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RAR 3.2.5

(1) The DFSA may in writing down or converting any instrument or liability relating to an Authorised Firm:
(a) reduce, including reducing to zero, the principal amount of, or outstanding amount due, in respect of Eligible Liabilities of the Authorised Firm;
(b) cancel Debt Instruments issued by the Authorised Firm, except secured liabilities;
(c) reduce, including reducing to zero, the nominal amount of Shares of the Authorised Firm and cancel the Shares;
(d) require the Authorised Firm to issue new Shares or other capital instruments, including preference Shares and contingent convertible instruments.
(2) A Pre-Resolution Valuation or a Provisional Valuation (as the case may be) shall form the basis of the calculation of the write down to be applied to the relevant capital instruments in order to absorb losses and the level of conversion to be applied to the relevant capital instruments in order to recapitalize the Authorised Firm.
(3) The DFSA may exercise the Write Down or Conversion Power:
(a) independently of any other Resolution Action; or
(b) in combination with a Resolution Action.
(4) The DFSA may exercise the Write Down or Conversion Power in relation to relevant capital instruments issued by an Authorised Firm in Resolution, when one or more of the following circumstances apply:
(a) the DFSA determines that unless the Write Down or Conversion Power is exercised in relation to relevant capital instruments, the Authorised Firm will no longer be viable;
(b) in the case of relevant capital instruments issued by an Authorised Firm that is a subsidiary or another entity in its Group, the DFSA determines that unless the Write Down or Conversion Power is exercised the Authorised Firm will no longer be viable; or
(c) in the case of relevant capital instruments issued by an Authorised Firm that is a parent, the DFSA determines that unless the Write Down or Conversion Power is exercised the Authorised Firm’s Group will no longer be viable.
(5) In complying with (4), the DFSA shall exercise the Write Down or Conversion Power in accordance with the priority of claims that would apply if the Authorised Firm in Resolution were to be wound up under the DIFC Insolvency Law.
(6) Where the principal amount of a relevant capital instrument is written down:
(a) the reduction of that principal amount will be permanent;
(b) no liability to the holder of the relevant capital instrument will remain under or in connection with that amount of the instrument which has been written down, except for any liability already accrued; and
(c) no compensation is paid to any holder of the relevant capital instruments other than in accordance with (7).
(7) In order to effect a conversion of relevant capital instruments, the DFSA may require an Authorised Firm to issue instruments to the holders of the relevant capital instruments and the relevant capital instruments may only be converted where the following conditions are met:
(a) the instruments are issued by the Authorised Firm with the agreement of the DFSA;
(b) the instruments are awarded and transferred without delay following the exercise of the Write Down or Conversion Power; and
(c) the Conversion Rate that determines the number of instruments that are provided in respect of each relevant capital instrument complies with these Rules.

 

Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]