Abu Dhabi, UAEFriday 15 November 2019

Dubai Financial Market introduces new rules for loss-making firms

Companies reporting losses above 50% of their capital need to explain losses and have a timetable for a turnaround

New measures to boost operational efficiency as well as make investors aware of the financial condition of the listed company. Christopher Pike / The National
New measures to boost operational efficiency as well as make investors aware of the financial condition of the listed company. Christopher Pike / The National

New measures have been introduced to improve oversight of loss-making companies by the Dubai Financial Market.

Companies reporting losses of 20 per cent or more of their issued share capital will be more closely monitored by the exchange and will be classified and colour-coded on the exchange’s website, making them easier to identify.

“Companies that are running at an accrued loss of 20 per cent and above of their capital are obliged to disclose to the regulator and the DFM, concurrently with the periodic or annual results announcements,” DFM said in a statement yesterday.

“They are also obliged to submit an explanation about the main causes of the losses and the planned measures to handle the situation,” it said.

Companies incurring losses of 50 per cent or more of their capital need to submit a detailed plan to handle the situation with a definite time frame, apart from listing the main causes of their poor performance. As part of the new measures, loss-making companies will also be classified and colour labelled on the DFM’s Market Watch webpage to enable investors to easily identify the financial position of each listed company before making their investment decisions.

Under the colour-coding system, companies with losses between 20 per cent and less than 50 per cent will be marked in yellow, whereas those with losses of more than 50 per cent of their capital will be flagged red, according to the statement.

“The DFM is committed to provide investors with a fair and transparent trading environment enabling them to take well-informed investment decisions based on the highest levels of clarity about each company,” said Hassan Al Serkal, chief operating officer of DFM.

The DFM is planning to host workshops for listed companies as well as for brokers and investors to make them aware of the new measures.

Updated: October 14, 2019 09:29 PM

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