CmaBoardReleases
Title: Announcement regarding issuance of Disciplinary Board Resolution No. (08/2022Disciplinary Board) (154-171/2021Authority)
Announcement regarding issuance of Disciplinary Board Resolution No. (08/2022 Disciplinary Board) (154-171/2021 Authority) and the imposition of a fine against each of:
1- Ekttitab Holding Company.
2- Aref Abdullah Al-Ajmi – Chairman of the Board of Directors –.
3- Sara Ali Darweesh Alshemali - Vice Chairman of the Board of Directors and the CEO –.
4- Nawaf Faisal Al-Hammadi – Member of the Board of Directors –.
5- Ahmad Dawood Al-Salman Al-Sabah – Member of the Board of Directors –.
6- Nadia Mary Ali Al-Hasan– Member of the Board of Directors –.
For the following reasons:
First: Ekttitab Holding Company violated the following:
1. Provision of Item (1) of Article (3-5-1) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The Company did not list the financial manager within the insiders watch list, as he was assigned to the tasks of the financial manager since 10/7/2019.
2. Provision of Item (9) of Article (4-1-1) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The Company did not disclose the assignment of the financial manager Mr. ---- who was assigned on 10/7/2019.
3. Provision of Item (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:
The Company did not disclose several material information (lawsuits) that affect the Company’s path and activities as well as their potential effect on its financial position as follows:
a. The lawsuits of the Company’s dispute with ….:
Sr. |
Details of the lawsuit |
Date |
1 |
The court judgement of the end of the case and obligating the Company to pay 3,201,136.700 KWD (three million, two hundred and one thousand, three hundred, and seven hundred fils) |
30/6/2016 |
2 |
The bank appealed the above judgement. |
02/05/2018 |
3 |
The appeal was inadmissible. |
01/09/2019 |
4 |
The bank settled the case. |
18/5/2021 |
b. The lawsuits of the Company’s dispute with ….:
Sr. |
Details of the lawsuit |
Date |
1 |
Failure to hear the case due to passage of time. |
22/12/2020 |
2 |
The appeal was accepted in form and the Company was obliged to pay the amount of 236,415 KWD (two hundred and thirty-six, and four hundred and fifteen Kuwaiti Dinars). |
04/04/2021 |
3 |
The appeal was submitted by the Company to the court of cassation for the court of appeal judgement above. |
31/5/2021 |
4. Provision of Items (26) and (27) of Article (4-1-1) and Item (9) of Appendix (10) of Module Ten (Disclosure and Transparency) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The Company did not disclose the call for the Board of Directors’ meeting no. (1/2021) held on 12/01/2021 and the results of this meeting in which the transaction of selling the shares of the Investors Group Company that were 29.8 million shares, equivalent to 1,162,200 KWD, and its approval was discussed.
5. Provision of Article (1-13) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The Company did not implement the International Financial Reporting Standard “IFRS 9” and did not reflect the fair value of its investment in a company in the periodical financial statements on 30/6/2021 within the Item of “Investments in the fair value through the other comprehensive income” after the issuance of the Authority’s resolution dated 1/4/2021 on cancelling the subscription of a company in 23,267,208 shares in a value of 1,030,737 KWD (one million, thirty thousand, and seven hundred and thirty-seven Kuwaiti Dinars only).
6. Provision of Item (2) of Article (5-7) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The audit committee did not recommend the appointment of external auditor to study the financial statements of the period that ended on 31/12/2020.
7. Provision of Item (1) of Article (5-8) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The ordinary general assembly held on 27/7/2020 appointed the Company’s external auditor to study the financial statements for the financial period that ended on 31/12/2020 without any recommendation from the audit committee.
8. Provision of Article (6-7) 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 Item (9) of the internal audit policy approved by the Company’s Board of Directors states that: “the internal auditor shall submit to the Company’s managing director or CEO the internal audit reports at least twice a year, ….” which results in the mentioned department’s lack of independence, especially that it is auditing the work and tasks of the Company’s CEO.
Second: Mr. Aref Abdullah Al-Ajmi – Chairman of the Board of Directors of Ekttitab Holding Company – violated the following:
1. 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:
The Secretariat of Ekttitab Holding Company’s Board of Directors, based on the request of Mr. Aref Abdullah Al-Ajmi in his capacity as Chairman of the Board of Directors of Ekttitab Holding Company, sent the call for the Board of Directors meetings and the agenda in a period less than 3 business days from the date of the meetings indicated in the following table:
Sr. |
Date of the meeting’s call |
Date of the Board of Directors’ meeting |
1 |
12/05/2019 |
14/05/2019 |
2 |
30/07/2019 |
01/08/2019 |
3 |
05/08/2019 |
07/08/2019 |
4 |
20/10/2019 |
22/10/2019 |
5 |
12/11/2019 |
14/11/2019 |
6 |
04/08/2020 |
06/08/2020 |
7 |
11/08/2020 |
13/08/2020 |
8 |
12/10/2020 |
14/10/2020 |
9 |
10/11/2020 |
12/11/2020 |
10 |
24/11/2020 |
26/11/2020 |
11 |
21/12/2020 |
23/12/2020 |
12 |
10/01/2021 |
12/01/2021 |
13 |
25/04/2021 |
27/04/2021 |
2. Provision of Article (3-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The following was proven to the Authority through the financial statements of Ekttitab Holding Company for the year that ended on 31/12/2020:
a. The Company accepted debt settlement with a company in the value of 2,249,890 KWD (two million, two hundred and forty-nine thousand, and eight hundred and ninety Kuwaiti Dinars only) against a company’s sale and waive of 225 stakes in Al-Arabiya Public Utilities Management Company to Ekttitab Holding Company, which is a high risk company because of the existence of a legal dispute on the asset that represent 98.1% of the total assets of the company in waiver.
b. Ekttitab Holding Company signed sale transactions to a related party on 1/7/2020 for investments of its own that were listed within the Item of “Investments in the fair value through the other comprehensive income”, and based on those contracts, the total value of the transaction was 1,520,595 KWD (one million, five hundred and twenty thousand, and five hundred and ninety-five Kuwaiti Dinars only). Those investments are represented in the following:
• A stake in a company in the value of 378,491 KWD (three hundred and seventy-eight thousand, and four hundred and ninety-one Kuwaiti Dinars only).
• A stake in a company in the value of 439,306 KWD (four hundred and thirty-nine thousand, and three hundred and six Kuwaiti Dinars only).
• A stake in a company in the value of 333,585 KWD (three hundred and thirty-three thousand, and five hundred and eighty-five Kuwaiti Dinars only).
• A stake in a company in the value of 369,213 KWD (three hundred and sixty-nine thousand, and two hundred and thirteen Kuwaiti Dinars only).
The book value of those investments was 923,008 KWD (nine hundred and twenty-three thousand, and eight Kuwaiti Dinars only) according to the financial statements of Ekttitab Holding Company for the period that ended on 31/12/2020.
c. The Company did not state the type of the project to be participated according to the contract signed on 2/12/2020 with a related party, and the report of the risk committee did not include actual analysis prepared for this investment opportunity or comparing it to returns on investment opportunities that may be available for Ekttitab Holding Company and may result in useful returns for the shareholders.
Moreover, the report included, within the Item of determining and evaluating the risks, the existence of the risk of inability to pay due to a company’s lack of liquidity. In addition, the Company is not licensed by the Capital Markets Authority to practice securities activities, noting that the percentage of the signed contract is around 11% of the total assets of Ekttitab Holding Company as on 31/12/2020.
3. Provision of Article (3-2) Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments which stipulated:
“Board of Directors’ resolutions greatly affect the company’s performance and safety of the financial position thereof. Therefore, the Board of Directors is supposed to have tools and mechanisms that enable it to perform effective monitoring the executive management’s work and pursuing managers’ performance. Besides, the Board must be provided with all necessary information and data to help the Board make resolutions”.
In his capacity as Chairman of the Board of Directors of Ekttitab Holding Company, he did not practice active monitoring of its work for the following reasons:
- Lack of annual performance evaluation for all the Company’s employees for the financial year that ended on 31/12/2020, noting that the mentioned evaluation is one of the important tools and mechanisms that allow the Company to practice active monitoring of its employees’ performance.
- Approving the resignation of the CEO on 30/4/2020 without presenting it to the Board of Directors.
- Lack of any studies approved by the Company’s Board of Directors regarding its participation in the establishment of a company in the amount of 2,000,000 KWD.
- Lack of feasibility study approved by the Company’s Board of Directors for the joint investment contract signed with a general trade and contracting company, noting that the investment value reached 1,200,620 KWD.
- Lack of feasibility study approved by the Company’s Board of Directors for the joint investment contract signed with a company.
- The Company’s signature of an agreement contract with a company on 1/10/2020 in which the Company will execute various financial services and the required procedures (financial transfers - transfers of salaries and receivables to the employees of Ekttitab Holding Company and its subsidiary companies) in accordance with fees (one Kuwaiti Dinar for each transaction) to be paid by Ekttitab Holding Company. This means that the Company and its shareholders were charged additional amounts at the time the Company was charged large accumulated losses, noting that the Chairman of the Board of Directors of Ekttitab Holding Company occupies the tasks of the Company’s Vice Chairman.
4. Provision of Item (15) of Article (3-7) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
Lack of evidence of his approval, as the Chairman of the Board of Directors of Ekttitab Holding Company, of appointing Mrs. Sara Alshemali to hold the tasks of the Company’s CEO, noting that the employment contract between the mentioned lady and the Company was signed on 01/09/2020.
5. Provision of Article (7-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven to the Authority through studying the financial statement of the year that ended on 31/12/2020 that Ekttitab Holding Company has taken an allocation in the amount of 638,650 KWD (six hundred and thirty-eight thousand, and six hundred and fifty Kuwaiti Dinars only) that is equivalent to 42% of the above sale value during the financial year that ended on 31/12/2020. The outstanding balance of Lotus General Trading and Contracting Company was 881,945 KWD as on 31/12/2020 which is considered a suspicion of unloading the Company’s assets in favor of related parties that resulted in harming the Company’s shareholders rights.
Third: Mrs. Sara Ali Darweesh Alshemali – Vice Chairman of the Board of Directors and the CEO of Ekttitab Holding Company – violated the following:
First: In her capacity as the Vice Chairman of the Board of Directors of Ekttitab Holding Company, she violated the following:
1) Provision of Article (3-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The following was proven to the Authority through the financial statements of Ekttitab Holding Company for the year that ended on 31/12/2020:
a. The Company accepted debt settlement with a company in the value of 2,249,890 KWD (two million, two hundred and forty-nine thousand, and eight hundred and ninety Kuwaiti Dinars only) against a company’s sale and waiver of 225 stakes in a company to Ekttitab Holding Company, which is a high risk company because of the existence of a legal dispute on the asset that represent 98.1% of the total assets of the company in waiver.
b. Ekttitab Holding Company signed sale transactions to a related party on 1/7/2020 for investments of its own that were listed within the Item of investments in the fair value through the other comprehensive income, and based on those contracts, the total value of the transaction was 1,520,595 KWD (one million, five hundred and twenty thousands, and five hundred and ninety-five Kuwaiti Dinars only). The book value of those investments was 923,008 KWD (nine hundred and twenty-three thousand, and eight Kuwaiti Dinars only) according to the financial statements of Ekttitab Holding Company for the financial year that ended on 31/12/2020.
c. The Company did not state the type of the project to be participated according to the contract signed on 2/12/2020 with British United General Trading and Contracting Company (related party), and the report of the risk committee did not include actual analysis prepared for this investment opportunity or comparing it to returns on investment opportunities that may be available for Ekttitab Holding Company and may result in useful returns for the shareholders.
Moreover, the report included, within the Item of determining and evaluating the risks, the existence of the risk of inability to pay due to a company’s lack of liquidity. In addition, the company --- for general trading and contracting is not licensed by the Capital Markets Authority to practice securities activities, noting that the percentage of the signed contract is around 11% of the total assets of Ekttitab Holding Company as on 31/12/2020.
2) Provision of Article (7-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven to the Authority through studying the financial statement of the year that ended on 31/12/2020 that Ekttitab Holding Company has taken an allocation in the amount of 638,650 KWD (six hundred and thirty-eight thousand, and six hundred and fifty Kuwaiti Dinars only) that is equivalent to 42% of the above sale value during the financial year that ended on 31/12/2020. The outstanding balance of --- for general trading and contracting was 881,945 KWD as on 31/12/2020 which is considered a suspicion of unloading the Company’s assets in favor of related parties that resulted in harming the Company’s shareholders rights.
Second: In her capacity as the CEO of Ekttitab Holding Company, she violated the provision of Item (5) of Article (3-10) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
In her capacity as the CEO of Ekttitab Holding Company, she spent the amount of 396,000 KWD during the period between December 2020 and February 2021 in favor of her business with a company before signing the contract of the project with the mentioned company on 01/03/2021 which may result in legal and financial risks on the Company and its shareholders.
Fourth: The following members of the Board of Directors of Ekttitab Holding Company:
1- Mr. Nawaf Faisal Al-Hammadi.
2- Ahmad Dawood Salman Al-Sabah.
3- Nadia Mary Ali Al-Hasan.
Violated the following:
1. Provision of Article (3-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
The following was proven to the Authority through the financial statements of Ekttittab Holding Company for the year that ended on 31/12/2020:
a. The Company accepted debt settlement with a company in the value of 2,249,890 KWD (two million, two hundred and forty-nine thousand, and eight hundred and ninety Kuwaiti Dinars only) against a company’s sale and waiver of 225 stakes in a company to Ekttitab Holding Company, which is a high risk company because of the existence of a legal dispute on the asset that represent 98.1% of the total assets of the company in waiver.
b. Ekttitab Holding Company signed sale transactions to a related party on 1/7/2020 for investments of its own that were listed within the Item of financial investments in the fair value through the other comprehensive income, and based on those contracts, the total value of the transaction was 1,520,595 KWD (one million, five hundred and twenty thousands, and five hundred and ninety-five Kuwaiti Dinars only). The book value of those investments was 923,008 KWD (nine hundred and twenty-three thousand, and eight Kuwaiti Dinars only) according to the financial statements of Ekttitab Holding Company for the financial year that ended on 31/12/2020.
c. The Company did not state the type of the project to be participated according to the contract signed on 2/12/2020 with the company --- for general trading and contracting (related party), and the report of the risk committee did not include actual analysis prepared for this investment opportunity or comparing it to returns on investment opportunities that may be available for Ekttitab Holding Company and may result in useful returns for the shareholders.
Moreover, the report included, within the Item of determining and evaluating the risks, the existence of the risk of inability to pay due to a British company’s lack of liquidity. In addition, the company --- for general trading and contracting is not licensed by the Capital Markets Authority to practice securities activities, noting that the percentage of the signed contract is around 11% of the total assets of Ekttitab Holding Company as on 31/12/2020.
2. Provision of Article (7-1) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven to the Authority through studying the financial statement of the year that ended on 31/12/2020 that Ekttitab Holding Company has taken an allocation in the amount of 638,650 KWD (six hundred and thirty-eight thousand, and six hundred and fifty Kuwaiti Dinars only) that is equivalent to 42% of the above sale value during the financial year that ended on 31/12/2020. The outstanding balance of --- for general trading and contracting was 881,945 KWD as on 31/12/2020 which is considered a suspicion of unloading the Company’s assets in favor of related parties that resulted in harming the Company’s shareholders rights.
The Resolution included the infliction of the following penalty: -
“First: Ekttitab Holding Company is fined an amount of five thousand Dinars for the first and second violations, five thousand Dinars for the sixth and seventh violations, and five thousand Dinars for each of the other violations.
Second: Mr. Aref Abdullah Al-Ajmi – Chairman of the Board of Directors of Ekttitab Holding Company – is fined an amount of two thousand Dinars for the first violation, thirty thousand Dinars for the second violation, ten thousand Dinars for the third violation, ten thousand Dinars for the fourth violation, ten thousand Dinars as well for the fifth violation, and he shall be dismissed from the Company.
Third: Mrs. Sara Ali Darweesh Alshemali is fined an amount of thirty thousand Dinars for the first violation, twenty thousand Dinars for each of the second and third violations, and she shall be dismissed from the Company.
Fourth: Each of Mr. Nawaf Faisal Al-Hammadi, Mr. Ahmad Dawood Salman Al-Sabah, and Mrs. Nadia Mary Ali Al-Hasan is fined an amount of thirty thousand Dinars for the first violation, twenty thousand Dinars for the second violation, and they shall be dismissed from the Company’s membership.
Fifth: Mr. Aref Abdullah Al-Ajmi, Mrs. Sara Ali Darweesh Alshemali, Mr. Nawaf Faisal Al-Hammadi, Mr. Ahmad Dawood Salman Al-Sabah, and Mrs. Nadia Mary Ali Al-Hasan are prohibited from practicing any of the registered activities at the Authority for three years as of the issuance date of this Resolution.”
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.