Regulatory Alerts2015-01-01
Decision No. (88) of 2015 of the Authority's Board of Directors
The General Authority for Financial Supervision issued Decision No. 88 of 2015 to establish mandatory approval procedures for real estate financing companies seeking to cease operations, liquidate assets, merge, or acquire shares exceeding 50% of issued capital. The regulation requires applicants to submit detailed justifications, auditors' reports, corporate resolutions, and competition impact assessments, with the Authority granting or denying requests within thirty days of complete submission. Additionally, the decree mandates pre- and post-acquisition notifications for ownership stakes between 10% and 50%, standardizes share exchange protocols, and supersedes conflicting prior provisions.
Official Gazette - Issue 205 on 7 September 2015
General Authority for Financial Supervision Decision No. 88 of 2015 of the Authority's Board of Directors Dated 11/8/2015
Regarding the Rules and Procedures Governing Cases of Merger, Cessation of Activity, Liquidation, or Acquisition of Shares in Real Estate Financing Companies
The Board of Directors of the General Authority for Financial Supervision Having reviewed Law No. 159 of 1981 on Joint Stock Companies, Limited Partnerships by Shares, and Limited Liability Companies, and its Executive Regulations: And Law No. 148 of 2001 on Real Estate Financing, amended by Presidential Decree-Law No. 55 of 2014: And Law No. 3 of 2005 on Protection of Competition and Prevention of Monopolistic Practices: And Law No. 10 of 2009 on Regulating Supervision over Non-Banking Financial Secrets and Instruments: And Cabinet Decree No. 1 of 2001 issuing the Executive Regulations for the Real Estate Financing Law, and Decrees Nos. 1 and 2 of 2015 amending said Executive Regulations: And Presidential Decree No. 197 of 2009 issuing the Statute of the General Authority for Financial Supervision: And Decision No. 28 of 2015 of the Authority's Board of Directors regarding the determination of fees for examining and studying applications related to real estate financing activities: And Decision No. 64 of 2015 of the Authority's Board of Directors regarding the conditions and requirements for licensing the practice of real estate financing or refinancing activities: And Memorandum from the Central Administration for Supervision and Oversight of Financing Companies dated 4/8/2015: And Approval of the Authority's Board of Directors at its meeting held on 11/8/2015
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DECIDED:
(Article One)
Real estate financing companies wishing to cease their activity, liquidate their assets or part thereof, merge with another company operating in the same activity, or acquire shares in real estate financing companies are required to submit a request to the Authority. None of these actions shall take effect until the Authority's approval is obtained in accordance with the rules and procedures set forth in this Decision.
(Article Two)
General Rules
The Authority shall review applications submitted to it regarding cessation of activity, liquidation of assets or part thereof, merger, or acquisition of shares in real estate financing companies, considering the impact of the procedure on free competition, stability of the real estate financing activity, protection of investors' (clients') rights, market stability considerations, and shareholders' interests.
The applicant shall be notified of the approval or rejection reasons within thirty days from the date of submitting the documents and data requested by the Authority.
(Article Three)
Cessation of Activity
A real estate financing company wishing to cease its activity is required to submit a request to the Authority from its legal representative or authorized person, accompanied by the following data:
The following data:
- A detailed report on the reasons for ceasing the activity.
- A resolution of the company's Extraordinary General Assembly approving the submission of a request to the Authority for liquidation.
- Regarding the practice of real estate financing activity.
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- The company's auditors' report regarding the cessation of the real estate financing activity.
- Proposed measures to govern the company's rights and obligations resulting from its practice of real estate financing activity, transferred to other licensed entities.
(Article Four)
Liquidation of Assets or Part Thereof (Financing Portfolio)
A real estate financing company wishing to liquidate (50%) or more of its real estate financing portfolio in its various forms is required to submit a request to the Authority from its legal representative or authorized person, whether the liquidation is mandatory or voluntary, accompanied by the following data:
1 - A detailed report on the reasons for liquidation. 2 - A resolution of the Extraordinary General Assembly approving the submission to the Authority for liquidation. 3 - The company's auditors' report regarding the liquidation. 4 - Proposed measures to be taken to liquidate the company's assets in the real estate financing activity. or transferring them to other licensed entities.
(Article Five)
Merger of Real Estate Financing Companies
A real estate financing company wishing to merge with one or more companies licensed to operate in the real estate financing activity is required to submit a request to the Authority from its legal representative or authorized person, accompanied by the following data:
1 - A statement of the reasons for the merger and its terms. 2 - Draft merger resolution. 3 - Resolutions of the board of directors and the Extraordinary General Assembly of each party to the merger approving the merger, conditional upon obtaining the Authority's approval.
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4 - Auditors' report of each company regarding the merger. 5 - Preliminary valuation of the assets and liabilities of each company seeking merger. 6 - The names of the parties to the contracts. 7 - Method for determining the rights and obligations of shareholders in each company seeking merger. 8 - Proposed measures regarding the transfer of financing agreements to the resulting company from the merger, which is licensed to practice real estate financing activity. 9 - The proposed merger plan in accordance with the procedures stipulated in Law No. 3 of 2005 on "Protection of Competition and Prevention of Monopolistic Practices".
(Article Six)
Acquisition of Shares in the Capital of Real Estate Financing Companies
1 - Acquisition of a percentage exceeding (50%) of the issued capital of real estate financing companies:
Any legal person wishing to own more than (50%) of the issued capital directly or through its related parties, or where the acquired percentage leads to actual control of the company, must submit a request to the Authority from the legal representative of the company or the authorized person to take this action.
Actual control by a legal person is defined as owning any percentage that enables it to appoint the majority of the board of directors members of the real estate financing company, or to decisively influence decisions issued by its board or its general assembly.
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The request shall be accompanied by the required data according to each case as follows:
(a) Acquisition of shares in one real estate financing company by another:
1 - A detailed report outlining the objectives sought from the acquisition process. 2 - Resolution of the acquiring company's board of directors approving the acquisition. 3 - Statement of the ownership structure resulting after completion of the acquisition process. 4 - Declaration from the acquiring applicant that its ownership of the target company's shares will not restrict competition in the real estate financing market or disrupt its operations.
(b) Acquisition of shares in a real estate financing company by a legal person:
1 - Statement of name, address, legal form, purpose and nature of activity, and date of commencement. 2 - Plan of the acquiring party regarding the target company. 3 - Statement of issued and paid-up capital, and names of owners of more than (10%) of the capital. 4 - Copy of the preliminary contract and the articles of association of the legal person. 5 - Recent official extract from the commercial register. 6 - Copy of the auditors' report and financial statements for the last three financial years, or for the last financial years if the company has not been established for three years. 7 - Statement of names of related parties to the acquiring applicant, including the banks and companies practicing financing activities subject to the Authority's supervision in which it participates, or any of its board members or any shareholder owning a percentage exceeding (10%) of the issued capital of each, specifying the value and percentage of participation.
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2 - Acquisition of a percentage ranging from (10%) to (50%) of the issued capital of real estate financing companies:
A real estate financing company in which any natural or legal person owns a percentage not less than (10%) and not exceeding (50%) of the issued capital is required to notify the Authority in writing within fifteen days at most from the date of completion of the acquisition, and to re-notify the Authority whenever the ownership percentage increases by (10%) or its multiples within the aforementioned limits.
3 - Share exchange:
In cases where shares in real estate financing companies are exchanged, whether with a natural or legal person, the acquisition procedures referred to in this Decision shall apply.
(Article Seven)
This Decision shall be published in the Official Gazette and on the Authority's website, and shall take effect from the day following its issuance. Any provision contrary to its provisions is hereby repealed.