The rights and obligations of everyone who trades on listed securities, selling or buying, arise by completing transactions through the stock exchange system, and their obligations are implemented in accordance with the rules in force at the clearing agency that clears and settles securities trades, the central depository of securities and other related services. The Exchange’s rules include special provisions for some transactions.

Transfer of ownership of listed securities

The regulation of the law establishing the Capital Markets Authority and Regulating Securities Activity for the transfer of ownership of listed securities stipulated that they be recorded in the records prepared for this with the clearing agency, unless dealing in them is in violation of the law, regulations, rules or the contract of the issuing company.

Owns a percentage of the shares of the company listed on the stock exchange

If a person alone or with allied persons owns more than 5% of the shares of a company listed on the Stock Exchange and wishes to increase this percentage by no more than 30% of the shares of the same company, he can achieve this according to the trading rules in force in the Stock Exchange, provided that he abide by The provisions of the declaration of interests (disclosure and transparency) stipulated in the regulation of the law establishing the Capital Markets Authority and regulating securities activity.

Disposition of shares

First: the founders’ disposal of the shares

The regulation of the Law of Establishing the Capital Markets Authority and Regulating Securities Activity prohibited the founders from disposing of their shares except after the lapse of at least two fiscal years from the date of the company’s registration in the Commercial Register, with the exception of the disposal that takes place from one of the founders or his heirs to one of his relatives up to the second degree or To another founder, or from the bankruptcy manager, the state, or one of the public institutions or bodies to third parties.

Any action to the contrary shall be null and every concerned person has the right to adhere to this nullity, and the court shall rule it on its own.

Second: Shareholders’ disposal of shares

The regulation of the law establishing the Capital Markets Authority and Regulating Securities Activity prohibits shareholders from disposing of their shares except after the company issues its first balance sheet for at least twelve months, with the exception of the disposal that takes place from a shareholder or his heirs to one of his relatives up to the second degree or to a shareholder another, or from the bankruptcy director, the state, or one of the public institutions or bodies, to a third party.

Any act to the contrary shall be null, and every interested person may adhere to this nullity, and the court shall rule on it on its own.

Subscription in Sukuk and Bonds by Non-Kuwaiti Investors

The regulation of the law establishing the Capital Markets Authority and regulating the activity of securities for non-Kuwaiti investors permitted subscription or ownership of sukuk and bonds, taking into account any restrictions imposed by the prospectus or any other law regarding non-Kuwaiti ownership of shares.

Profit Shares

Create Profit Shares

It is not permissible to establish foundation shares, and profit shares may be established by a decision issued by the extraordinary general assembly in return for amounts provided without interest to the company after its incorporation. The profits determined for him, and the decisions of the extraordinary general assembly of the company regarding the annual accounts of profits and losses shall apply to him.

Assignment of dividends

Profit shares shall be assigned in the presence of the assignor and the assignee or their representative before the clearing agency that maintains the company’s shareholder register, to prove the assignment in accordance with the rules, procedures, and forms prepared by the clearing agency for this purpose.

The regulation permitted the assignment of dividends for all or some years, and also allowed that the assignment of dividends of debts that arose from it.

Issuance of a waiver certificate

The clearing agency shall issue a certificate to the assignee of what has been assigned, and the clearing agency shall notify the company issuing the shares of what has been assigned.

Cancellation of dividends

Profit shares shall be canceled if the right due to which these shares arose have expired, in accordance with the terms agreed with the company when issued.

Repurchase Agreement (Right of Refund)

It may be agreed in contracts for the sale of listed or unlisted securities that the seller retains the right to redeem the sold in return for paying a certain amount during a certain period.

The regulation requires that the agreement include the deposit of the securities traded with a custodian, who will manage and dispose of them in accordance with what is agreed upon between the seller and the buyer, and this agreement is noted in the securities register subject of the agreement.

It also required that the stock exchange’s rules include special provisions regulating repurchase transactions. The provision stipulated in Article 508 of the Kuwaiti Civil Code, which considers the contract in this case a loan secured by a mortgage, does not apply to these contracts.

If you are looking for a Kuwaiti law firm that specializes in providing legal services to the securities, capital and stock market activities, you can count on us at Taqneen, Law Firm and Legal Consultations.

To book an appointment or request legal advice about the duties of securities companies in the optimal implementation of clients’ orders, we are pleased to receive your inquiries at (info@Taqneen.com).