The Financial Regulatory Authority (“FRA”) enacted to decrees aiming at increasing minority shareholders’ protection in companies under the supervision of the FRA, including companies listed on the Egyptian Stock Exchange (“EGX”).
On 7 June 2020, the FRA enacted decrees numbers 91 for the year 2020 (“Frist Decree”) and 92 for the year 2020 (“Second Decree”) respectively amending (i) the requirements of the review committees in listed companies and (ii) the requirements of the review and risk committees in companies operating in the field of securities (collectively the “FRA Decrees”).
Below are the key highlights of the FRA Decrees.
First Decree: amending the requirements of the review committees applicable to listed companies
The First Decree amends Article 37 of the EGX listing rules in relation to the composition requirements of the review committees.
Under the First Decree, the board of directors of listed companies are required to form a committee for review composed of a minimum of 3 non-executive board members, with a new possibility to appoint external members in the said committee. In addition, the First Decree requires that the majority of the committee members be independent members including the head of the committee.
The First Decree further stipulates that the committee members must have experience and knowledge in the company’s field of business, including financial and accounting expertise.
Second Decree: amending the requirements of the review and risk committees applicable on companies operating in the field of securities
The Second Decree amends the composition of the review and risk committees provided by the corporate governance rules enacted by virtue of FRA’s decree No. 107 for the year 2016.
The Second Decree closely follows the regulations enacted by the First Decree regarding the constitution of the review committee.
As for the risk committee, a minor amendment was introduced by the Second Decree through increasing the number of independent members required to be 2 instead of 1. In addition, instead of at least 1 independent member, the majority of the committee members must be constituted from non-executive board members and independent members. Additionally, external members are now allowed to be a part of the risk committee.
Listed companies as well as companies operating in the field of securities are granted a compliance period which ends on 31 December 2020.
Way Forward
The main objective of the FRA Decrees is to allow the board of directors of listed companies as well as companies operating in the field of securities to perform their supervisory role more efficiently and more effectively by appointing the persons said companies see fit to be members of the review and risk committees even if said members are external. The FRA Decisions would also guarantee transparency and will confer more protection to the interests of the shareholders, especially minority shareholders.
