The Financial Regulatory Authority (FRA) on Sunday released rules and regulations for companies seeking to set up Special Purpose Acquisition Companies (SPAC).
PSPCs are companies created for the sole purpose of raising capital through an IPO to acquire or merge with another company.
The rules include the timeline for companies to pull the trigger on SPAC mergers and listing on the Egyptian Stock Exchange (EGX), as well as requirements on shareholder structure and minimum capital. The regulator has also released changes to listing and delisting rules to allow PSPCs to reach EGX.
The settlement comes weeks after the proposal led by EGX chairman Mohamed Farid received the green light from FRA.
FRA has also published Resolution 172 for the year 2021, which includes an amendment to the rules for listing and delisting securities on EGX.
Mohamed Omran, President of the FRA, clarified that those who wish to exercise the activity of PSPC must follow the procedures for constitution and approval of the venture capital activity in accordance with the provisions in force so that the capital issued and paid up of the company is not less than EGP 10 million, paid by the founders / sponsors.
He added that the SPAC must undertake to increase its capital within a period of one month from the date of its registration with the Authority through a public subscription and / or a private offer. based on the investment plan to acquire the target companies. Then, it should reform its board of directors in accordance with a decision of the General Assembly after completing the augmentation procedures. Finally, a general manager is elected from among the founders (sponsors).
Omran explained that the new resolutions regulated the ownership structure of the founders and determined that the percentage of ownership of legal persons should not be less than 50% of the capital of the company, provided that the percentage of financial institutions and / or qualified investors is not less than 25% of its capital, and The contribution of the founders / Patrons 5% of the capital of the company after capital increase, and their shares must not be less than EGP 10 million when the company is incorporated.
According to Omran, a change has been made to the registration rules and an article has been introduced which allows the registration of shares of companies for acquisition, and the non-applicability of the provisions relating to the presentation of financial statements. of the two years preceding the registration request. Any pledges of the retention rate of the main shareholders may not be less than 51% of the shares they hold in the capital. The percentage of net profit for the last financial year preceding the application for registration must not be less than 5% of the capital. Own shares must be kept for a period of three months.
On the other hand, the company targeted for the acquisition must comply with the EGX listing rules, unless it is one of the startups or promising companies working in the field of technology, innovation and digital technologies, in which case it would be excluded from the provisions of points (5, 7, 8) of article (7) of the securities listing and delisting regulations.
He also underlined that the aim of PSPC is limited to the acquisition of ownership percentages in entities or companies within two years from the date of completion of the capital increase by offering three alternatives. They include: the acquisition of 100% of the capital or voting rights, followed by the merger in the company, or the acquisition of a percentage of control of the capital or of voting rights greater than the percentage necessary to make the decision merger, or the acquisition of a percentage representing an absolute majority of the capital or voting rights.
Omran said that the authority’s board of directors has approved the establishment of a number of controls for targeted investment in order to comply with the basic objective of establishing companies for the purpose to acquire as the preferred method for many experienced founders and principal shareholders. , knowing that the value of the acquired company represents at least 80% of the volume of available funds.