Following the establishment of the requisite legal framework by virtue of the Companies Law No. (42) of 2021 concerning companies, the Board of Directors of the Capital Market Authority has issued Instructions No. (2) of 2023 pertaining to the Buyback and Disposition of Company Shares, and Instructions No. (3) of 2023 pertaining to the Conversion of the Legal Form of Public Shareholding Companies Listed on the Palestine Exchange.
The issuance of these Instructions on the Buyback and Disposition of Company Shares No. (2) of 2023 comes as a result of companies being allowed to directly buyback their own shares directly or through another person on their behalf. The PCMA began to draft and issue such Instructions to govern company share buyback rules and determine how said shares can be disposed. These Instructions took into consideration optimizing the public interest of the capital market, the interest of shareholding companies, and the interest of investors, especially minority investors. The Instructions also addressed aspects related to the obligations of the company interested in buying its own shares, such as the approval of the shareholders in their meetings held in an extraordinary manner, the company’s request to purchase its shares, and purchase information. In addition, they covered the trading mechanisms in the Palestine Exchange, culminating as to the manner of disposition of such shares pursuant to the legal ownership terms. This is in accordance with the general provisions related to profits distributed by the company, participation and voting in shareholders’ meetings, representation in the board of directors, and company procedures during the ownership term. Finally, it also outlines the specific restrictions on insider transactions during the term of the company’s buyback and disposition of such shares.
In regards to the issuance of the Instructions on the Conversion of the Legal Form of Public Shareholding Companies Listed on the Palestine Exchange No. (3) of 2023, these instructions were introduced to regulate the consequences of converting the legal form of public shareholding companies listed on the Palestine Exchange into limited liability or private shareholding companies with the aim to protect investors, especially minority shareholders. Some of the key conditions for approval of such conversions predominantly include disclosure to the PCMA, the Palestine Exchange, and the public within one working day of the meeting of the board of directors recommending the conversion to the shareholders’ meeting to be held in an extraordinary manner which in no way shall exceed the start of the next trading session following the issuance of such board of directors resolution. This disclosure should state the reasons and justifications for such conversion. The Instructions also provide that said conversion is permissible if the number of company shareholders who are not board members or major owners does not exceed fifty shareholders unless written approvals from shareholders owning 90% of the shares are provided. These approvals should be submitted to both the PCMA and the Companies Registrar for prior approval before convening the extraordinary shareholders’ meeting. Furthermore, the Instructions outline mechanisms for dealing with shareholders willing to sell their shares and those who object, ensuring fair transfer prices.