FRA Develops Listing Rules to Facilitate Companies’ Dealings in Treasury Shares 2023
Treasury Shares……..What Is It?
Treasury shares are a portion of previously issued shares a company has repurchased from its shareholders. These shares are purchased from the market through the Egyptian Stock Exchange and can either remain in the company’s possession, used for future issuance to potential shareholders or the company may decide to permanently withdraw these shares from the market so that they are no longer available for any use. It is worth noting that these shares are not entitled to any distributions and have no voting rights during the period of the company’s ownership.
FRA’s Decree Regarding Treasury Shares
New Amendments to the Decree
The new amendments to the decree stipulate the following:
- Companies must notify the stock exchange of their desire to buy or sell treasury shares according to the form approved by the Authority.
- The purchase of treasury shares carried out through the open market and not the private transactions market, provided that the implementation period does not exceed one month from the date of notification.
Companies that have not executed 50% of the quantity required to be purchased during that period may not submit a request to purchase again before the expiration of 3 months from the previous implementation date unless you provide justifications that are appreciated and accepted by the Stock Exchange.
- Canceling the previous time period of at least three days between notifying the company of purchasing treasury shares and implementation, along with attaching the minutes of the company’s Board of Directors meeting containing the decision to buy or sell before the rolling out.
- The shares to be purchased must be in the form of local shares.
- The period of the company’s holding of treasury shares shall not be less than three months and not exceed one year from the rolling out or acquisition.
- Treasury shares do not exceed 10% of the company’s total registered shares.
- The purchase of treasury shares should not cause the percentage of freely trading shares to fall below the stipulated minimum.
- The company’s Board of Directors shall be the issuer for the decision to buy and sell treasury shares, and the dealing and listing of orders for treasury shares shall be limited to the core trading session, excluding discovery sessions and the closing auction session.
- The purchase of treasury shares financed through the company’s own cash resources, and the submission of a recent report from the auditor or an acknowledgment from the legal representative stating the availability of financial resources with the company wishing to purchase treasury shares is obligatory, given that the borrowing is not permissible.
- The decision to purchase treasury shares must be issued by the General Assembly and not the company’s Board of Directors.
- The company is committed to disclosing to the stock exchange the percentage of what was executed as a sale or purchase of treasury shares at the end of each day on which the execution took place, and the stock exchange publishes it on the means prepared for that.
What Did the New Amendments Target?
The new amendments in the FRA’s decree aimed to achieve justice and equality between the main shareholders by buying and selling treasury shares and to emphasize the prohibition of insiders, including members of the Board of Directors, subsidiaries, and sister companies, from selling their shares during the implementation period of purchasing.
In addition, These amendments have helped achieve the goal of dealing in treasury shares by enabling companies wishing to purchase treasury shares to carry out the full quantity required to be purchased without waiting for several days because it may result in price changes, which increases the need of listed companies to reconvene the Board of Directors and set a new price for implementation
FRA's Head Statement Regarding This Decree
Dr. Mohamed Farid, the head of the FRA, stated that this decree aims to facilitate companies’ dealings in treasury shares and stressed the Authority’s keenness to complement efforts to develop the rules for listing and delisting securities and to develop new mechanisms that help companies access the financing necessary for expansion, growth, and business development.
He added that under these amendments, companies listed on the Egyptian Stock Exchange are able to redirect some of their cash resources to invest in their treasury shares in order to benefit from the growth opportunities that the company is working to achieve and benefit from the profits expected to be distributed.
It is clear that the FRA is exerting efforts to facilitate companies’ dealings in treasury shares, so it issued this decree. To learn more about this decree, click here or here and to read the full decree, click here. If you want to know more about the laws related to finance and accounting, contact AHG Chartered Accountants.