CMA and Corporate Finance

Background on applicable regulations

  • CMA's ambit predominantly covers publicly listed entities, but has far reaching effects on all entities looking to raise public and private finance.
  • Besides, CMA regulations has detailed provisions governing various finance activities typically encountered by a corporate, viz.,:
    • Mergers & Acquisitions (Chapter 7)
    • Capital Raise (Chapter 7)
    • Listing Requirements (Circular No. 3 read with Chapter 7)
    • Investment Funds (Chapter 8)
    • Other Securities related Services (Chapter 5)
  • As an independent advisor, AB provides a wide range of services across broad categories of Transaction, Valuation & Financial Advisory. AB, upon request, shall prepare a CMA Compliance Roadmap for any corporate finance activity, to enable seamless and effective compliance functions.

CMA Regulations & Requirements

Regulations

  • Financial transactions involving securities between two listed companies or on exception basis between a listed and unlisted entity are brought within the ambit of CMA.
  • Such financial transactions can arise on account of Acquisitions, Mergers, listing services and Capital Raise among others.
  • CMA promulgates hiring independent consultants, timely approval by board and shareholders and has also imposed penalties for inaction/violation.

1. Acquisitions (5-30%)

  • For all acquisitions, acquirer is required to obtain prior approval (Article 249) and submit an offer document fulfilling the requirements listed by the CMA. (Article 258)
  • Requires adherence to minimum float rules and minimum offer price. (Circular 3 & Article 287)
  • Settlement of purchase consideration with adherence to minimum cash settlement proportion in certain instances. (Article 287)

2. Acquisitions (more than 30%)

  • The acquirer is required to get prior approval from CMA for acquisition of more than 30% stake. (Article 249)
  • Adherence to mandatory offer provisions if the acquirer intends to make an offer for more than 30% stake. (Article 271)
  • Requires issuance of prospectus in instances of settlement of purchase consideration through new shares. (Article 268)
  • Suspend listing of bidders securities during reverse acquisition. (Article 290)
  • Adherence to disclosure rules and regulatory requirements for continued listing. (Article 382)
  • Structure purchase consideration components. (Article 287)

3. Capital Increase

  • Obtain prior approval (Article 249) from the CMA for capital raise / increase in the following instances:
    • Initial Public offerings
    • Rights Issue of shares,
    • Private placement,
    • Issue of various debt instruments.
  • Requires preparation and issue Prospectus/Offer document in compliance with CMA general requirements and regulations. (Articles 258 & 268)
  • Adherence to minimum paid up capital and issue size requirements. (Circular No. 3)

4. Investment Funds

  • Obtain prior approval and license from the CMA to establish investment funds in the State of Kuwait. (Article 297)
  • Requires preparation and issue of prospectus & other legal agreements in compliance with CMA general requirements and regulations. (Article 305 & 308)
  • Adherence to disclosure rules and regulatory requirements for private placement and deemed public offerings. (Article 302 & 303)
  • Comply with CMA requirements regarding the obligations of the fund manager and Board of Directors. (Article 312 & 316)
  • Comply with CMA requirements regarding the administration activities of the fund manager and Board of Directors. (Articles 323 - 345)

5. Stock Exchange Listing (Circular No. 3)

  • Fulfillment of minimum requirements of financial profit track records and other key metrics.
  • Adherence to free float and minimum paid up capital requirements.
  • Fulfillment of minimum shareholding requirements for promoter, non-promoter and public.
  • Requires issuance of listing prospectus and submission of formal listing application as per listing rules of CMA.
  • Obtain prior regulatory approvals in accordance with CMA regulations.

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