10/19/2021 | Press release | Distributed by Public on 10/19/2021 23:42

Announcement Regarding Issuance of Disciplinary Board Resolution No. (58/2021 Disciplinary Board) (70/2021 Authority) and imposition of a fine of 14 thousand Dinars against 1)[...]

Title:Announcement Regarding Issuance of Disciplinary Board Resolution No. (58/2021 Disciplinary Board) (70/2021 Authority) and imposition of a fine of 14 thousand Dinars against 1) Kuwait Remal Real Estate Company. 2) Chairman of the Board of Directors of Kuwait Remal Real Estate Company for violating the rules of Disclosure and Transparency and the Listing Rules and Corporate Governance.

For the following reasons:

1- Kuwait Remal Real Estate Company. It was proven that that it violated the following:

First: Provision of Item No. (14) of Article (4-1-1) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Company did not disclose a number of material information (lawsuits) that may affect the course of the Company's work and activity, as well as its potential impact on its financial position.

Second: Provision of Article (4-2-1) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Company was late in disclosing several material information.

Third: Provision of Article (4-7-1) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Company does not publish any of its disclosures of material information on its website.

Fourth: Provision of Item (2/paragraph d) of Appendix No. (1/ Real Estate Assets Valuation) of Module Eleven (Dealing in Securities) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Company valuated a number of its properties (Al-Nassar Tower - Al-Nassar Complex - Wardah Complex) by the valuator (Kuwait International Bank) during the financial year ending on December 31, 2019 and December 31, 2020, on a date exceeding a month from the date of the financial statements.

Fifth: Provision of Article (1-13) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Company did not take any provisions for the lawsuits filed against the Company by Burgan Bank, despite their negative impact on the Company's financial position, as follows:

• Demanding the payment of an amount of about KWD 24,000,000 (only twenty-four million Kuwaiti Dinars).

• The aforementioned bank carried out the executive seizure procedures on the Company's property.

Sixth: Article (3-2) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that no annual appraisal was available for all employees working for the Company for the financial years ending on December 31, 2019 and December 31, 2020, noting that the mentioned appraisal is one of the most important tools and mechanisms that allow the Company to exercise effective control over the performance of its employees.

Seventh: Provision of Item (2) of Article (4-3) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that there is no clear policy approved by the Company's Board of Directors regarding the remuneration of members of the Board of Directors and the executive management.

Eighth: Item (2) of Article (5-7) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Audit Committee did not recommend the reappointment of the external auditor assigned to study the financial statements for the period ending on December 31, 2020.

Ninth: Provision of Item (1) of Article (5-8) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Ordinary General Assembly, held on 29/06/2020, reappointed the Company's external auditor for the financial period ending on December 31, 2020, without any recommendation from the Audit Committee in this regard.

Tenth: The provision of clause (4) of Article (6-3) of Module Twelfth (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that there are no qualified human cadres within the Company, whether employees or a manager, to carry out the tasks of risk management.

Eleventh: The provision of item (2) of Article (6-7) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

The Authority found a number of observations related to the Internal Audit Department of the Company under inspection, as follows:

1. The lack of qualified human and functional cadres within the Company to carry out the functions of the Internal Audit Department.
2. The Company's failure to appoint a manager for the mentioned department.

C- The tasks of the mentioned department and the tasks of risk management have been assigned to an external office, which leads to the absence of the aforementioned office's independence. Assigning the Internal Audit Department, in addition to assigning other technical departments (risk management) to one external office represents a conflict of interest.

Twelfth: Provision of Article (11-1) of Module Twelfth (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that no training courses were available for members of the Board of Directors and the Executive Management for the financial year ending on December 31, 2020.

2- The Chairman of the Board of Directors of the Kuwait Remal Real Estate Company violated the following:

First: Provision of Article (3-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

In addition to the non-compliance with Item (5) of Article (3-10) of the same Module, where it was proven to the Authority that the Company's Board of Directors and its executive management did not perform the tasks entrusted to them to enhance the Company's competitiveness, as well as achieve high growth rates, and work on what contributes to maximizing profits, as well as optimal management of the Company's resources, for the following reasons:

a- Financial difficulties facing the Company:

• The Company's accumulated losses amounted to KWD 16,606,405 (sixteen million six hundred and six thousand four hundred and five Kuwaiti Dinars), according to the financial statements for the period ending on 30/09/2020.

• The Company's current liabilities exceeded its current assets, according to the financial statements for the period ending on 30/09/2020, as follows:

b- Profit-sharing contract:

1- A profit-sharing contract was signed between Kuwait Remal Real Estate Company and another company on 26/11/2017 for an amount of about KWD 6,400,000 (six million four hundred thousand Kuwaiti Dinars).

2- The mentioned contract expired on 26/10/2018, noting that the inspection team was not provided with any documents indicating its renewal, and the said amount was not collected as of the end of the inspection.

3- In its response to the inspection team, the Company indicated that "the Company was not provided with any details about the nature of the investment."

4- Kuwait Remal Real Estate Company requested from ------ on 08/12/2020 to pay the value of the said contract.

5- On December 13, 2020, ------- Company submitted a proposal to settle the value of the contract, by granting the Kuwait Remal Real Estate Company a total of 28,460,968 shares of the shares of -------- Company due to its inability to pay the value of the contract in cash.

6- The Board of Directors of Kuwait Remal Real Estate Company decided to accept the proposal to settle the value of the contract against the shares mentioned in its meeting No. (06/2020) held on 16/12/2020.

7- The Authority was not provided with evidence that the Company received the mentioned shares as of the end of the inspection.

C- Selling Mahboula real estate:

• The mentioned property was sold on 01/02/2018 to --------- company for an amount of KWD 4,850,000.

• The Company did not provide the Authority with evidence that it collected the amount of the sale of the mentioned property as of the date of the end of the inspection.

Second: Provision of Item (6) of Article (2-5) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that the Chairman of the Board of Directors sent invitations to attend a number of Board of Director meetings and their agenda within a period of less than three working days from the date of those meetings, as follows:

Third: Item (1) of Article (3-7) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the Authority that there was no strategic plan approved by the Company's Board of Directors for the financial years ending on December 31, 2019 and December 31, 2020.

The Resolution included the infliction of the following penalty: -

"First: - Kuwait Remal Real Estate Company is fined an amount of one thousand Dinars for the eighth and ninth violations, and a thousand Dinars for each of the other violations.

Second: - The Chairman of the Board of Directors of Kuwait Sands Real Estate Company is fined an amount of one thousand Dinars for each of the violations attributed to him.".

In this regard, the CMA emphasizes the implementation of CMA Law and its Executive Bylaws on all persons dealing in securities activities, and urges them to comply with these rules in order to promote investors' confidence, create a sound investment environment, and implement the Law according to the principles of fairness, transparency, and integrity in line with the best international practice.

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