Title: Announcement regarding issuance of Disciplinary Board Resolution No. (89/2023 Disciplinary Board) - (133, 134, 136, and 143/2023 Authority) and imposition of a fine against: Arabi Holding Group Company, Chairman of the Board of Directors, Vice Chairman of the Board of Directors, (4) Board Members, the Financial Manager, and the Company’s External Auditor for violating the rules of Disclosure and Transparency, Listing, Corporate Governance, and Securities Activities and Registered Persons

Announcement regarding issuance of Disciplinary Board Resolution No. (89/2023 Disciplinary Board) - (133, 134, 136, and 143/2023 Authority) and imposition of a fine against: Arabi Holding Group Company, Chairman of the Board of Directors, Vice Chairman of the Board of Directors, (4) Board Members, the Financial Manager, and the Company’s External Auditor for violating the rules of Disclosure and Transparency, Listing, Corporate Governance, and Securities Activities and Registered Persons.

For the following reasons:
First: Arabi Holding Group Company violation of the following provisions:
1) The provision of Item (22) 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 CMA that Arabi Holding Group Company failed to disclose in Boursa Kuwait Securities Exchange the signing of a contract by its Associate Company for the design, construction, equipping, and maintenance of hospitals in the value of KWD 153 million (one hundred and fifty-three million Kuwaiti Dinars only) on 13/12/2016, in addition to not disclosing the contraction works that took place from 17/7/2017 to 6/9/2021.

2) The 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 CMA that Arabi Holding Group Company delayed disclosing the material information of the issuance of a Disciplinary Board Resolution for the Company regarding the imposition of a fine against each of:

1.    Arabi Holding Group Company.
2.    Chairman of the Board of Directors of Arabi Holding Group Company.
3.    Vice Chairman of the Board of Directors of Arabi Holding Group Company.
4.    Member of the Board of Directors of Arabi Holding Group Company.
5.    Member of the Board of Directors of Arabi Holding Group Company.
6.    Member of the Board of Directors of Arabi Holding Group Company.
7.    Member of the Board of Directors of Arabi Holding Group Company.

For violating the rules of Disclosure and Transparency and the rules of Corporate Governance. The aforementioned Disciplinary Board Resolution was issued on 7/9/2023, and the Company disclosed it on 11/9/2023.

3) The provision of Article (1-14) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven to the CMA through reviewing the annual financial statements for the financial year that ended on 31/12/2022 of Arabi Holding Group Company that the Company did not comply with the International Financial Reporting Standards and the International Accounting Standards as follows:

• The Company failed to comply with Paragraph (29) of the International Financial Reporting Standard 16 (IAS 16 - Property, Plant and Equipment). The Company measured real estates included in the same Class, which were buildings constructed on freehold property and leased lands in the value of KWD 17,727,382 (seventeen million, seven hundred and twenty-seven thousand, three hundred and eighty-two Kuwaiti Dinars) (Clarification 5 of the financial statements), represented by local and foreign real estates, through using the revaluation model for land and the cost model for buildings, which conflicts with the requirements of the aforementioned paragraph that requires using one model for the same Class under the item of (Property, plant and equipment).

• The Company failed to comply with Paragraph (28) of the International Accounting Standard 2 (IAS 2 - Inventories) and failed to fulfill Paragraph (5/4) of the financial reporting framework due to the Company’s continuation of listing the inventory which amounts to KWD 23,210,401 (twenty-three million, two hundred and ten thousand, four hundred and one Kuwaiti Dinars) and proving it in its financial statements without invoking the net realizable value, and without having control thereover or benefits thereof.

• The Company did not comply with the International Financial Reporting Standard 9 (IFRS 9 – Financial Instruments) due to its failure to build up provisions for liabilities included within the Item of (Contract Receivables) and the Item of (Retention letter within trade receivables and other debit balances) that exceeded 365 days according to requirement of the standard.

Second: Members of the Board of Directors of Arabi Holding Group Company:
1. Chairman of the Board of Directors of Arabi Holding Group Company.
2. Vice Chairman of the Board of Directors of Arabi Holding Group Company.
3. Member of the Board of Directors of Arabi Holding Group Company.
4. Member of the Board of Directors of Arabi Holding Group Company.
5. Member of the Board of Directors of Arabi Holding Group Company.
6. Member of the Board of Directors of Arabi Holding Group Company.

This is due to their violation of the provision of Item (5) 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 CMA through reviewing the annual financial statements for the financial year that ended on 31/12/2022 of Arabi Holding Group Company that the Company did not comply with the International Financial Reporting Standards and the International Accounting Standards as follows:

• The Company failed to comply with Paragraph (29) of the International Financial Reporting Standard 16 (IAS 16 - Property, Plant and Equipment). The Company measured real estates included in the same Class, which were buildings constructed on freehold property and leased lands in the value of KWD 17,727,382 (seventeen million, seven hundred and twenty-seven thousand, three hundred and eighty-two Kuwaiti Dinars) (Clarification 5 of the financial statements), represented by local and foreign real estates, through using the revaluation model for land and the cost model for buildings, which conflicts with the requirements of the aforementioned paragraph that requires using one model for the same Class under the item of (Property, plant and equipment).

• The Company failed to comply with Paragraph (28) of the International Accounting Standard 2 (IAS 2 - Inventories) and failed to fulfill Paragraph (5/4) of the financial reporting framework due to the Company’s continuation of listing the inventory which amounts to KWD 23,210,401 (twenty-three million, two hundred and ten thousand, four hundred and one Kuwaiti Dinars) and proving it in its financial statements without invoking the net realizable value, and without having control thereover or benefits thereof.

• The Company did not comply with the International Financial Reporting Standard 9 (IFRS 9 – Financial Instruments) due to its failure to build up provisions for liabilities included within the Item of (Contract Receivables) and the Item of (Retention letter within trade receivables and other debit balances) that exceeded 365 days according to requirement of the standard.

Third: The Executive Management at Arabi Holding Group Company:
1. Executive Director.
2. Financial Manager.

They violated the provision of Item (4) of Article (3-10) of Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments and the provision of Article (5-2) Module Fifteen (Corporate Governance) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:
It was proven to the CMA through reviewing the annual financial statements for the financial year that ended on 31/12/2022 of Arabi Holding Group Company that the Company did not comply with the International Financial Reporting Standards and the International Accounting Standards as follows:

• The Company failed to comply with Paragraph (29) of the International Financial Reporting Standard 16 (IAS 16 - Property, Plant and Equipment). The Company measured real estates included in the same Class, which were buildings constructed on freehold property and leased lands in the value of KWD 17,727,382 (seventeen million, seven hundred and twenty-seven thousand, three hundred and eighty-two Kuwaiti Dinars) (Clarification 5 of the financial statements), represented by local and foreign real estates, through using the revaluation model for land and the cost model for buildings, which conflicts with the requirements of the aforementioned paragraph that requires using one model for the same Class under the item of (Property, plant and equipment).

• The Company failed to comply with Paragraph (28) of the International Accounting Standard 2 (IAS 2 - Inventories) and failed to fulfill Paragraph (5/4) of the financial reporting framework due to the Company’s continuation of listing the inventory which amounts to KWD 23,210,401 (twenty-three million, two hundred and ten thousand, four hundred and one Kuwaiti Dinars) and proving it in its financial statements without invoking the net realizable value, and without having control thereover or benefits thereof.

• The Company did not comply with the International Financial Reporting Standard 9 (IFRS 9 – Financial Instruments) due to its failure to build up provisions for liabilities included within the Item of (Contract Receivables) and the Item of (Retention letter within trade receivables and other debit balances) that exceeded 365 days according to requirement of the standard.

Fourth: The External Auditor of Arabi Holding Group Company violated the following:
1) The provision of Article (3-4-5) of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the CMA that, in his capacity as the external auditor of Arabi Holding Group Company, he did not provide any notice on the Company’s non-compliance with Paragraph (29) of the International Financial Reporting Standard 16 (IAS 16 - Property, Plant and Equipment) within his report prepared on the financial statements of Arabi Holding Group Company for the financial year that ended on 31/12/2022. ). The Company measured real estates included in the same Class, which were buildings constructed on freehold property and leased lands in the value of KWD 17,727,382 (seventeen million, seven hundred and twenty-seven thousand, three hundred and eighty-two Kuwaiti Dinars) (local and foreign real estates) through using the revaluation model (fair value) for land and the cost model for buildings, which conflicts with the requirements of the aforementioned paragraph that requires using one model for the same Class.

2) The provision of Item (7) of Article (3-4-4) of Module Five (Securities Activities and Registered Persons) of the Executive Bylaws of Law No. 7 of 2010 and their amendments:

It was proven to the CMA that, in his capacity as the external auditor of Arabi Holding Group Company, he did not notify the CMA of the Company’s violation to Paragraph (29) of the International Financial Reporting Standard 16 (IAS 16 - Property, Plant and Equipment) mentioned above.

The Resolution included the infliction of the following penalty: -

“First: Levying a fine against Arabi Holding Group Company in the amount of KWD 20,000 (twenty thousand Dinars) for the first violation, and the amount of KWD 1000 (one thousand Dinars) for the second violation, and the amount of KWD 3000 (three thousand Dinars) for the third attributed violation in all its items.

Second: Levying a fine against each of:
1. Chairman of the Board of Directors of Arabi Holding Group Company.
2. Vice Chairman of the Board of Directors of Arabi Holding Group Company.
3. Member of the Board of Directors of Arabi Holding Group Company.
4. Member of the Board of Directors of Arabi Holding Group Company.
5. Member of the Board of Directors of Arabi Holding Group Company.
6. Financial Manager of the Board of Directors of Arabi Holding Group Company.

In the amount of KWD 3000 (three thousand Dinars) on each one of them for the attributed violation in all its items.

Third: Levying a fine against Member of the Board of Directors of Arabi Holding Group Company – the Executive Director in the amount of KWD 5000 (five thousand Dinars) for the attributed violations due to correlation.

Fourth: Levying a fine against the external auditor of Arabi Holding Group Company in the amount of KWD 1000 (one thousand Dinars) for the two attributed violations”. 

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.