Bahrain Bourse Adopts New Procedures for Listed Companies with Accumulated Losses

Thursday, September 3, 2020
As part of Bahrain Bourse’s (BHB) continuous efforts to develop the Capital Market in the Kingdom of Bahrain and enhance transparency in the market, BHB announced the implementation of new procedures related to listed companies with accumulated losses of 20% and above of its share capital based on the financial results of the third quarter 2020, following obtaining approval from the Central Bank of Bahrain.

The new procedures, which will come into effective implementation as of the third quarter financial results 2020, and will classify and color-flag listed companies with accumulated losses on Bahrain Bourse’s website under “Products & Services – Asset Classes”, enabling investors and others to clearly identify the financial position of listed companies and make informed investment decisions.  

As per the new procedures, listed companies with accumulated losses will be classified into three categories upon disclosure of its financial results: the first category will include companies with losses between 20% and less than 50% of their share capital, the  second category will include companies with losses of 50% up to 75% of their share capital, and the third category will encompass companies with accumulated losses of 75% and above of its share capital. Accordingly, listed companies within the first category will be yellow-flagged on Bahrain Bourse’s website, and listed companies within the second category will be orange-flagged, and the third category will be red-flagged.

Sh. Khalifa bin Ebrahim Al Khalifa, Chief Executive Officer of Bahrain Bourse commented stating,  “Bahrain Bourse is continuously seeking to promote fairness and enhance transparency in the market by implementing new rules and procedures that will protect as well as assist investors and others in taking well-informed investment decisions. The new procedures organize the mechanism related to dealing with listed companies with accumulated losses reaching 20% or more of its share capital, and at the same time ensures investors’ protection.”
 
Under the new procedures, listed companies are required to make an immediate public disclosure once its accumulated losses reach 20% or more of its share capital. Companies shall disclose the total accumulated losses, its percentage of the share capital, justification of the accumulatd losses, and measures taken to restore its financial position. The company will be flagged accordingly indicating that it has reached accumulated losses. After restoring its financial position, the company shall immediately disclose to the public the reduced accumulated losses, and the yellow flag on the website will be removed accordingly.
 
The same procedure shall apply to the companies with accumulated losses that reach 50% or more of its share capital. The company will be orange-flagged indicating that it has reached accumulated losses of 50% or more of its share capital.

In the event that accumulated losses of a listed company reach 75% or more of its share capital, BHB will immediately suspend the trading on the company and the company will be red-flagged until a public disclosure is made once the company’s accumulated losses are reduced to 75% or below.