UAE Free Zone Companies Now Permitted to Carry Out Public Offerings and List Their Shares Onshore in the UAE
December 8, 2020
The UAE Securities and Commodities Authority (SCA) has issued regulations (SCA resolution No. 25/R.M., issued on November 2, 2020) permitting companies established in the UAE’s free zones to carry out public offerings and list their shares “onshore,” including on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM).
Such “onshore” offerings and listings were previously only available to public joint stock companies organized under the UAE Commercial Companies Law and foreign joint stock companies listed in their home jurisdiction.
These regulations come only a few weeks after the removal of long-standing limitations on foreign and free zone ownership of UAE “onshore” companies (click to see our alert memo).
Together, these developments allow UAE public companies to be structured with a listed holding company organized in a free zone such as the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC) and operating subsidiaries “onshore.” Issuers may opt for this structure given the features of the ADGM and DIFC, including legal regimes and court systems heavily influenced by English law.
The conditions and features applicable to such offerings by a free zone company include:
- the company must be in the form of a public joint stock company (or equivalent) and have a minimum capital of AED 20 million (fully subscribed and paid-up).
- offering of at least 25%, but no more than 75%, of the company’s share capital in the UAE “onshore” public offer (with the upper limit at 100% in offerings directed only to qualified investors).
- offering can be conducted via public subscription or a book building process.
- listing of the shares on ADX or DFM.
- a Memorandum of Understanding dealing with supervision and control over the company between the regulator of the relevant free zone and the SCA is required, and the company must obtain a non-objection certificate from its free zone regulator.
- two years of activity (either directly or through one or more of its subsidiaries).
- two years of audited financial statements and two years of net profits.
- use of a prospectus in the form approved by the SCA.
The regulations also include enhanced obligations applicable to the listing advisor(s) that are applicable to all offerings (whether or not of free zone companies). Previously, such advisor(s) were required to consult with the company to put in place all necessary systems for disclosures to be made promptly under applicable laws and regulations and for the board of directors to be aware of the current and future financial position of the company to enable proper decision-making. Under the new regulations, the listing advisor(s) now have a duty to ensure that such systems are in place and must issue a formal notice to the SCA confirming that the company satisfies all listing requirements.
If you have any questions concerning these latest developments, please feel free to reach out to your regular contacts at the firm.