The Financial Regulatory Authority (“FRA”) issued a Decree No. 47 of 2020 (“Decree”), published on 19 April 2020, amending the listing and delisting rules and stated that it is prohibited for any person to hold the positions of: (i) Chief Executive Officer or Managing Director; and (ii) Chairman of a company at the same time. The Decree applies to the listed companies as well as the companies to be listed.
It was also addressed in the FRA’s Circular No. 9 of 2020 that the companies shall rectify their situation within one year as of the following day of the Decree’s publication date (i.e. April 19, 2021) or during the first board of directors’ nomination.
It is worth noting that the FRA issued a recent Decree No. 123 of 2019 amending the listing and delisting rules by imposing a new requirement on the board of directors formation stating that it shall include at least one female board member; and companies shall rectify their situation by December 31, 2020 or during the first board of directors’ nomination.
The Circular and a statement by Dr. Mohamed Omran (Chairman of the FRA) have discussed the rationale behind the Decree emphasizing that it was issued based on studying the best practical practices in applying corporate governance rules. Also, the main rationale was to separate the executive function of the Managing Director/ Chief Executive Officer from the supervisory function practiced by the Chairman. Moreover, such separation between the powers and functions shall allow the objective evaluation of the executive management.
It was also stated that it promotes focusing on the long term goals that are in the interest of the shareholders rather than short term goals that only benefits the executive management.
