CmaBoardReleases
Title: Announcement regarding issuance of Disciplinary Board Resolution No. (88/2021 Disciplinary Board) (89/2021 Authority) and imposition of a fine of 15 thousand f Dinars against 1- Al Arabiya Real Estate Company. 2- Emad Jawad Bukhamseen - in his capacity as Chairman of the Board of Directors of Al Arabiya Real Estate Company for violating the rules of Corporate Governance.
Announcement regarding issuance of Disciplinary Board Resolution No. (88/2021 Disciplinary Board) (89/2021 Authority) and imposition of a fine of 15 thousand f Dinars against 1- Al Arabiya Real Estate Company. 2- Emad Jawad Bukhamseen - in his capacity as Chairman of the Board of Directors of Al Arabiya Real Estate Company for violating the rules of Corporate Governance.
For the following reasons:
First: The violation by Al Arabiya Real Estate Company of the 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, after studying the evaluation of one of the Company’s real estate (Burj Al Arabiya), that there is a conflict of interest between the bank evaluating the real estate and the Company. The Company’s CEO is at the same time a member of the Board of Directors of a bank, which represents a conflict of interest, which constitutes the Company’s violation of the provision of Article (7-1) above.
Second: Violation of Dr. Emad Jawad Bukhamseen in his capacity as Chairman of the Board of Directors of Al Arabia Real Estate Company for 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:
He failed, in his capacity as Chairman of the Board of Directors of Al Arabiya Real Estate Company, to take any serious measures to preserve the shareholders’ money and assets in relation to the Company’s land located in the Emirate of Ajman (United Arab Emirates), for the following reasons:
The Emirate of Ajman has expropriated the right of ownership of the aforementioned land for the public benefit, with compensation to the Company with an alternative land or material compensation (cash).
Initially, compensation for alternative land was chosen.
The alternative land compensation was withdrawn and the material compensation (cash) was chosen, due to its non-strategic location from the Company's point of view.
On 02/02/2011, a letter was received from the Emirate of Ajman to the Company regarding its entitlement to a financial compensation in the amount of 220,000,000 UAE Dirhams (it has not been received to date).
Accordingly, the Company recorded the amount of compensation in its financial statements for the period ending on 31/12/2011 at an amount of KWD 10,057,080, which is equivalent to an amount of 132,000,000 UAE Dirhams (not received to date).
The Company has allocated an amount of 88,000,000 UAE Dirhams (the remaining amount of the original compensation amount of 220,000,000 UAE Dirhams) to meet the costs and expenses necessary to complete the claim and collection procedures.
Although the Company allocated a large amount of approximately (40%) of the total compensation amount to meet the costs and expenses necessary to complete the claim and collection procedures, the said compensation amount has not been collected from 2011 to date.
As a result, the Company created a provision in the amount of KWD 3,017,125 over the original compensation amount, as it decreased from an amount of KWD 10,057,000 to an amount of KWD 7,039,955 according to the financial statements for the period ending on 31/12/2019.
2- The provision of Item (18/a) of Article (3-7) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
He failed, in his capacity as Chairman of the Board of Directors of Al Arabiya Real Estate Company, to ensure the integrity of the Company’s financial and accounting systems, as follows:
On 12/12/2019, the Company signed a preliminary sale contract with a company to sell three properties for an amount of KWD 4,170,000.
The signing of the preliminary sale contract resulted in a loss of KWD 480,000
The expected amount to be collected from the said contract amounting to KWD 4,170,000 was recorded under (trade receivables) in the financial statements for the period ending on 31/12/2019.
The loss arising from the said contract amounting to KWD 480,000 was recorded in the consolidated income statement under the heading of loss on sale of real estate investments.
The recording of the loss amount in the consolidated income statement resulted in a decrease in the shareholders’ ownership rights in the Company by an amount of KWD 480,000.
What was stated in the preliminary sale contract was not implemented, meaning that the deal with the Company was not completed.
In spite of that, the Company decided to bear the loss resulting from the preliminary sale contract, knowing that the deal was not executed.
The Resolution included the infliction of the following penalty: -
“First: - Al Arabiya Real Estate Company is fined an amount of five thousand Dinars for the violation attributed to it
Second: Dr. Emad Jawad Bukhamseen, in his capacity as Chairman of the Board of Directors of Al Arabiya Real Estate Company, is fined an amount of five thousand Dinars for each of the two 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.