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Saudi stock exchange to flag companies with losses exceeding 20%

Saudi stock exchange to flag companies with losses exceeding 20%

Flags will be placed beside company names on the Saudi Stock Exchange website when they exceed 20, 35 and 50 per cent losses

Saudi Arabia’s Capital Market Authority (CMA) has issued amended rules governing companies with losses that exceed 20 per cent or more of their share capital.

Under the changes, flags will be placed beside a company’s name on the Saudi Stock Exchange website when it has accumulated losses of 20 per cent or more, 35 per cent or more and 50 per cent or more of its share capital.

The new instructions will take effect from April 22, 2017, meaning the current system governing companies with losses of 50 per cent or more will remain in place until then.

The CMA said current procedures requiring the delisting of a company if its accumulated losses amount to 100 per cent or more of share capital were still in place for 2016 financial results.

These give companies two full financial years without improvement below 75 per cent or operating profits or positive cash flow before they are delisted.

New provisions of the country’s companies law will require businesses to undertake a list of procedures when accumulated losses amount to 50 per cent or more of their paid capital.

These include informing the company chairman immediately, who must then inform the board.

The board must then call for an extraordinary shareholder general assembly within 45 days, which will decide whether to increase or decrease the company’s capital to reduce losses below 50 per cent or to dissolve it.

The company will be considered dissolved if it does not convene a general assembly during the specified time, a resolution is not achieved during the meeting or if an agreed capital increase is not subscribed for within 90 days of the resolution.

Earlier this week, troubled Saudi construction firm Mohammad Al Mojil Group said it had written directly to Deputy Crown Prince Mohammed bin Salman explaining that it may not be able to continue operating.

The company’s shares were suspended from the stock exchange in July 2012 over losses.

Read: Troubled Saudi builder MMG appeals to deputy crown prince

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