CMA says capital hike without rights issue ‘additional’ option

Logo of Capital Market Authority (CMA)

The Capital Market Authority (CMA) recently approved the amended Instructions for Listed Companies Announcements on the Saudi Exchange (Tadawul), which included the addition of forms for announcing capital increases while suspending rights issues.

This does not entail the permanent suspension of rights offerings from the capital market. Instead, it is a new alternative for joint stock companies that allows them to tap the capital market as a financing channel that ensures the continuity of companies and contributes to supporting their growth and expansion. Other capital hike options remain unchanged, the market regulator said.

The new option to increase capital while suspending the priority right came in implementation of the Companies Law and its Executive Regulations. It does not contravene with the other capital adjustment options, said the market regulator.

According to the Rules on the Offer of Securities and Continuing Obligations, all options for increasing the capital of listed companies, including the abovementioned option, is only enforceable with the approval of the company's extraordinary general meeting (EGM) within six months from the date of the CMA's approval. If not ratified by the EGM during this period, the authority’s approval shall be considered void.

Earlier this month, the CMA announced that the amended Instructions for Listed Companies Announcements on Tadawul-listed joint stock companies are effective as of Jan. 1, 2024.

The move is aimed at improving and raising the quality of disclosures of listed companies, besides boosting investor awareness.

In 2006, the CMA issued the first edition of the instructions, which was updated multiple times over the past years.