Chairman of the Board

Capital Market Authority Board Resolution No. (170) of 2014

Date: 21/12/2014

Amending Capital Market Authority Board Resolution No. (11) of 2014 Regarding the rules for listing and delisting securities at the Egyptian Exchange

The General Council of the Capital Market Authority

After reviewing:

• The Law on Joint Stock Companies, Companies with Limited Liability by Shares, and Limited Liability Companies issued by Law No. (159) of 1981 and its executive regulations;
• The Capital Market Law issued by Law No. (95) of 1997 and the decisions issued in implementation thereof;
• The Central Depository and Registry for Securities Law issued by Law No. 93 of 2000 and its executive regulations;
• Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments;
• Presidential Decision No. (191) of 2009 regarding the provisions organizing the management and financial affairs of the Egyptian Exchange;
• The Basic Statute of the Capital Market Authority issued by Presidential Decision No. (192) of 2009;
• Capital Market Authority Board Resolution No. (11) of 2014 regarding the rules for listing and delisting securities at the Egyptian Exchange;
• And the approval of the Authority's Board of Directors in its session No. (22) of 2014 dated 21/12/2014;

It has decided

(Article One)

The definition of free-float shares in Article (4), and the provisions of Articles (7, 8, 9, 29), Item First of Article (16), and Item (2) of the first paragraph of Article (38) of the rules for listing and delisting securities at the Egyptian Exchange are replaced with the following texts:

Article (4): Definitions

Free-Float Shares:

The term "free-float shares" refers to all shares available for trading (buying or selling) without restrictions. They are calculated after excluding from the company's shares listed in the Exchange's tables the following:

• 1- Shares owned by holding business sector companies in their subsidiary companies listed on the Exchange.
• 2- Shares owned by major shareholders according to the following percentages:
  • 100% of the shares that must be retained according to these rules.

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Article (7): Conditions for listing shares of Egyptian companies:

The following conditions must be met for listing shares of Egyptian companies:

• 1- The company's offered shares must not be less than 10% of the total listed shares of the company. The term "offering" in applying this condition refers to offering the company's shares for sale on the Exchange based on an offering prospectus or a disclosure report for the purpose of offering, according to the form prepared by the Authority. Either must be published in two widely circulated daily newspapers, subject to the Exchange's approval prior to publication, following the issuance of the Authority's no-objection letter regarding the independent financial advisor's study on the fair value of the shares, ensuring adherence to recognized prices and methodologies for preparing such studies. The company is considered compliant with the aforementioned condition if its shareholder structure at the time of submitting the listing application includes at least 10% of its capital owned by shareholders other than founders and major shareholders. None of the shares included in that percentage may be pledged.

• 2- The number of shareholders in the company must be less than 300 shareholders, provided that the shares allocated to them are distributed according to the controls specified by the Exchange to verify that the offering is not fictitious.

• 3- The percentage of free-float shares must not be less than 5% of the company's total shares, and their market value at the time of offering must not be less than 10 million Egyptian pounds.

• 4- The number of issued shares required to be listed must not be less than 5 million shares.

• 5- The company must submit listing applications for financial statements for the two years preceding the listing application. These statements must be prepared according to Egyptian accounting standards and audited according to Egyptian auditing standards by one of the accountants registered in the Authority's registry, and certified by the company's General Assembly, with the minutes notarized by the competent administrative authority.

• 6- The issued capital must be fully paid and not less than 50 million Egyptian pounds or its equivalent in foreign currencies, based on the latest annual financial statements or the latest periodic financial statements accompanied by a comprehensive audit report from the accountant and certified by the company's General Assembly. Shareholders' equity in the latest annual or periodic financial statements preceding the date of the listing application must not be less than the paid-up capital.

• 7- When listing the company's shares, undertakings must be submitted that the percentage of retention by major shareholders of the company will not be less than 51% of the shares owned by them in the company's capital. If the total shares held according to this percentage amount to 25% of the issued company's capital, the remaining 25% must be completed from the contributions of board members and the company founder, for a period of not less than two years from the date of offering on the Exchange or from the date of the company's listing. This applies after the company's listing in the pre-listing issuance market, and the same previous percentage must be retained in any increase in the company's capital for the same period, except for free shares.

• 8- It is permitted - with the approval of the Authority and the company's Ordinary General Assembly - to transfer the held shares, in part or in full, during the retention period mentioned, if the buyer is a bank, insurance company, direct investment fund, one of the entities specialized in investment, or a legal entity with distinguished experience and a distinguished track record in the field of the company's activity. It is required that the buyer undertakes to comply with the retention condition until the end of the stipulated period.

• 9- A report on the company's business model, its management structure, its track record, and the government policy it will follow after listing must be submitted.

• 10- The net profit before tax percentage for the last financial year preceding the listing application must not be less than 5% of the paid-up capital required to be listed. The company's net profit before tax must be generated from the company's activity achieving its purpose stated in its articles of association. It is required that the net profit before tax percentage, calculated annually based on the periodic financial statements confirming the capital required to be listed and the financial statements following them (if prepared), be not less than 5% of the capital weighted by the period.

• 11- The offering prospectus or disclosure report mentioned in Item (1) of this Article must be published before the company's shares begin trading.

• 12- It is permitted to list shares of companies that do not meet conditions (1) and (2) mentioned, if the company submits a listing application with an undertaking to meet these two conditions within six months from the date its shares are listed on the Exchange. Trading in the company's shares is not permitted during that period except for the purpose of meeting these conditions after they are met. Listing is considered void if the two conditions are not met within the specified period. The Authority may extend this deadline for other periods.

• 13- It is also permitted to list shares of companies that do not meet condition (9) in one of the following cases: The company submits listing applications for financial statements for three financial years preceding the listing application, prepared according to the conditions and provisions mentioned in condition (5). It is required that the average annual net profit of the company generated from its activity achieving the company's main purpose before tax over the three years preceding the listing application be not less than 5%. It is required that no net losses be applied from its activity achieving its main purpose during any of the three financial years preceding the listing application.

• 14- For companies ranked as having financial statements, consolidated financial statements for a full financial year preceding the listing application must be submitted, prepared according to the conditions and provisions mentioned in condition (5). It is required that the net profit before tax percentage from its activity achieving its main purpose be not less than 5% of the paid-up capital required to be listed. It is required that the net profit before tax percentage from its activity achieving its main purpose be not less than 5% of the paid-up capital required to be listed. It is required that the net profit before tax percentage from its activity achieving its main purpose be not less than 5% of the paid-up capital required to be listed. It is required that the net profit before tax percentage from its activity achieving its main purpose be not less than 5% of the paid-up capital required to be listed. It is required that the net profit before tax percentage from its activity achieving its main purpose be not less than 5% of the paid-up capital required to be listed.

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Article (8): Conditions for listing shares of Egyptian companies established through an offering of shares in a subscription and which have not issued financial statements for two financial years

Without prejudice to legal restrictions on trading shares according to Article (45) of Law No. (159) of 1981 and Article (14) of Law No. (8) of 1997, and Law No. (14) of 2012, it is permitted to list shares of Egyptian companies established through an offering of shares in a public or private subscription – or whose shares were subsequently offered through a private or public offering or subscription – based on a subscription or offering prospectus depending on the case, or an information memorandum approved by the Authority, which have not issued financial statements for two full financial years, if they meet the following conditions:

• 1- The issued and paid-up capital of the company required to list its shares must not be less than double the minimum capital amount mentioned in Article (7), Item 6.

• 2- The total shares owned by major shareholders must not be less than 51% of the company's capital.

• 3- The percentage of free-float shares must not be less than 15% of the company's total shares, and the number of shareholders in the company must not be less than 1,000 shareholders.

• 4- The number of issued shares required to be listed must not be less than 20 million shares.

• 5- The percentage of retention by major shareholders and founders combined in the company at the time of submitting the listing application must not be less than 75% of their share in the company, and not less than 40% of the company's total shares. This applies until the annual financial statements are approved, in which the Exchange condition in Article 7, Item 9 is achieved. It is required that two full years pass from the date of the previous Exchange listing in any increase in the company's capital for the same period.

• 6- The company must publish the disclosure report mentioned in Article 138 of the Executive Regulations of Law 159 of 1981, and submit a study approved by one of the financial advisors registered in the Authority's registry, demonstrating growth and profitability opportunities. The study must include at least the following:

  • The activities the company has undertaken.
  • The contracts the company has concluded.
  • The company's business plan.
  • The expertise of the company's management team.
  • The licenses and approvals the company has obtained (industrial, environmental, etc.).
  • Future financial expectations.
  • The adequacy of the company's financial resources to achieve its plans.
  • Future profitability expectations.
  • The fair value of the shares at the time of offering.

• 7- A report on the company's business model, its management structure, its track record, and the government policy it will follow after listing must be submitted.

Article (9): Conditions for listing shares of small and medium-sized companies

The following conditions must be met for listing shares of small and medium-sized companies:

• 1- The company's offered shares must not be less than 20% of the company's total shares. The term "offering" in applying this condition refers to offering the company's shares for sale on the Exchange based on an offering prospectus or a disclosure report for the purpose of offering, according to the form prepared by the Authority. The Exchange must approve it prior to publication after the issuance of the Authority's no-objection letter regarding the independent financial advisor's study on the fair value of the shares, ensuring adherence to recognized prices and methodologies for preparing such studies.

• 2- The number of shareholders in the company must not be less than 100 shareholders, provided that the allocated shares are distributed according to the controls specified by the Exchange to verify that the offering is not fictitious.

• 3- The percentage of free-float shares must not be less than 10% of the company's total listed shares.

• 4- The number of issued shares required to be listed must not be less than 100,000 shares.

• 5- The company must submit listing applications for financial statements for two financial years preceding the listing application. These statements must be prepared according to Egyptian accounting standards and audited according to Egyptian auditing standards by one of the accountants registered in the Authority's registry, approved by the company's Ordinary General Assembly, and certified by the competent administrative authority.

• 6- The Listing Committee may accept the listing of companies' securities that have not issued financial statements previous to a full financial year, provided the issuing company submits business plans for the next three years, specifying expected profits. These plans must be approved by one of the sponsors or financial advisors accredited by the Authority, after the issuance of the Authority's no-objection letter regarding the independent financial advisor's study on the fair value of the shares, ensuring adherence to recognized prices and methodologies for preparing such studies.

• 7- The issued capital must be fully paid and not less than 1 million pounds and not more than 50 million pounds, based on the latest annual financial statements or the latest periodic financial statements accompanied by a comprehensive audit report from the accountant and certified by the company's General Assembly.

• 8- The company must commit, within three years from the date of listing, to expansions and increasing its issued and fully paid-up capital, in implementation of what was stated in the disclosure report mentioned in Item (1) of this Article or the company's business plans.

• 9- Shareholders' equity in the latest annual or periodic financial statements preceding the date of the listing application must not be less than the paid-up capital.

• 10- Undertakings must be submitted that major shareholders of the company will retain a percentage not less than 51% of their shares in the company's capital, with a minimum of 25% of the total shares required to be listed. If half of what they own is less than 25%, it must be completed from what is owned by board members and the company founder.

• 11- This retention must be for a period of not less than two financial years from the date of listing on the Exchange, and the retention of 25% must continue for an additional financial year.

• 12- It is permitted - with the approval of the Authority and the company's Ordinary General Assembly - to transfer the held shares, in part or in full, during the retention period mentioned, if the buyer is a bank, insurance company, direct investment fund, one of the entities specialized in investment, or a legal entity with distinguished experience and a distinguished track record in the field of the company's activity. It is required that the buyer undertakes to comply with the retention condition until the end of the stipulated period.

• 13- A report on the company's business model, its management structure, its track record, and the government policy it will follow after listing must be submitted.

• 14- The issuing company and the sponsor must commit to notifying the Exchange within a period of not less than one month in case of wishing to terminate the contract with the sponsor. The Authority's Listing Committee must accept the company's securities if it does not have a sponsor during the same period. The responsibility of monitoring the company's compliance with listing and disclosure rules and standards will be assumed. The sponsor must continue for a period of not less than two years from the date of listing, during which the company will be covered by the research coverage procedures for the company it sponsors.

• 15- The listing of shares of public companies in non-Egyptian financial markets is permitted with the approval of the Authority and based on the controls issued by a decision of the Authority's Board of Directors.

• 16- A report on the company's business model, its management structure, its track record, and the government policy it will follow after listing must be submitted.

• 17- The issuing company and the sponsor must commit to notifying the Exchange within a period of not less than one month in case of wishing to terminate the contract with the sponsor. The Authority's Listing Committee must accept the company's securities if it does not have a sponsor during the same period. The responsibility of monitoring the company's compliance with listing and disclosure rules and standards will be assumed. The sponsor must continue for a period of not less than two years from the date of listing, during which the company will be covered by the research coverage procedures for the company it sponsors.

• 18- It is permitted to list shares of companies that do not meet condition (1) or more of the conditions mentioned in Item (2) of this Article, provided the company submits a listing application with an undertaking to meet these conditions within six months from the date its shares are listed on the Exchange. In case of failure to meet this undertaking, the listing is considered void. The Authority may extend this deadline for other periods.

Article (16): Conditions for listing foreign securities

First: Foreign Shares

It is permitted to list shares of companies issued by foreign companies whenever they meet the following conditions:

• a- The company's shares must be listed on one of the foreign exchanges that are subject to the supervision of an authority exercising powers similar to those of the Authority in the capital market field. The shares must be in Egyptian pounds or in a convertible foreign currency.

• b- The company must commit to submitting the accountant and financial statements to the Exchange, and preparing and auditing these statements according to Egyptian, international, or American standards. The company must also commit to submitting board of directors' reports to the Exchange, and providing the Exchange with an Arabic translation of these statements to publish on its website.

• c- The capital required to be listed for the foreign company must not be less than one million US dollars, or in the case of small and medium-sized companies, ten million US dollars.

• d- Conditions related to Egyptian depositary receipts regarding the number of shareholders, percentage of free-float shares, and the minimum number of shares required to be listed, as mentioned in Article (15), must be met.

• e- The company must have a legal representative in Egypt.

• f- Conditional approval may be issued subject to meeting the condition mentioned in Item (a) above. Final approval will be issued after the Exchange verifies its fulfillment.

Article (26): Cases of disclosure regarding transactions of major shareholders and affiliated parties

Without prejudice to the provision of Article (8) of Law No. (95) of 1997 and Chapter Twelve of its executive regulations, every shareholder must disclose to the Exchange when exceeding what they own of a percentage of 5% and its multiples of the number of securities representing the capital of the company listed on the Exchange or its voting rights, including shares for which subscription rights were acquired through purchasing subscription rights.

The persons mentioned in the previous paragraph are also committed to disclosing their future investment plan and the shareholders' views regarding the management of the company if the purchased percentage and affiliated parties reach 25% or more of the company's capital or voting rights.

Disclosure must be made after execution and before the start of the next trading session, according to the form prepared by the Exchange and approved by the Authority for this purpose. In all cases, the Exchange is committed to publishing this data immediately upon notification. Notification of publication is done through trading screens and the Exchange's website.

The provisions of the previous paragraphs apply to members of the board of directors of the listed company and its employees and their affiliated parties when selling or buying shares reaching a percentage of 3% or its multiples of the company's securities (including subscription rights).

Violations of the cases where the aforementioned percentages are exceeded by up to 1% of the capital shares when trading through affiliated parties who are not necessarily aware of the transactions of other parties in their trades are not considered violations. Similarly, transactions of financial securities on behalf of one of the affiliated parties by one of the licensed companies are not considered violations.

Article (38): From the first paragraph

• 2- No major shareholder or their affiliated groups may trade in other periods before execution according to the form prepared for that purpose by the Exchange in the previous paragraph, except after notifying the Exchange.