Article 302 invoked: Accumulated losses cross 97% of share capital
DUBAI/September 30: Shareholders of Arabtec Holding, whose total equity or networth has already turned negative with a deficit of AED350.78 million as on June 30, 2020, have voted on Wednesday to discontinue the company’s operations by invoking the Article 302 of the Federal Law No (2) of 2015.
According to experts, this was a foregone conclusion for a company like Arabtec that has piled up huge accumulated losses that far exceeded its share capital as of June 30, 2020.
The board will now file for the liquidation of the company that reported a loss of AED793.61 million for the six-month-period ending June 30, 2020. According to media reports the shareholders have also voted to authorise the company board to appoint AlixPartners and Matthew Wilde, or any other person or persons the board considers fit, as liquidators.
Invoking Article 302
The Article 302 of the Federal Law No (2) of 2015 requires a company, whose accumulated losses exceed its issued share capital, to call a General Meeting of the Shareholders to vote on either dissolving the company or to continue its activity with an appropriate restructuring plan within 30 days of the issue of the condensed consolidated interim financial information.
In the case of Arabtec Holding, the accumulated losses at AED1.460 billion as of June 30, 2020, have far exceeded the 50 per cent threshold of the share capital at AED1.5 billion.
Seriously enough, the company’s finances are in bad shape with the company having broken certain covenants with the financiers requiring the Group to maintain specified financial ratios at specified reporting dates.
More importantly, businessbenchmark.news had last week reported that the auditors of the company, Deloitte & Touche, one of the Big Four firms, had expressed an Adverse Conclusion on the company’s first half financials (FY20) for various reasons explained under Basis for Adverse Conclusion.