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Target cos to appoint external auditor
KUWAIT CITY, Dec 8: The Capital Markets Authority (KMA) and the Central Bank of Kuwait (CBK) alone are not the sole authorities responsible for ensuring the ‘governance system’ on companies listed on the Kuwait Stock Exchange, reports Al-Rai daily. These two authorities will be joined by Ministry of Commerce and Industry (MoCI) and will be one of the regulatory authorities to set up rules and ensure their implementation. In this regard sources told the daily, the ministry officials are preparing to implement the governance system also on unlisted companies, specifically those whose annual revenues reach 100 million dinars and above, in an effort to ensure proper functioning of their work, and to confirm the integrity of the administration to fulfill the obligations and commitments and to ensure that these establishments achieve their objectives in a sound legal and economic manner.
The sources added, the ‘governance system’ which the Commerce Ministry officials aim to apply to unlisted companies includes almost all the standards that the KMA applies to companies listed on the Kuwait Stock Exchange, including allowing the employee to report and protect any suspicion of corruption that he monitors in the company, which reflects the openness of officials of these companies intellectually, and their commitment to take responsibility. The sources pointed out that the implementation of governance will include unlisted companies, foremost of which are closed and limited liability companies and holding companies, which represent umbrellas for investment, industrial and service companies and other activities, which will lead family companies to obligatory implementation of governance procedures. Moreover, the target companies will be required to appoint an external auditor and to ensure its independence and integrity, with the appointment of an independent board member within the composition of its boards of directors.
The sources stated that governance is one of the most important and necessary processes to ensure the achievement of justice and equality between shareholders, whether they are inside or outside the company, because of the means of control it provides that work to increase quality and develop performance, which leads to preserving the interests of all parties, noting that the facilities that have a governance system increases investor confidence, because the rules of governance guarantee the protection of their rights.
The sources indicated that the ministry officials’ move in this direction comes as part of broader efforts they are undertaking to increase the rate of transparency in the corporate sector, within the limits that help improve the local business environment, explaining that providing a system for the governance of this large sector of companies has become a necessity to manage, direct, regulate and monitor these institutions. It ensures that its mission and objectives are achieved, and that governance ensures the achievement of efficiency, transparency and a balance of interests. The sources explained the Commerce Ministry officials are currently forming a technical and legal opinion regarding the application of the governance procedure to unlisted companies whose annual revenues amount to 100 million dinars and above, explaining that the system relies a lot on the role of this methodology in increasing the transparency rate in the corporate sector from outside the trading system especially since governance has become a necessity and is no longer an option, and that influential international economic institutions have come to view the governance system in any country as a basic measure of the righteousness, transparency and justice of its economic and investment environment.
Governance in general, whether for listed or unlisted companies, is of great importance for both companies, and for shareholders alike, because for companies it was able to raise the economic efficiency of the facility by laying the foundations for the relationship between the managers of the facility, the board of directors and the shareholders; because it works on setting the organizational framework through which the objectives of the facility can be determined, and ways to achieve them by providing appropriate incentives for members of the Board of Directors and the Executive Management, in order to work towards achieving the objectives of the facility that take into account the interests of shareholders and it leads to openness to the global financial markets, and attracts a broad base of investors to finance expansion projects. If the establishments do not depend on foreign investments, they can increase the confidence of the local investor and thus increase capital at a lower cost. Speaking of the shareholders, it helps to guarantee the rights of all shareholders, such as the right to vote, and the right to participate in decisions regarding any material changes that may affect the performance of the facility in the future and allows for full disclosure of the facility’s performance, financial position and decisions taken by senior management, helps shareholders identify the risks involved in investing in these facilities.
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