JEDDAH — The Saudi Capital Market Authority (CMA) urges Board of Directors and shareholders of companies that incurred substantial losses to comply with Article 150 of the new Companies Law before the deadline.
The CMA, jointly with the Ministry of Commerce and Industry, have clarified that joint stock companies which have lost half of its paid capital will be granted a one year period starting from 25/7/1437H corresponding to 2/5/2016 to comply with provisions of Article (150) of the new Companies Law.
CMA urges shareholders, chairmen and members of Board of Directors in those companies to utilize this opportunity to ensure compliance with the provisions of Article 150. The one-year window will end on 25/7/1438H corresponding to 22/4/2017.
Article 150 stipulates certain procedures for companies that have lost %50 or more of its paid capital as the followings:
n Any auditor or company official who becomes aware of the fact that the company has lost %50 or more of its paid capital must notify the Chairman of the Board of Directors immediately.
n The Chairman must notify the Board of Directors immediately.
n Within15 days of being notified, the Board of Directors must call for an extraordinary general assembly meeting to be held within 45 days of such notification.
n The extraordinary general assembly should decide either to increase or decrease the company's capital to the extent that losses reach a level below %50 of its paid capital- in accordance with the relevant laws and regulations, or dissolve the company before the date stipulated in its bylaws.
According to the new companies' law the company is terminated by law in any of the following cases:
n If the extraordinary general assembly does not meet during the specified period above
• If the meeting of the extraordinary general assembly is held within the specified period but is unable to pass a resolution in the matter
n If the subscriptions for increase the capital do not cover the whole amount within 90 days from the general assembly’s resolution to increase the capital.
CMA would like to emphasize that listed companies which incurred losses that are equal to or more than 50% of its paid capital before or during the one year period that starts from 25/7/1437H corresponding to 2/5/2016, should make a monthly announcement explaining its plans and actions that will be taken to comply with the provisions of Article 150.
CMA currently is working on amending the instructions and procedures related to listed companies with accumulated losses up to 50% of its capital or more to be in line with the new Companies Law. The amended instructions and procedures will be announced once approved by the CMA Board. The Authority had emphasized that it will take into account the rights of shareholders and investors in these companies, which would increase the transparency and disclosure of the Capital Market and increase the efficiency and fairness of trading in the shares of listed companies. — SG
