On October 2nd, 2018, the General Authority for Investment (GAFI) issued Booklet No. 3 of 2018, aimed at protecting the rights of minority shareholders as stipulated in the law.
These provisions guarantee that, if laid out clearly in the company’s articles of association, each group of 10% shares will be allocated one seat on a company’s board of directors. This gives a chance for minority shareholders to be represented fairly on the board.
Indeed, this booklet ensures added protection for minority shareholders. Generally, the issue is one of social justice and fairness, paired with the objective of encouraging members of society to participate in business and trade, as well as in the capital market. The constitution, as well as the laws mentioned above, are legal bases for the new directives. Moreover, relevant laws such as the Company Law, No. 159 of 1981 gives minority shareholders the rights to receive dividends, partake in decision-making, vote on the board of directors, question the company’s auditor, and even resort to court if necessary. However, the fact that the booklet makes it clear that each group of 10% shares will be represented on the board is a step forward in the protection of minority shareholders.
In fact, there have been a number of other recent positive reforms in the area of company law. For example, if shareholders with no less than 5% shares find that decisions haremful to them or to other stakeholders are being taken, they can ask GAFI to step in and stop their company’s General Assembly. Moreover, shareholders now have of votes proportional to their percentage of shares when it comes to voting for the board of directors. Finally, the directives give shareholders the right to appeal against an increase in capital if they see that this is harmful to them or to other stakeholders.
We believe that these changes are an evolution of legislation in the right direction, as well as a step forward in protecting the rights of minority shareholders. For that reason, we expect further future legislation to be imposed with the same incentives, strengthening minority shareholders and encouraging businesses to thrive.