2014-01-01
The General Authority for Financial Supervision issued Decision No. (53) of 2014 to establish regulatory controls and procedures for investment funds offering their documents in installments and for closed-end fund companies seeking approval to issue additional document tranches. The decision mandates that installment payments apply exclusively to private equity and non-public real estate funds, requires a minimum 25% initial payment with a maximum five-year completion period, and outlines strict notification, dividend distribution, and default sale procedures. Furthermore, it stipulates that closed-end funds must fully pay the nominal value of prior issuances before launching new ones, requiring shareholder approvals, specific quorum rules, fair value assessments, and regulatory authorization prior to any offering.
Dated 13/4/2014
Regarding the controls and procedures for offering investment fund documents in installments And approving a closed-end investment fund company to offer more than one issuance of documents
After reviewing the Capital Market Law issued by Law No. (95) of 1992 and its Executive Regulations and the decisions issued to implement them;
And the Central Depository and Registry of Securities Law issued by Law No. (93) of 2000 and its Executive Regulations;
And Law No. (10) of 2009 concerning the regulation of supervision over non-banking financial markets and instruments;
And Presidential Decree No. (191) of 2009 regarding the regulations governing the Egyptian Exchange and its financial affairs;
And Presidential Decree No. (192) of 2009 issuing the Statute of the General Authority for Financial Supervision;
And the approval of the Authority's Board of Directors at its meeting held on 13/4/2014;
The following controls and procedures shall apply regarding investment funds offering their documents in installments:
1- Payment for investment documents in installments shall not be permitted except for private equity funds and real estate investment funds not offered to the public.
2- The information memorandum must include provisions for installment payment, the value of each installment, and the payment dates for each installment until the full nominal value of the documents is fulfilled. In all cases, the minimum paid amount of the document's value at establishment shall not be less than 25%, and the period specified for full payment of the document's value shall not exceed five years from the establishment date.
The information memorandum may also include provisions granting the investment manager the authority to set the call date for each installment, provided that the period allowed for document holders to make payments shall not be less than sixty days, unless all document holders agree to pay these installments earlier.
3- Investment document holders must be notified of the dates and periods specified for paying each installment and the name of the licensed bank authorized to activate the subscription for each installment, according to the notification method agreed upon in the information memorandum.
4- Investment documents not fully paid due to installment payments shall retain all rights granted to investment document holders. When determining the investment document's share in the net asset value, the paid amount of the document shall be taken into account. Similarly, when distributing cash or annual dividends, distribution shall be proportional to the paid amount relative to the nominal value of the document.
5- The procedures outlined in Articles (143, 144, 145, 146, 147, 148) of the Executive Regulations of Law No. (159) of 1981 shall apply regarding investment document holders who fail to pay installments within the specified deadlines, the sale of documents, and other procedures related to selling these documents and settling the amounts resulting from the sale.
6- In the event of transferring fund documents before their full value is paid, the transferee shall be bound by the conditions for paying the remaining document value and at the same deadlines.
The following controls and procedures shall apply regarding obtaining the Authority's approval for a closed-end fund company to offer a new issuance of documents:
All provisions stipulated in Article (17) of the Executive Regulations of the Capital Market Law regarding determining the fair value of the new issuance documents and the nominal value of the fund's documents shall apply. In all cases, all issuances of the fund's documents shall have a single nominal value.
2- Approval from the group of investment document holders in the fund and the Extraordinary General Assembly of the fund company's shareholders is required for the proposed issuance. The investment manager shall submit a proposal to increase the funds invested in the fund through a new issuance of investment documents, convene the fund's advisory session, and present the proposal to the fund company's board of directors. The proposal must include an analysis of the fund's performance to date, justifications for the increase, and an attached fair value study detailing the new fair value. If the fund company's board of directors approves the proposal and the fair value study, it shall be presented to the document holders. If they approve it – as stipulated in item (3) – it shall then be presented to the fund company's Extraordinary General Assembly to ratify the proposal and the fair value study.
3- For the validity of the document holders' meeting to ratify the new issuance, document holders representing half of the outstanding investment documents must be present. If this quorum is not met at the first meeting, the second meeting shall be valid if document holders representing 25% of the outstanding investment documents attend, and the decision shall be issued by a three-quarters majority of the documents present at the meeting.
In all cases, the second meeting must not be held on the same day as the first meeting.
4- If the new issuance causes the nominal value of the fund's documents to exceed fifty times the fund company's capital, procedures to increase the issued and paid-up capital of the fund company must be undertaken, adhering to the provisions of Article (17) of the Executive Regulations of the Capital Market Law to determine the issuance value of the shares, and considering the fair value study. Approval from the competent authority regarding the company must be obtained for the increase in issued and paid-up capital and the issuance value of the new issuance, all while adhering to the invitation procedures.
5- After fulfilling the aforementioned procedures, the fund company shall submit a request to the Authority to offer the new issuance of investment documents, accompanied by the subscription prospectus or information memorandum, as applicable, along with all data and supporting documents stipulated in Chapter Two of Part Three of the Executive Regulations of the Capital Market Law. The offering procedures shall not commence until the Authority's approval for licensing the new issuance and approving the subscription prospectus or information memorandum is obtained.
6- The provisions stipulated in Chapter Two of Part Three of the Executive Regulations of the Capital Market Law regarding procedures for announcing the invitation for private offering and subscription in the new investment documents, as well as the controls for subscription coverage and document allocation, shall apply.
This decision shall be published in the Egyptian Gazette and on the Authority's website, and shall take effect from the day following its publication in the Egyptian Gazette.
Chairman of the Board of Directors
(
Sherif Samy
)
46076