Boursa Kuwait’s new market segmentation and listing rules

Introduction

The Kuwait law regime governing the listing of Kuwaiti companies on Boursa Kuwait (the local stock exchange) is primarily governed under Module 12 (listing rules) of the executive by-laws (the CMA listing rules) to the Kuwait Capital Markets Law (Law No. 10 of 2010) (the CML). In April 2018, Boursa Kuwait promulgated its listing rules (the rulebook), the purpose of which was to clarify the regulatory and organisational framework of Boursa Kuwait that governs all operational aspects of Kuwait’s stock exchange. Importantly, the rulebook has specified the new segmentation of the local exchange into three distinct market categories and the associated listing rules applicable for each market, as outlined in Chapter 7 (listing) of the rulebook. Without prejudice to the CMA listing rules, the Boursa listing rules apply to companies which are currently listed on the local exchange as well as those wishing to list on Boursa Kuwait.

The three new market segments are, the Premier Market, the Main Market, and the Auction Market (a listing on the Auction Market is not permissible at this time). Kuwait listed companies are now arranged among the aforementioned markets according to criteria which include market capitalisation and liquidity.

In order for an applicant company (applicant) to be approved to list its shares on Boursa Kuwait, the requisite Boursa Kuwait listing application form, together with all relevant supporting documentation, must first be filed with Boursa Kuwait and approved by Boursa Kuwait and the CMA. The CMA and Boursa Kuwait reserve the right to request the applicant provides additional information/documentation and/or complies with additional requirements.

This article provides a high level outline of the requirements and procedures for an applicant to list its shares on either the Premier Market or Main Market.

The Premier Market
A listing on the Premier Market requires:

a) That the fair value of the shares of the applicant that are not
owned by a person having control over the applicant or by a group controlling the applicant, must be at least KD45 million. The fair value of the shares must also be determined by a CMA licensed valuator or an investment adviser (valuer);
b) The applicant must have no less than 450 shareholders, each of which must hold an aggregate fair value of no less than KD10,000 of the shares in the applicant; and
c) The applicant must continue to exercise one or more of its main objects as set forth in the constitutional documents of the applicant. The majority of the applicant’s revenues must be derived from such objects and issued financial statements approved by the applicant’s general assembly during the last seven fiscal years, prior to the submission date of the listing application.

The Main Market

a) That the fair value of the shares of the applicant that are not owned by a person having control over the applicant or by a group controlling the applicant, must be at least KD15 million. The fair value of the shares must also be determined by a valuer;
b) The company must have no less than 450 shareholders, each of which must hold an aggregate fair value of no less than KD5,000 of the shares in the applicant. Alternatively, the applicant must have no less than 250 shareholders, each of which must hold an aggregate fair value of no less than KD10,000 of the shares in the applicant; and
c) The company must continue to exercise one or more of its main objects as set forth in the constitutional documents of the applicant. The majority of the applicant’s revenues must be derived from such objects and issued financial statements approved by the company’s general assembly during the last three fiscal years, prior to the submission date of the listing application.

Securities listing procedure

a) The listing application must be filed with Boursa Kuwait;
b) Within 30 days of being provided with the listing application,
Boursa Kuwait must issue its recommendation to the CMA which will then also consider the listing application and decide whether or not to approve the listing application.

The listing application must be submitted together with the following supporting documentation:

i) Basic information on the applicant;
ii) A copy of the constitutional documents of the applicant
together with a copy of its commercial register and
commercial license;
iii) A letter from the auditors of the applicant confirming that the
applicant complies with the requirements set out under
Clause 2(c) or 3(c) above, as applicable;
iv) A copy of the audited financial statements of the applicant for
the last three years preceding the filing of the listing
application;
v) A list of the members of the board of directors of the
applicant, its CEO and the authorised signatories of the
applicant;
vi) A list of the auditors, listing advisor and other relevant
advisors, of the applicant;
vii) Copies of the minutes of the applicant’s ordinary and extra-ordinary general assembly for the last three years;
viii) A copy of the shareholders register of the applicant issued by
the Kuwait Clearing Company;
ix) Written evidence of the appointment of the listing advisor of
the applicant;
x) The names of the major shareholders of the applicant;
xi) A list of all insider persons of the applicant (as required to be
maintained under the executive bylaws to the CML);
xii) An undertaking by the applicants board of directors and
executive management and applicable insider persons that they will comply with all applicable rules of Boursa Kuwait; and
xiii) A certified cheque to the CMA for application fees for the listing, as well as proof of payment to Boursa Kuwait for processing the listing application.

Once the listing application has been considered by Boursa Kuwait, it may act as follows:

a) Issue a reasoned conditional approval recommendation vis-à-vis
the applicant, subject to the completion/performance of certain
requirements; or
b) Issue a reasoned recommendation to the CMA that it rejects the
licence application where the relevant documentation has not been submitted by the applicant and/or where the prescribed fees have not been paid by the applicant.

Assuming a favorable recommendation by Boursa Kuwait, and that the CMA has also satisfied itself with the listing application, then the CMA must notify the applicant accordingly, and require the same to enter into the relevant membership agreement with Boursa Kuwait, pay all prescribed listing fees and that it complete all relevant procedural requirements for the shares of the applicant to be listed on Boursa Kuwait within one month of the CMA issuing its listing approval vis-à-vis the applicant.