The UAE's Securities and Commodities Authority (SCA) recently issued a decision which amends certain provisions of its regulations for issuing and offering shares of Public Joint-Stock Companies. In this article, we provide a high-level overview of these amendments.

We set out below an overview of Decision No. 25 of 2020 (the Decision) and its main amendments to SCA's Decision No. 11 of 2016 on the regulations for issuing and offering shares of Public Joint-Stock Companies (the Regulations). Note that we have not set out all of the changes introduced by the Decision, just a taste of some of the key amendments.

The Decision was issued on 2 November 2020, and came into effect on 2 December 2020.

Scope of the Regulations

The Decision expands the scope of the Regulations by amending the definition of an offer of shares in "Onshore UAE" (i.e. outside the financial free zones).

This is reflected in the changes to the following relevant definitions:

• The definition of an ''Offering'' (i.e. an offer of shares) now expressly encompasses, in addition to the public of offer of shares of onshore public joint stock companies, the invitation to the public to subscribe in shares of a "Foreign Company", or a "Free Zone Company''. We note that the amendments did not exempt, or introduce "lighter" requirements for, offers of shares made through a "private placement" (i.e. a non-public offer made to a limited number of qualified investors).
• Furthermore, the Decision introduces the new defined term ''Free Zone Company'' which expressly includes companies established in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM).

In line with the changes above, chapter 5 is amended to also cover offers of shares in "Free Zone Companies" in addition to "Foreign Companies". Furthermore, the Decision expanded the application of Chapters 2 and 3 of the Regulations to offers of "Foreign Companies" and "Free Zone Companies" shares to the public in Onshore UAE.

Conditions for offering shares in Free Zone Companies

While the conditions for offering shares in Foreign Companies remain generally unchanged, the Decision introduced no less than 18 conditions which must be met before the SCA will approve a Free Zone Company to offer its shares for public subscription in Onshore UAE. These include:

• The shares offered to the public must list on one of the UAE "Markets" (this defined term was not amended and still only includes SCA-licensed exchanges, i.e. the Dubai Financial Market and the Abu Dhabi Exchange).
• The company's paid-up capital must not be less than AED20m.
• The net shareholders' equity must not be less than 100% of the paid-up capital.
• The shares offered must not be less than 25% and not more than 70% of the company's capital (however, 100% of the shares may be offered qualified investors).
• The company must have achieved net profits in the last two fiscal years at least.
• The company must have sufficient working capital for the 12 months subsequent to the SCA's approval of the prospectus.

Mandatory appointments

Following the amendment of the Regulations, companies proposing to offer their shares to the public are now required to appoint "a subscription receiving institution", and SCA-licensed "Financial Advisor" and "Listing Advisor".

Duties of the Listing Advisor

The duties of the listing advisor have been amended and now include requirement to take into account ''principles of trust, justice and equality'' in addition to other commercial considerations and investors' interests. How the SCA will interpret these principles remains to be seen (especially since the SCA does not publish guidance on its regulations).

Conclusion

The Decision expands the scope of the Regulations to include any and all public offers of shares made in Onshore UAE. It therefore provides greater clarity for issuers who wish to make an offer of securities in the UAE. However, it may create unsurmountable challenges for DIFC and ADGM issuers seeking to offer their shares to investors in Onshore UAE.