Fresh amendments in the works to regulate listing of share types, classes not previously listed

Tadawul-listed companies could soon be able to submit capital increase requests for the issuance and listing of new shares of types and classes not previously listed, according to fresh amendments by the Capital Market Authority (CMA) (pdf). The proposed amendments are open for public feedback until 9 May through the Istitlaa platform.

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The rationale: The proposed draft aims to provide more comprehensive disclosures for different share types — including redeemable shares and share conversions — in a bid to simplify financing for companies, allowing them to meet their capital needs and offer more investment options. It also introduces new rules for raising capital by issuing unlisted share types while ensuring capital increases remain within authorized limits.

Issuing + listing new shares: Companies would be permitted to raise capital by issuing and listing a new type or class of shares that haven’t previously been listed as long as they fall within the limits of the authorized capital and don’t exceed 10% of the issued capital.

Securing regulatory approvals prior to board approval: The new shares must be offered to investors through a rights offering, and the company must secure approval from the CMA and other relevant regulators before the board of directors can approve the issuance. Additionally, the board must approve the issuance within six months of receiving regulatory approval from the CMA.

Detailed disclosures: The draft includes a requirement to disclose the different types and classes of shares and includes details and terms regarding redeemable shares and convertible shares in the prospectus, shareholder circular, and registration document.

Redefining substantial shareholders: The amendments look to redefine substantial shareholders as those who hold 5% or more shares and/or voting rights in the company. The draft also requires substantial shareholders to notify the Exchange if they hold 5% or more of the voting rights in the issuer's shares. The current regulations in place are limited to ownership or interest only.