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FRA Decree on the Sale and Purchase of Treasury Shares

Banking & Finance Briefings

On October 4, 2023, the Egyptian Financial Regulatory Authority (the “FRA”) issued Decree No. 210 of 2023 (the “Amendment”), whereby amending FRA Decree No. 11 of 2014 (the “Old Decree”), which outlines the listing and delisting rules of securities on the Egyptian Stock Exchange (the “EGX”).

The Amendment has widened the listed companies’ obligation to pre-notify the EGX when dealing on their treasury shares (the “Pre-notification”), obliging the listed companies at the EGX that seek to either purchase or sell a portion of their treasury shares to pre-notify the EGX, rather than being limited to the purchase of treasury shares, provided that the company’s board of directors meeting minutes including the resolution to purchase or sell the treasury shares is attached to the Pre-notification.

In addition to the conditions stipulated in the Decree including inter alia, (i) treasury shares to be purchased are required to be in the form of local shares, (ii) the company is to hold the treasury shares for a period of not less than three (3) months and not exceeding one (1) year as of the date of execution, otherwise it will be required to decrease its capital by an amount equivalent to the nominal value of the treasury shares, and (iii) the percentage of treasury shares shall not exceed 10% of the listed company’s total shares. The Amendment added various points that are required to be duly observed regarding the sale and purchase of the treasury shares, including inter alia, (i) ensuring that the company’s purchase of treasury shares shall not lead to a decrease in the percentage of freely traded shares in the company, to the extent which is below the minimum stipulated in EGX listing and delisting rules, and (ii) the requirement for the company to finance the purchase process through its own resources, as it is not permissible to finance it through loans.

Furthermore, the company is required to provide the EGX with a disclosure regarding the percentage of treasury shares that were purchased or sold at the end of each trading day in which the execution took place, and accordingly the EGX will publish such disclosure through its designated means.

In all cases, the prior approval of the company’s General Assembly is required to be obtained for the resolution of purchasing treasury shares, in case such purchasing will lead to an increase in the voting rights of the shareholder(s) and their relevant parties including, inter alia, subsidiaries and sister companies, to the percentage that requires compulsory purchase offer, provided that the shareholder(s) and their relevant parties including, inter alia, subsidiaries and sister companies shall omit on voting on the General Assembly’s resolution.

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