of the competent local authority to reduce the capital.

Important notice:  

  • Applicants must ensure that the information contained in their application and the documents attached are complete and accurate.      
  • Applicants must complete all the requirements for this service within three months from the date of the submission of the application. Otherwise, the application will be automatically rejected and the applicant will be notified of the rejection. In this case, a new application will have to be submitted.      
  • The Securities and Commodities Authority shall not be held responsible or liable for any kind of obligations, rights, or consequences that may arise from the rejection of the application.  
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