JEDDAH, 8 July 2005 — The Ministry of Commerce and Industry and the Capital Market Authority announced yesterday the steps and regulations agreed on to establish a joint stock company and increasing its capital. The announcement comes as a clarification of the role and procedures allocated to each agency following previous confusions on these matters. The conflict became apparent last year when the IPO date for Etihad Etisalat telecommunication company, which was permitted to operate the second mobile service in the Kingdom, was announced before the company had its license and thus was allowed certain exemptions.
This confusion in procedures between the ministry’s role and the CMA in regulating IPOs and increasing a company’s capital created problems and delays for other companies seeking to increase their capital.
In May, the two agreed that increasing a company’s capital is the domain of the CMA and that establishment and transfer of a company is for the Ministry of Commerce. The following month, CMA announced that it is studying the requests of 12 companies to increase their capital, two of which have since been approved. CMA said that among the criteria for approving the increase in capital is identifying the reasons, determining the companies compliance with the transparency standards, previous increases, analyzing money flow and the company’s financial performance and stock profits.
The steps and regulations announced yesterday clarify the procedure to be followed for establishing a joint stock company or changing its capital. In establishing a company, the founders should present their request to the Ministry of Commerce, which will study it according to the system for companies. The ministry will then forward the request to the CMA to study it and approve it.
The ministry will then issue the license for establishing the company. This process is not to take more than 22 working days. If the company needs a royal decree, the ministry will present the request to have the royal decree issued. Once the ministerial decision or the royal decree is issued for establishing the company, the CMA will take over regulating the company’s IPO according to the system.
After the company’s founding assembly is set, the ministry issues a decision to announce the company’s establishment in the media and register it with the ministry. The company can then apply to the CMA to register and trade its stock in the market.
For changing a company’s capital and floating its stocks, the steps are first for the company’s board of directors to make its recommendation and present its request to the CMA for approval according to the capital market system. After getting the CMA’s approval, the company applies to the ministry to set a date for holding the general assembly’s extraordinary meeting and approve the invitation.
At the meeting the request for the change in capital is presented for approval by the shareholders. The CMA then supervises organizing the floating of the company’s extra stocks according to the capital market system. The CMA will consequently inform the ministry of the results so that it makes the changes in its trade registry.
