UAE: Transformation of Investment Market through Ease of IPO Regulations

The Securities and Commodities Authority (SCA) has announced, on 2nd November 2020, about the amended Offering Rules, enabling UAE free zone companies to list and offer their shares to the public through IPO (Initial Public Offering) in the UAE, to raise equity finance.

Formerly, only Public Joint Stock Companies (PJSC) established in the UAE had the privilege to offer their shares in the UAE . However, due to the recent amendment to the Offering Rules, free zone companies are now eligible to offer their shares to the public provided that the corporate regulations of the governing free zone specifically allows the incorporation of the right corporate vehicle (a Public Limited Company or PLC), which qualifies for a public offering. 

The free zone company that wishes to offer shares to the public under the New Regulation must take the legal form of a joint stock company or a legal form that has characteristics similar to that of the joint stock company under the UAE Commercial Companies Law. This entity has no limit on the number of shareholders it may have, and it may list its shares on any of the following exchanges, provided that the PLC has a share capital of AED 20 Million:- 

1. Dubai Financial Market (DFM) 

2. Abu Dhabi Securities Exchange (ADX) 

3. Nasdaq Dubai 

On 14 March 2021, Dubai Airport Free Zone Authority (DAFZA), in response to the amendment to the Offering Rules, has issued new Implementing Regulations for the free zone companies aspiring for IPO in the UAE. 

To become a DAFZA PLC, the below cases may be considered:

1. An existing free zone with limited liability may be converted to a PLC 
2. Incorporate a new PLC, or; 
3. An existing free zone branch may be converted to a PLC 

Ms. Amna Lootah, Assistant Director General, DAFZA, said: “The inclusion of free zone companies as well as SMEs in the Dubai Financial Market and Nasdaq Dubai Growth Market is a qualitative addition to the financial, regulatory and legislative system that the emirate of Dubai provides to investors in general. It was also designed to attract international companies within the free zones in Dubai and facilitate their growth and expansion, as they are an important element that drive exceptional growth and rapid transformation across various sectors.” 

“Through various initiatives,DFM and Nasdaq Dubaiwill contribute to support SME’s as well as large companies by allowing them access to emerging investors and many other investments opportunities. The partnership will also reinforce Dubai as an attractive infrastructure for the local, regional and international markets and will provide efficiency, effectiveness and flexibility to support and protect the investment environment and the business community within the free zones in the coming years,”Ms. Lootah added. 

Hassan Al Serkal, CEO of DFM said:“The capital markets in Dubai have successfully created a world-class infrastructure and regulations that offer flexible IPO and listing options, as part of the relentless efforts to fortify Dubai’s leading and efficient role in empowering businesses in various economic sectors and support their sustainable growth. We are pleased to collaborate with DAFZA, the key strategic partner in implementing this initiative, to keep free zone-based companies posted on IPO and listing opportunities on DFM’s Main Market, enabling them to raise the necessary funds for implementing strategic expansion plans. The DFM-listed companies have raised AED 77 billion by implementing IPOs and Rights Issues on the market. Additionally, the listing also strengthens issuers presence and links with various types of investors.” 

Hamed Ali, CEO of Nasdaq Dubai and Deputy CEO of DFM said: “The Nasdaq Dubai Growth Market, scheduled for launch early next year as one of the Dubai Future District initiatives, the largest future economy specialized area in the region, provides emerging companies and SMEs in the UAE and beyond with unique IPO and listing opportunities. The imminent market is supported by a comprehensive regulatory framework for seamless and flexible listing that enables companies to reinforce growth through the IPO route. The Nasdaq Dubai Growth Market also provides investors with lucrative and diversified investment opportunities in a wide range of high growth emerging and new economy companies.” 

This new initiative of the UAE Government and DAFZA, is certainly another providential and excellent opportunity for investors around the world, to setup a (100% foreign ownership) free zone company and offer their shares to the public by registering with the any of the three Stock Exchanges.

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