The investigation found that the amount owing by Tawhid, Tawfiq and Tamjid Abdullah ("Abdullah Brothers") to Damas International Limited ("Damas") comprised of approximately AED 365, 000,000 (USD 99,400,000) plus the value of approximately 1,940,250 grams of gold, the price of which is to be fixed on a date agreed by Damas and the Abdullah Brothers.
These drawings required the prior approval of the Damas International Limited ("Damas") Board of Directors ("Board") and/or shareholders of Damas, which was not obtained.
The DFSA found that:
· The Abdullah Brothers contravened DFSA Laws and Rules in that they:
- Engaged in the practice of withdrawing Damas funds for their own personal use and did not disclose the drawings or other transactions to, or seek the approval of, the Board; and
- Obtained the drawings as loans from Damas on non-commercial terms.
· Tawhid Abdullah contravened DFSA Laws and Rules in that he failed to disclose, immediately, to the Board:
- The drawings;
- The use to which the drawings would be put; and
- His interest in properties sold to Damas.
· Tawfique and Tamjid Abdullah contravened DFSA administered Laws and Rules in that they failed to make adequate and reasonable enquiries into the transfer, purpose and use of the drawings of Damas funds.
· Tawfique Adbullah, as Chairman, failed to provide to the Board information about the directors drawings, in a timely manner, and in a form and of a quality appropriate to enable the directors to discharge their duties.
· Damas and its Board contravened DFSA Laws and Rules in that they failed to establish and maintain appropriate systems and controls to:
- Safeguard shareholders' investments and the assets of Damas;
- Ensure the Damas Chairman supplied the Board with sufficient information to carry out its functions; and
- Ensure the Audit Committee carried out its functions.
· Damas also failed to:
- Disclose, without delay, the nature, content and details of the drawings; and
- Obtain the consent of shareholders to provide financial assistance to the Abdullah Brothers.
Damas, each of the non-Executive Damas Directors and the Abdullah Brothers have entered into Enforceable Undertakings (EUs) with the DFSA.
In particular Damas and the Board have accepted the DFSA's position regarding their corporate governance failures and agreed to implement a range of corporate governance measures and controls. These include that Damas:
· Obtains the resignation of each non-Executive Board Member of his and her directorship within 30 days of the EU, and that each not seek reappointment to the Board for a period of 2 years;
· Calls an extraordinary general meeting of shareholders to appoint a new Board within 30 days of the EU;
· Appoints, and appropriately allocates and apportions, Board and senior management responsibilities;
· Establishes appropriate measures to ensure the Board receives the information it requires to act on an informed basis;
· Establishes appropriate and proper systems and controls;
· Appoints a full-time Compliance Officer and Company Secretary;
· Establishes appropriate measures to manage and mitigate risk;
· Agrees to appoint a new auditor;
· Pays a financial penalty in the amount of AED 2,569,000 (USD 700,000), of which AED 367,000 (USD 100,000) is to be paid within 30 days of the EU with the balance suspended but payable upon a failure by Damas to comply with a term or condition of the EU; and
· Pays the cost of the DFSA's supervision of compliance with the EU in the amount of AED 92,000 (USD 25,000).
The Abdullah Brothers have undertaken to:
· Repay the amount owing to Damas;
· Disclose and particularise to Damas each of their assets over a value of AED 300,000 (USD 82,000);
· Grant to Damas a legal mortgage or other enforceable security over their assets;
· Resign as Directors of Damas, within 30 days of the EU and its subsidiaries within a timeframe suitable to the DFSA;
· Not act as a Director or Officer of Damas and any DIFC company for periods of 5 and 10 years;
· Pay the costs of the DFSA investigation; and
· Pay a financial penalty in the amount of AED 11,010,000 (USD 3,000,000), of which AED1,101,000 (USD 300,000) is to be paid within 180 days of the EU with the balance suspended but payable upon a failure, by any of the Abdullah Brothers, to comply with a term or condition of the EU.
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