Updates on the listing of joint stock companies in Dubai
What you need to know on the Decree No.3 of 2021 making the listing of joint stock companies in securities exchanges in Dubai mandatory.
Earlier this year (26 January 2021), His Highness Sheikh Mohammed bin Rashid Al Maktoum issued Decree No.3 of 2021 ("Decree") making the listing of joint stock companies in securities exchanges in Dubai mandatory.
What does this mean and who is affected?
All licensed public joint stock companies established in Dubai will now need to list their shares in local securities exchanges, which includes Dubai Financial Market (DFM) and Nasdaq Dubai ("Local Markets").
Public joint stock companies which are established and licensed outside Dubai but within the UAE, and have branches, assets or activities in Dubai (excluding the public joint stock companies which are established by virtue of a federal legislation) ("Non-Dubai Companies") will need to list their stocks in the Local Markets when their annual profits or revenues resulting from their activities in Dubai reach 50% or above of their total annual profits or revenues, or when the percentage of their total assets owned in Dubai amount to 50% or more of their entire assets. If either threshold is reached, the listing should be completed within a year from the date of reaching the respective threshold. Any Non-Dubai Company that does not reach either threshold may still list their shares in the Local Markets in accordance to the listing requirements and regulations.
Foreign companies established and licenced outside the UAE with branches, assets and activities in Dubai who wish to list their shares in Local Markets, can do so as either a primary or secondary listing as long as they abide by the conditions, rules and regulations in force in the Local Markets.
Companies that are affected by the mandatory listing of the shares in the Local Markets must make sure they adjust and comply with the Decree within one year from the date of enforcement ie by 25 January 2022, subject to any extension from the Economic Development Department, the authorities supervising the special development zones as well as the free zones including the Dubai International Financial Centre ("Licensing Authority").
The Decree has also introduced responsibilities and obligations that Licensing Authorities have been entrusted with. This includes monitoring compliance and enforcing penalties to those that violate the Decree by cancelling registration and licensing until changes have been made to meet the requirements of the Decree.
The purpose of this is to encourage businesses to list in the Local Markets to create more liquidity and investor choice and thus increase its capital markets. However, in practice, what we are likely to see is affected companies requesting the Licensing Authority to permit a delay in listing as forcing a company to list within a certain time period regardless of the state of the market at the time of listing may not be commercially viable. This is also likely to create uncertainty for investors on whether the companies that have been forced to list in the Local Markets are able to meet the ongoing obligations of a public company such as corporate governance and reporting obligations.
