The Capital Markets Authority is currently working to amend the executive regulations of the project to develop a mechanism for participation in the general assembly meetings of companies listed on the Kuwait Stock Exchange, which will be implemented in two phases. The proposal for amendments was prepared in cooperation with the Kuwait Clearing Company in its capacity as the central depository for securities.
This proposal complements the initial application of the mechanism of participation in general assemblies electronically through the system provided by the Kuwait Clearing Company in May 2020, reports a local Arabic daily.
The CMA has also prepared a study that included a questionnaire in which the opinion of some member countries of the International Organization of Securities Commissions (IOSCO) was surveyed to determine what can be benefited from those countries with regard to the mechanism of participation and electronic voting in the general assemblies of listed companies, with the aim of providing a comprehensive overview of the gaps, weaknesses and limitations of local and global practices to adopt best practices in this regard.
By completing the implementation of this project, the Capital Markets Authority aims to encourage shareholders, especially small shareholders and foreign investors (directly or indirectly) to participate in the general assemblies of listed companies remotely and enable them to exercise their rights to make decisions through electronic means in order to provide more transparency and clarity to shareholders with regard to the decisions of the board of directors of listed companies, providing the opportunity for small shareholders to view and discuss these decisions, and facilitating the achievement of the required percentage for companies.
After studying it and setting the rules regulating the project, the CMA surveyed the opinion of local external bodies represented by some listed companies and regulatory authorities such as the Central Bank of Kuwait and the Ministry of Commerce and Industry, and some foreign bodies such as HSBC and Blackrock in order to obtain their opinion on the draft amendments to the executive regulations and the guide to policies and procedures of the general assemblies through the electronic systems of the Kuwait Clearing Company, as among those listed companies were companies and banks listed in the Premier Market, as these companies contain a larger and broader shareholder base that enables them to express effective opinions and ideas in the project of developing the mechanism of participation in the general assemblies.
The study provides recommendations for the implementation of the first phase of the project, which are as follows:
— Adding the definition of “electronic system for participation”, which is the system provided by the clearing agency for listed companies to enable the shareholders of these companies to participate in the general assembly without the need for these shareholders to attend in person, and their participation is calculated within the quorum for attending and voting at the general assembly.
— Establishing a new mechanism to determine who has the right to attend the General Assembly by adding a clear definition called “the date of the right to attend the General Assembly,” which is the date ten working days before the date of the General Assembly. The mechanism for determining the date of the right to attend the General Assembly aims at the following:
— Reducing the risk of non-conformity of balances between the clearing records and the sub-registers of the combined accounts (local or foreign), as currently the matching takes place only on the day of the assembly, which increases the risk of non-conformity due to lack of time.
— Increasing the participation of foreign institutions from the shareholders, due to the custodians’ ability to determine the shareholders entitled to attend before a sufficient period of time from the day of the meeting, and thus facilitating the procedures of the representation and the receipt of the voting data.
— Increasing the efficiency of the clearinghouse’s automated systems in terms of the matching process on shareholders’ balances and identifying those who fail, if any.
— Giving consolidated accounts and custodians the ability to split invitations and voting cards with clearing systems without the risk of non-conformity, which is currently caused by the fact that the balances are variable until the day of the meeting.
— Working on some technical developments on the electronic system for participation in associations by the Kuwait Clearing Company.
— Obligating some listed companies to make available the Kuwaiti company’s electronic clearing system for shareholders to participate in the general assembly.
— Organizing the disclosure of the details of the General Assembly by issuing a new form for this purpose.
The study also concluded by providing recommendations for the implementation of the second phase of the project, which are as follows:
— Adding the definition of “voting agent”.
— Disclosures related to the proxy, the announcement, and the results of the general assembly meeting.
The Capital Markets Authority confirms that it is in the final stages of adopting these amendments, and they will be applied in the period after the regular general assemblies season, which are expected after July 31, 2022.
During the pre-implementation period, an awareness campaign will be conducted through workshops and meetings dedicated to market dealers, in coordination with the Kuwaiti Clearinghouse company and the Kuwait Stock Exchange Company, in an effort to understand the new provisions and regulations of the project, which aim to provide protection for dealers and investors in the market and to enable small shareholders to exercise their rights in making decisions related to the company.