On 26 January 2021, His Highness Sheikh Mohammed bin Rashid Al Maktoum issued Decree No.3 of 2021 Listing of Joint Stock Companies in the Securities Markets (the New Decree).
The New Decree aims to improve the liquidity and choice of investment options in Dubai’s securities exchanges, the Dubai Financial Market and NASDAQ Dubai. Here, we provide an overview of the New Decree, including its requirements and the potential impact it could have for your business.
What companies does the New Decree apply to?
The New Decree places distinct statutory requirements on your company if it is:
- a public joint-stock company (PJSC) incorporated onshore in Dubai or in any of its free-zones with a license from the relevant local company registration authority
- a PJSC incorporated and licensed outside Dubai but elsewhere in the UAE that has branches, assets, or activities in the Emirate of Dubai, or
- a company which is incorporated and licensed abroad, but has branches, assets, or activities in the Emirate of Dubai.
Under Article 2(a) of the New Decree, your PJSC registered in the Emirate of Dubai (including its free zones) is now required to list its shares on a stock exchange in Dubai (Dubai Financial Market and NASDAQ Dubai) subject to ensuring compliance with federal listing requirements and regulations. Article 7 stipulates that if your PJSC is not already listed, then this listing must take place within one year of the enforcement date of the New Decree, being 25 January 2022. We don't expect that there are many PJSCs in Dubai not yet listed.
It is important to note, however, that under Article 2(c) the New Decree prohibits you from listing shares of a Dubai registered PJSC on any stock exchanges outside of Dubai (including those outside of the UAE) before completing a listing on a stock exchange within the Emirate of Dubai.
What about PSJCs established outside Dubai but within the UAE?
If your PJSC was established outside Dubai but within the UAE and has branches, assets or activities within Dubai, in accordance with Article 3(a) of the New Decree, you are required to list your shares on one of the stock exchanges in Dubai within one year of meeting either of the following conditions/thresholds:
- 50% of your annual profits or financial returns are realised from practicing activities in Dubai, or
- 50% of the assets you own are based in Dubai.
For those PJSCs registered in the UAE but outside of the Emirate of Dubai that already meet one of the thresholds, the deadline for listing is within one year of the enforcement date of the New Decree, being 25 January 2022.
If your PJSC is registered in the UAE but outside the Emirate of Dubai and has not met either of the required thresholds yet, but you still wish to list, then you are able to do so on any of the stock exchanges in Dubai. This is subject to compliance with federal listing requirements and regulations.
How does this apply to foreign companies?
The New Decree does not impose a mandatory obligation for foreign companies that have branches, assets, or activities within Dubai to list on one of Dubai's stock exchanges. It does, however, confirm that you have the option and right to voluntarily list on a Dubai-based securities exchange as a primary or secondary platform in accordance with and subject to meeting federal listing requirements and regulations.
We would also like to clarify that the New Decree does not affect companies registered as limited liability companies in any of the Emirates (including free zones).
Duties of the licencing authorities
In addition to outlining the listing requirements for PJSCs, the New Decree separately lists some of the relevant duties of licencing authorities (like Dubai Economy or the free zone authorities) in connection with the enforcement of the New Decree. This can include taking necessary action against violators (including cancellation of their licences) and duly monitoring the compliance of companies with the provisions of the New Decree.
Here to help
With an increase in the control functions being exercised by local authorities to ensure compliance with local laws and regulations by the business community, we recommend that you start evaluating the situation of your PJSC as soon as possible to determine whether any actions are required. Our Corporate/M&A and Capital Markets team in Dubai would be happy to assist with any restructuring aspects for your local business.
