Egyptian Financial Supervisory Authority

Egyptian Financial Supervisory Authority

Chairman of the Board of Directors

Board of Directors Decision No. (137) dated 27/11/2016

Regarding the Regulation of Trading Pre-emptive Rights in Subscriptions for Shares of Capital Increase in Joint Stock and Commandite Companies Whose Shares Were Offered in a Public Offering and Are Not Listed on Egyptian Exchanges

The Board of Directors of the Egyptian Financial Supervisory Authority

Having reviewed Law No. (159) of 1981 on Joint Stock, Commandite, and Limited Liability Companies and its implementing decisions; And the Capital Market Law No. (95) of 1992 and its executive regulations and implementing decisions; And the Central Depository and Registration Law No. (93) of 2000 and its implementing decisions; And Law No. (10) of 2009 Regulating Supervision over Non-Egyptian Markets and Financial Instruments; And Presidential Decree No. (191) of 2009 Organizing the Management and Financial Affairs of the Egyptian Exchange; And Minister of Investment Decision No. (95) of 2016; And EFSA Board Decision No. (81) of 2013; And upon the approval of the Board of Directors in its session held on 27/11/2016.

DECIDED

(Article One)

Without prejudice to the regulations governing subscription in capital increase shares and the provisions of Chapter Twelve of the Executive Regulations of the Capital Market Law, the provisions of this Decision shall apply regarding the regulation of trading pre-emptive rights in subscription to capital increase shares of joint stock and commandite companies whose shares were offered in a public offering and are not listed on Egyptian exchanges.

(Article Two)

For the purpose of applying the provisions of this Decision, the following terms shall carry the meanings indicated alongside each:

• Company / Companies: Joint stock or commandite companies whose shares were offered in a public offering (based on a prospectus approved by the Authority at establishment or capital increase) and are not listed on Egyptian exchanges.
• Pre-emptive Right: A tradable security instrument during the period specified in this Decision, representing shareholders' right to subscribe to a specific number of capital increase shares in proportion to the number of shares they own on the acquisition date.
• Right Holder: Shareholders registered with the Central Depository and Registration Company on the acquisition date.
• Acquisition Date: The last day on which the underlying shares are traded cum-pre-emptive rights, as determined by the competent authority of the company.
• Right: Egyptian banking working days.

(Article Three)

In the event of a capital increase, the company shall enforce pre-emptive rights for existing shareholders to subscribe to the capital increase shares as fully paid-up registered shares, unless the Extraordinary General Assembly decides to waive the enforcement of pre-emptive rights upon capital increase, subject to Article (32) of the Executive Regulations of the Capital Market Law. Such companies, when submitting a request to the Authority to issue capital increase shares as fully paid-up registered shares, must attach a commitment to register pre-emptive rights with the Central Depository and Registration Company, as well as designate one or more banks licensed to receive subscriptions, provided that the bank has an electronic link with the Central Depository and Registration Company.

(Article Four)

When notifying existing shareholders of the issuance of capital increase shares as fully paid-up registered shares in accordance with Article (33) of the Executive Regulations of the Capital Market Law, the company must ensure that the call for existing shareholders to subscribe to the increase shares specifies the acquisition date of pre-emptive rights and its duration.

(Article Five)

The competent department at the Authority shall notify the Egyptian Exchange and the Central Depository and Registration Company of companies that have decided to increase capital via fully paid-up registered shares and enforce pre-emptive rights, including the acquisition date, duration, subscription opening period, start and end dates of the subscription period, and the period during which pre-emptive rights may be traded separately from or alongside the underlying shares, to facilitate a trading mechanism for these rights on the Egyptian Exchange.

(Article Six)

Trading of pre-emptive rights shall be conducted through the Egyptian Exchange according to the mechanism it determines. During the period specified in this Decision, the right holder may trade the right separately from the underlying share, either by assignment or disposal through a licensed securities brokerage firm. The new buyer or assignee may subscribe to the increase shares based on this right, and may also assign or dispose of it to third parties until the end of the specified trading period.

(Article Seven)

The Central Depository and Registration Company shall perform the following:

1. Prepare a register of pre-emptive right holders prior to their separate trading, detailing the number of subscription rights corresponding to each shareholder's holdings based on the company's shareholder registry held by the depository, and issue account statements for these rights.
2. Register the pre-emptive right as a separate issuance throughout the capital increase subscription period and create a dedicated list for it in the central registration system database.
3. Conduct clearing and settlement operations for traded subscription rights based on transactions executed at the Egyptian Exchange and in accordance with its rules and procedures, provided that the settlement period exceeds three working days.

(Article Eight)

The Egyptian Exchange shall notify the Central Depository and Registration Company daily at the end of each working day regarding all trading activity conducted on pre-emptive rights.

(Article Nine)

Pre-emptive rights shall be traded separately starting from the first day of the capital increase share subscription opening and ending four working days before the specified closing date of the subscription period.

(Article Ten)

The company shall not trade its own treasury shares, whether by sale or purchase, during the capital increase subscription period. Furthermore, treasury shares shall not carry tradable pre-emptive rights.

(Article Eleven)

The trading price of pre-emptive rights shall be determined by mutual agreement between the seller and the buyer.

(Article Twelve)

Pre-emptive rights are not pledgeable.

(Article Thirteen)

The pre-emptive right shall lapse if the holder or purchaser fails to subscribe to the increase shares during the original subscription period based on these rights.

(Article Fourteen)

Joint stock or commandite companies whose shares are registered with the Central Depository and Registration Company, other than those listed on an exchange or those that offered shares in a public offering, which have decided by their competent authority to enforce pre-emptive rights for existing shareholders, may apply the provisions of this Decision.

(Article Fifteen)

The Egyptian Exchange and the Central Depository and Registration Company for Securities shall issue executive procedures for this Decision, subject to approval by the Authority prior to implementation.

(Article Sixteen)

This Decision shall be published in the Official Gazette and on the Authority's website, and shall take effect from the day following its publication in the Official Gazette. Competent departments and authorities shall implement it according to their respective jurisdictions.

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Chairman of the Board of Directors
Sherif Samy

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