ARTICLE
27 April 2016

The UAE Commercial Companies Law In Focus: Capital Markets

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Clyde & Co

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Clyde & Co is a leading, sector-focused global law firm with 415 partners, 2200 legal professionals and 3800 staff in over 50 offices and associated offices on six continents. The firm specialises in the sectors that move, build and power our connected world and the insurance that underpins it, namely: transport, infrastructure, energy, trade & commodities and insurance. With a strong focus on developed and emerging markets, the firm is one of the fastest growing law firms in the world with ambitious plans for further growth.
The CCL has introduced a raft of changes to facilitate capital markets transactions. Further SCA regulation will flesh out the detail of the CCL provisions.
United Arab Emirates Corporate/Commercial Law

The CCL has introduced a raft of changes to facilitate capital markets transactions. Further SCA regulation will flesh out the detail of the CCL provisions. Some of the key changes in this area include:

  • Reduction in the mandatory minimum free float for listed PJSCs: the CCL requires between 30% and 70% of the shares to be publicly offered, compared with 55% to 80% under the Old CCL.
  • Secondary offers (offers for sale) now permitted: Article 279 of the CCL now permits shareholders of a company converting into a PJSC to sell a maximum of 30% of the company's capital in the IPO.
  • Provisions permitting and facilitating book-building, underwriting and trading in nil-paid rights on a rights issue (the SCA has recently published draft regulations in relation to IPOs for public consultation).
  • Issuances to strategic investors: shares may be issued to "strategic investors" outside of the pre-emption regime.

Provisions encouraging IPOs

The fact that the founders can now retain up to 70% – and therefore control – of their companies may encourage more local businesses to consider an IPO. The sell-down provision is also helpful, in that it provides a partial exit route for the founders at the time of listing. The 30% cap, together with the retention of the 2-year lock-up period, are understandable protections in a UAE context: in a market with a large, less sophisticated retail investor base, it is not unreasonable to require the founders to stand behind their company for a period of time post-listing.

Prarthna Chaddha, Partner

The UAE Commercial Companies Law In Focus: Capital Markets

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