Instructions for Licensed Exchange Companies to Obtain Loans from Shareholders or Credit from Licensed Banks

In the name of Allah, the Most Gracious, the Most Merciful

[Logo of the Central Bank of Jordan]

Number: 17/3/9/1634
Date: 21/11/1440 AH
Corresponding to 24/7/2019 AD

Circular to Licensed Exchange Companies

Subject: Instructions for Licensed Exchange Companies to Obtain Loans from Shareholders in the Company / Credit from Licensed Banks in the Kingdom

Greetings,

Based on the provisions of Articles (12/b) and (19/a) of the Exchange Business Law No. (44) of 2015, we attach hereto the Instructions for Licensed Exchange Companies to Obtain Loans from Shareholders in the Company / Credit from Licensed Banks in the Kingdom, issued pursuant to the decision of the Board of Directors of the Central Bank No. (172/2019) dated 4/7/2019.

Please accept our highest regards,

Governor
Dr. Ziad Faris

Number of Attachments: (2)
P.O. Box 37 Amman 11118 - Jordan Phone 4638889 / 4639730 Fax 4638889 Website www.cbj.gov.jo Email info@cbj.gov.jo

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Instructions for Licensed Exchange Companies to Obtain Loans from Shareholders in the Company / Credit from Licensed Banks in the Kingdom, issued pursuant to the decision of the Board of Directors of the Central Bank No. (172/2019) dated 4/7/2019, based on the provisions of Articles (12/b) and (19/a) of the Exchange Business Law No. (44) of 2015.

Article (1): An exchange company wishing to obtain a loan from shareholders in the company / credit from licensed banks in the Kingdom must submit an application for Central Bank approval on the form prepared for this purpose, and the application must be signed by the authorized signatories of the company and stamped with the company's official seal.

Article (2): The exchange company must attach to its application referred to in Article (1) above a financial statement reflecting the company's actual financial status on the date of the application, certified by an auditor.

Article (3): When studying the application submitted by the exchange company for Central Bank approval to obtain a loan from shareholders in the company / credit from licensed banks in the Kingdom, the following shall be considered:
a- At least two years must have passed since it commenced its work. b- The extent of the exchange company's compliance with the provisions of all effective legislation in the Kingdom, and in particular the Exchange Business Law and the effective instructions for combating money laundering and financing of terrorism for exchange companies. c- At least one year must have passed since the date the company repaid the last loan granted to it from shareholders in the company / from licensed banks in the Kingdom.

Article (4): The following conditions must be met in the loan from shareholders in the company / credit from licensed banks in the Kingdom sought to be obtained:
a- The credit from licensed banks in the Kingdom must be in the name of the exchange company and not in the name of its shareholders. b- The loan from shareholders in the company / credit from licensed banks in the Kingdom must be used in its operational activity, and the Central Bank must be provided with the company's repayment plan. c- The total balance of the loan from shareholders in the company / credit granted by licensed banks in the Kingdom and its interest shall not exceed (50%) of the company's paid-up capital at any time, and the interest on the loan granted by shareholders in the company shall not exceed the average interest rate prevailing on the date the loan was granted. d- The repayment period for the loan from shareholders in the company / credit granted by licensed banks in the Kingdom shall not exceed two years. The company may request an extension of the repayment period for the entire loan/credit amount or part thereof, provided that the total period from the start of the loan/credit granting until repayment does not exceed (3) years.

e- The shares of shareholders in the paid-up capital of the exchange company shall not be pledged to obtain credit from licensed banks in the Kingdom. Nor shall any of the company's assets be pledged except to obtain credit related to financial guarantees specified in accordance with the provisions of Article (5/b) of the Law or with the prior approval of the Central Bank, as security against credit granted for the purpose of purchasing a fixed asset for the company's operational use exclusively. In all cases, the company must inform the Central Bank of the nature of the guarantee provided to obtain the credit.

Article (5): Subject to the provisions of Articles (1), (2) and (3) of these Instructions, the company wishing to obtain a supporting loan from shareholders in the company must attach to the application submitted for Central Bank approval the following:
a- A feasibility study showing the expected financial impact of the supporting loan on the company's business. b- The company's plan for repaying the supporting loan, and repayment of that loan must begin after two years from the date of obtaining it.

Article (6): The following conditions must be met in the supporting loan from shareholders in the company sought to be obtained:
a- The supporting loan from shareholders in the company must be used to support the company's capital and its operational activity, and this loan must be interest-free. b- The amount of the supporting loan from shareholders in the company shall not exceed (100%) of the company's paid-up capital at any time, and under no circumstances shall any of the company's assets be pledged as security for this loan. c- The maturity period for repaying the supporting loan from shareholders in the company shall not be less than five years, and this loan shall not be repayable early before the original maturity date, whether in a lump sum for the entire loan amount or part thereof. d- The company may, after informing the Central Bank, cover the entire loss amount incurred at the end of the financial period or part of it, by reducing the balance of the existing supporting loan from shareholders in the company, and only once, provided that there are no retained earnings in the company's accounts at that time from previous financial period(s). e- The agreement concluded between the company and its shareholders, who are the providers of the supporting loan, must include clauses that take into account the above conditions. f- The number of times the company obtains a supporting loan from shareholders in the company shall not exceed two times at most during the company's lifetime.

Article (7): An exchange company whose application for obtaining a loan/supporting loan from shareholders in the company / direct credit from licensed banks in the Kingdom is approved must provide the Central Bank of Jordan with the following:

a- A copy of the agreement concluded between the company and shareholders in the company / licensed banks in the Kingdom, showing the terms of granting the loan/credit. b- The amount of the existing loan/supporting loan/credit balance and evidence that the company has repaid the amounts due on the maturity date in due course, as well as a statement of transactions made on the loan/supporting loan granted by shareholders in the company / credit granted by licensed banks in the Kingdom, on a semi-annual basis, and it must reach us no later than the tenth day of the month following the period for which this statement is prepared. It must be certified by the company's auditor if the loan is granted by shareholders in the company.

Article (8): These Instructions do not apply to credit that must be provided in favor of one of the official entities in the Kingdom, and we must be provided with full details regarding it.

Article (9): The exchange company must include detailed explanations regarding the balance of the existing loan/supporting loan from shareholders in the company / credit granted by licensed banks in the Kingdom, within the explanations related to the company's final financial data, ensuring that these explanations include, at a minimum, the ceiling of the loan/supporting loan/credit granted, its duration, its existing balance, payment amounts, repayment mechanism, interest rate, commission rate and amount, and the remaining period until the maturity date, where applicable.

Article (10): Meeting the conditions and requirements for obtaining a loan/supporting loan from shareholders in the company / credit from licensed banks in the Kingdom is the basis for considering the exchange company's application submitted specifically for this purpose and does not necessarily imply the Central Bank's automatic approval of the application.

Article (11): An exchange company is not allowed to grant loans or any type of credit, including guaranteeing third parties.

Article (12): These Instructions shall come into effect from their date, and the instructions for licensed exchange companies to obtain loans/credit facilities No. (2011/1) issued pursuant to the decision of the Board of Directors of the Central Bank No. (48/2011) dated 28/4/2011, based on the provisions of Articles (14/b) and (15/a) of the Exchange Business Law No. (26) of 1992, as amended by the decision of the Board of Directors of the Central Bank No. (88/2012) dated 19/7/2012, are repealed.

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In the name of Allah, the Most Gracious, the Most Merciful

[Logo of the Central Bank of Jordan]

Central Bank of Jordan
Exchange Business Supervision Department
P.O. Box (37) / Amman

Form ( )

Application for Approval for an Exchange Company to Borrow from Shareholders in the Company / Credit from Licensed Banks in the Kingdom

Application Date: -
Company Name: -
We request approval for the company to borrow from shareholders in the company / credit from licensed banks in the Kingdom according to the data provided below:

Amount of Loan/Credit Requested: ( ....... ) Jordanian Dinar Source of Obtaining the Loan/Credit:
[ ] Loan from Shareholders in the Company
[ ] Supporting Loan from Shareholders in the Company.
[ ] Credit from Licensed Banks in the Kingdom

Annual Interest Rate on the Loan/Credit: ( ...... %)
Commission Paid and its Rate: ....................................................................................
Duration of the Loan/Credit:
( ..... ) year, ( ..... ) month

Repayment Method:
[ ] Lump sum at the end of the period.
[ ] In monthly installments, the value of each installment (........) Jordanian Dinar.
[ ] In installments ............. the value of each installment (........) Jordanian Dinar.

Purpose of Borrowing/Credit:

1. ....................................................................................................................
2. ....................................................................................................................

Amount of Guarantees (if any): (....................) Jordanian Dinar
Source of Guarantees (if any): ....................................................................................
Date of Obtaining the Last Loan/Credit (if any): ...........................................................
Date of Repayment of the Last Installment of the Last Loan/Credit (if any): .......................................................

• We commit to providing the Central Bank with any data related to the above loan/credit upon request.

Name and Signature of the Authorized Signatory for the Company Company Seal