August 9, 2020
The FRA’s precautionary measures in response to Covid-19
The Financial Regulatory Authority (the “FRA”) has recently implemented several measures in order to mitigate the Covid-19 impact, and has consolidated them in a statement released by the FRA in March 2020 (the “Statement”).
These measures mainly concern the following non-banking financial markets (the “Measures”):
We guide you through some of the key Measures of the Statement as follows:
Measures relating to the capital market
The FRA’s board of directors issued Decree No. 27 of 2020 amending Decree No. 11 of 2014 on the listing and delisting rules (the “Listing Rules”). Said decree stipulates that the FRA may exempt companies from having to disclose their share buyback within the stipulated deadline, if deemed justifiable by the FRA.
Further to the above, the FRA’s board of directors issued Decree No. 42 of 2020 allowing companies with shares publicly listed on the Egyptian Stock Exchange to disclose their financial statements for the quarters ending on 31 December 2019 and 31 March 2020 at a later date.
In addition, the FRA has extended the deadline applicable to companies in relation to the completion and execution of the listing procedures in accordance with the Listing Rules, provided that said companies provide the FRA with a timeline for the completion and execution of the listing procedures.
Measures relating to convening general shareholders’ meetings
In accordance with the Companies Law No. 159 of 1981, the FRA is now encouraging and supporting companies in holding shareholders’ meetings through teleconference means. It also requires that companies make available electronic voting systems to allow shareholders to vote during such meetings.
The FRA also indicated in its statement that companies must ensure that due precautions be taken when holding physical meetings. In its statement, the FRA stresses that companies must closely observe the Egyptian Ministry of Health’s instructions in relation to the precautions necessary as to not aid the spread of Covid-19.
Measures relating to the insurance market
The FRA has instructed insurance companies subject to the supervision of the FRA and operating in the Egyptian market to grant their clients extensions on insurance premiums.
The FRA further granted small and medium enterprises (i.e., SMEs) an extension period of 6 months to pay the insurance premiums. In addition, the FRA has granted a grace period of 60 days to allow clients, who have incurred the cancelation of their insurance between 1 March 2020 and 1 June 2020 due to non-payment, to renew their insurance.
Measures relating to the mortgage finance, leasing, and factoring market
In an aim to mitigate the negative effects that Covid-19 may have on clients, the FRA has obliged companies operating in the mortgage finance, leasing and factoring market to postpone all credit entitlements for their clients (whether such clients are institutions or individuals) for a period of six months. Said clients are also exempt from paying any fines due to the late payment of such entitlements.
Measures relating to the microfinancing market
Among the Measures implemented in relation to the microfinancing market, the FRA has decided to:
Market Reaction
The FRA has taken a proactive approach in protecting the interests of stakeholders in the markets subject to its supervision. It is still too early to speculate whether the FRA’s Measures will have a marked effect on the markets possibly affected by Covid-19 and whether the Measures will mitigate the effects of the Covid-19 outbreak. However, it must be noted that any Measures aiming to shield negatively affected subsets are welcome.
These measures mainly concern the following non-banking financial markets (the “Measures”):
- The capital market;
- The insurance market;
- The mortgage finance, leasing and factoring market; and
- The microfinancing market.
We guide you through some of the key Measures of the Statement as follows:
Measures relating to the capital market
The FRA’s board of directors issued Decree No. 27 of 2020 amending Decree No. 11 of 2014 on the listing and delisting rules (the “Listing Rules”). Said decree stipulates that the FRA may exempt companies from having to disclose their share buyback within the stipulated deadline, if deemed justifiable by the FRA.
Further to the above, the FRA’s board of directors issued Decree No. 42 of 2020 allowing companies with shares publicly listed on the Egyptian Stock Exchange to disclose their financial statements for the quarters ending on 31 December 2019 and 31 March 2020 at a later date.
In addition, the FRA has extended the deadline applicable to companies in relation to the completion and execution of the listing procedures in accordance with the Listing Rules, provided that said companies provide the FRA with a timeline for the completion and execution of the listing procedures.
Measures relating to convening general shareholders’ meetings
In accordance with the Companies Law No. 159 of 1981, the FRA is now encouraging and supporting companies in holding shareholders’ meetings through teleconference means. It also requires that companies make available electronic voting systems to allow shareholders to vote during such meetings.
The FRA also indicated in its statement that companies must ensure that due precautions be taken when holding physical meetings. In its statement, the FRA stresses that companies must closely observe the Egyptian Ministry of Health’s instructions in relation to the precautions necessary as to not aid the spread of Covid-19.
Measures relating to the insurance market
The FRA has instructed insurance companies subject to the supervision of the FRA and operating in the Egyptian market to grant their clients extensions on insurance premiums.
The FRA further granted small and medium enterprises (i.e., SMEs) an extension period of 6 months to pay the insurance premiums. In addition, the FRA has granted a grace period of 60 days to allow clients, who have incurred the cancelation of their insurance between 1 March 2020 and 1 June 2020 due to non-payment, to renew their insurance.
Measures relating to the mortgage finance, leasing, and factoring market
In an aim to mitigate the negative effects that Covid-19 may have on clients, the FRA has obliged companies operating in the mortgage finance, leasing and factoring market to postpone all credit entitlements for their clients (whether such clients are institutions or individuals) for a period of six months. Said clients are also exempt from paying any fines due to the late payment of such entitlements.
Measures relating to the microfinancing market
Among the Measures implemented in relation to the microfinancing market, the FRA has decided to:
- lower the cost incurred for obtaining financing for clients regularly settling the fees for such financing and the administrative fees relating thereto;
- lower instalment fees for microfinancing by 50% for clients hindered by Covid-19;
- establish one or more committees specialized in microfinancing to ensure that the interests of microfinancing clients are protected during the Covid-19 outbreak; and
- establish a unit within the FRA responsible for monitoring and containing the effects that Covid-19 has on the microfinancing sector. This unit will have the authority to take measures against entities not following the FRA’s instructions.
Market Reaction
The FRA has taken a proactive approach in protecting the interests of stakeholders in the markets subject to its supervision. It is still too early to speculate whether the FRA’s Measures will have a marked effect on the markets possibly affected by Covid-19 and whether the Measures will mitigate the effects of the Covid-19 outbreak. However, it must be noted that any Measures aiming to shield negatively affected subsets are welcome.
