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Tuesday, 18 February 2020

Did the FRA just make reverse takeovers possible?

REGULATION WATCH- Did the FRA just make reverse takeovers (aka: “reverse IPOs”) possible? The Financial Regulatory Authority (FRA) has made two amendments to EGX listing regulations that allow publicly-traded companies to acquire larger non-listed companies, according to an official statement (pdf). Under the new rules, EGX-listed companies can go after privately-held businesses whose value is equal to or greater than that of the buyer, provided the target of the acquisition meets all of the EGX’s listing regulations within one month of the transaction closing. If the transaction results in the proportion of the listed company’s shares falling beneath the freefloat threshold, it will be granted a one-month grace period to issue more shares.

The FRA will also require companies to seek the approval of their general assemblies if they refuse to contribute to a capital increase of a subsidiary in which they hold a 10% stake or more. Officials say the move is intended to “better protect the rights of shareholders from unilateral action by company board”

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