Tadawul to implement new rules for loss-making firms on April 22

The Saudi Stock Exchange (Tadawul) will implement the new procedures and instructions related to listed companies with accumulated losses reaching 20 percent or more of its share capital as of April 22, 2017, Tadawul said in a statement.

The Capital Market Authority (CMA) has announced the new framework for companies with three ranges of accumulated losses: 20-35 percent, 35 percent to less than 50 percent, and 50 percent or more.

1) Under the new regulations, the company should immediately disclose to the public the total accumulated losses, its percentage of the capital, and the main reasons that caused the losses.

2) Tadawul shall add a flag next to the company’s name on the website indicating that the reached accumulated losses.

3) In case the accumulated losses reached 50 percent of capital or more, according to article (150) of the companies’ law, the company should immediately announce the board’s recommendation to the extraordinary general assembly of an increase or decrease of the capital, or a recommendation dissolve the company before the prescribed date in its by-laws.

4) After restoring its position and upon receiving an external auditor’s report, the company should immediately disclose to the public the reduced accumulated losses and the steps taken to see that reduction through.

5) Accordingly, Tadawul shall delete the accumulated losses flag.

Should a company’s accumulated losses decrease to be within another range of the three ranges the framework covers (20-35 percent, 35 percent to less than 50 percent, and 50 percent), steps 1, 2, 4, and 5 would be implemented again.

A company’s shares will be delisted if the company is dissolved by the force of law or when the extraordinary general assembly decides to dissolve the company before the prescribed date in its by-laws.