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ME-ALLIANCE LEGAL UPDATE
Securities & commodities Authority issue a new decision to regulate Private Placement for Debt Securities, Cheques, and Financial Instruments
This decision outlines the rules for issuing bonds, cheques, and other securities through private placements. It applies to companies issuing these instruments, excluding government entities and their wholly-owned companies. It covers requirements for obtaining preliminary approval, submitting necessary documents, and the procedures for issuing convertible bonds or sukuk. Additionally, it includes guidelines for issuing and placing securities outside the country or in financial free zones.
Scope of Application
The provisions of this decision apply to companies issuing debt securities, cheques, or financial instruments through a private placement. Federal or local government entities or wholly-owned subsidiaries of such entities are excluded, except for the requirement to notify the authority of private placement operations.
Issuance Requirements Within the Country
Prior to applying for approval of the private placement and issuance, a company must obtain preliminary approval from the authority by submitting a draft invitation to the general assembly meeting and attaching all required documents. Subsequently, the company shall submit a request for final approval from the authority, including the necessary documents such as the general assembly’s approval, details of the placement including the type of financial instrument, the size of the placement, and a declaration from the board of directors confirming the absence of conflicts of interest.
If the cheques are convertible into shares, a report from an independent financial advisor must be provided, detailing the conversion process and the names of the ultimate beneficiaries. The placement may be part of a program for successive issuances lasting up to two years, provided that the general assembly and the company’s board of directors approve each issuance. The applicant is required to pay the applicable fees, and the authority may request any additional data or documents.
Authority Decision
The authority shall issue its approval of the application within one business day from the date of submission, provided all requirements are met. If the application is rejected, the authority will explain the reasons for rejection.
Issuance Outside the Country
When issuing bonds, cheques, or financial instruments outside the country or within a free financial zone inside the country, the issuer must notify the authority of the key placement details immediately after the completion of the placement and issuance process.
Issuer Responsibilities and Obligations
The company must submit the required documents with the invitation to the general assembly, including a study from an independent financial advisor, a statement of the bond or cheque holders’ share of profits, a decision from the Shariah supervision committee regarding the compliance of the cheques with Shariah law, and a report from the company’s board of directors. The company must also appoint a licensed bank as a payment agent within the country and provide the authority with any data or documents requested within a specified period. The company is responsible for the accuracy of the submitted data and must immediately notify the authority of any changes.
Listing and Trading of Bonds and Cheques
Bonds, cheques, and financial instruments issued through private placement can be listed and traded in the market provided that trading is restricted to professional investors, trading occurs through a designated platform, and they are registered with the authority before listing in the market.
Penalties
Administrative penalties apply to violations of the provisions of this decision. The authority may suspend or cancel the issuance procedures, or any approvals granted if there is a breach of the decision’s provisions or related circulars.
This decision sets forth the provisions related to the private placement of bonds, cheques, and financial instruments. It applies to issuing companies, excluding government entities. The decision requires obtaining preliminary and final approval from the authority, submitting specific documents, and notifying the authority of issuances outside the country. It also outlines the issuer’s responsibilities, requirements for listing and trading the securities, and specifies penalties for violations.
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