– Constituting of Bondholders Authority
– Organizing of Its Meetings
– Controlling the Issuance of Its decisions
– Granting Its Rights
The bond concept is a loan presented by the bond buyer to the issuer entity of the bonds, like corporates or governments when it is in need for capital, and the bond buyer is called bondholder, and he is considered any natural or legal person whom his name is registered in the bondholders’ record, also bondholders take over forming an authority of bondholders due to every group of bonds issuance to protect the common interests for its members, it shall have a legal representative from among its members or been chosen from others.
So how bondholders’ authority is formed? And how to organize its meetings? And what are the controls of its decisions emission? Also, what are its rights?
In the RHR group for advocacy and legal advices we answer these questions through what is stipulated in the Money markets authority establishing law and its executive regulation.
Firstly: Constituting of Bondholders Authority
The bonds issuer should through a month from the date of subscription termination of bonds to invite the bondholders authority for approving its private system, and to elect or choose its representative, if the issuer didn’t invite the bondholders authority for a meeting through this period, so every concerned person has the right to require the Money markets authority to invite bondholders for meeting through a time limit by no more than fifteen working days from the date of submitting the requirement.
Secondly: Organizing Meetings of the Bondholders Authority
– Inviting to Attend the Bondholders Authority Meeting
The bondholder’s authority holds its meetings according to the invitation of the representative or the issuer, or according to a requirement presented by bondholders who represent 5% of its value at least, or according to the Money markets authority, also the bondholder’s authority meeting is chaired by the representative or the one whom elected by authority for this purpose.
Also, the invitation for attending the bondholder’s authority meeting is directed including the schedule of work, the date, and the place of holding meeting by one of the following methods:
- Advertisement in two national daily newspapers and the stock change before holding the meeting by at least five working days.
- Certified mails sent to bondholders before the specific time of holding the meeting by at least five working days.
- Email or fax before holding the meeting by at least five working days.
- Hand delivery of the invitation to bondholders or their legal representative before the specific time of the meeting by at least three working days, while indicating the invitation copy by a receive note.
Also, it is required for the validity of the advertisement by the mentioned methods that the bondholder has provided the issuer or clearing agency with information about his country or his Email or his fax number, and to be stated in the prospectus on the advertisement through those methods, and any change of those mentioned information by the bondholder is not taken into account unless he told the issuer or the clearing agency before his announcement by at least five working days.
– Working Schedule and the Time, Place of Meeting
The one who presented the invitation should send announcements of work schedule, date, place of meeting before at least five working days from holding the meeting to all of: The Money markets authority, the representative, the issuer, and the obligor, besides, not attending of the Money markets authority representative after announcing him doesn’t result in voiding the bondholders’ authority meeting.
– Discussing of the Business Listed on the Work Schedule
It is not permitted to bondholders’ authority to discuss subjects which are not listed on the work schedule unless it were of the urgent matters that have arisen after preparing the schedule or unfolded through the meeting, or if the Money markets authority inquired that, or the representative, or bondholders who own 5% of the bonds value, and if it appeared while discussion insufficiency of the information related to some presented issues, the meeting should be postponed for a time limit with no more than ten days if the bondholders who own 25% of the bonds value required that, also the postponed meeting can be held without needing to new procedures of invitation.
Thirdly: The bondholders’ Authority Decisions
Decisions of the bondholders’ authority are not considered valid unless the meeting is attended by a number representing two thirds of the issued bonds value, if this quorum is not fulfilled, so the bondholders’ authority should invite to a second meeting by the same schedule through five working days from the date of the first meeting, and it is sufficient in the second meeting members who represent one third of the bonds value, and decisions are made by the majority of two thirds of the attendees, also, it is allowed to hold the postponed meeting without the need to new procedures of invitation if that was mentioned in the first meeting invitation.
Besides, every decision leads to extending the bond fulfilling period, reducing the return or dept capital, reducing deposit, or affecting the bondholders’ rights, should not be taken unless of attending two thirds of the issued bonds value, and the decisions of the bondholders’ authority shall apply to absentees and violators of those attendees.
Fourthly: The Bondholders’ Authority Rights
It is allowed to the bondholders’ authority representative to attend the general assemblies for the obligor, and the obligor should be presented the same invitation directed to shareholders, it is also allowed for the representative to participate in discussions without voting, besides, the representative has the right to take all precautionary measures to protect the rights of bondholders.
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