The UAE draft regulations for issuance of preference shares by UAE Listed Companies.

On 01 October 2018, the UAE Securities and Commodities Authority (SCA), published draft regulations for consultation which would allow for the issuance of preference shares by Public Joint Stock Companies.

While Article 206(1) of Federal Law No. (2) of 2015 concerning Commercial Companies (the Commercial Companies Law) provides that a public joint stock company may not issue different classes of shares, Article 206(2) specifically provides that the UAE Federal Cabinet may, on a proposal by the Chairman of SCA, issue a resolution determining other classes of shares and the conditions of issuing the shares, the rights and obligations arising from such shares and the rules and procedures regulating them. These regulations, once finalised, would therefore be published pursuant to Article 206(2) of the Commercial Companies Law.

The draft regulations anticipate allowing a Public Joint Stock Company to issue preference shares with a value not exceeding 20% of the company’s issued share capital, subject to certain conditions set out in the draft regulations (which also provides for different types of preference shares, such as redeemable, convertible, participating, or cumulative preference shares). The draft regulations also provide details on documents and procedures required to request SCA’s approval for the issuance of such preference shares (including but not limited to various prospectus requirements), the timeline for such approval and the ongoing obligations in respect of such preference shares (including requirements in respect of redeeming, converting or changing the preference shares), and the potential penalties and liabilities for non-compliance with such regulations (which ranges from AED 100,000 to AED 1 million).

The consultation period on the draft regulations is open until 25 October 2018. For any queries relating to the draft regulations, please contact Lee Irvine and Samir Safar-Aly.