14 Mar 2021

Mandatory Listing of Shares of Joint Stock Companies on the Securities Exchanges in the Emirate of Dubai

Authored by: Bilal Snaineh and Sundus Khan

In Brief:

1. H.H. Sheikh Mohammed Bin Rashid Al Maktoum, in his capacity as the Ruler of Dubai, issued Decree No. 3 of 2021 on the listing of shares of Joint Stock Companies on the Securities Exchanges in the Emirate of Dubai (“Decree”) which mandates:

(i) public joint stock companies established in Dubai; and

(ii) other forms of companies established in Dubai that intend to list their shares (including companies established in the free zones)

(together, “Dubai Companies”) to primarily list their shares on the Dubai securities exchanges, being the Dubai Financial Market and Nasdaq Dubai (“Dubai Financial Markets”).

2. All public joint stock companies that are established outside Dubai, but inside the UAE, and which have branches, assets or activities in Dubai, excluding public joint stock companies which are incorporated under federal legislation (“UAE Companies”), are also required to list their shares on the Dubai Financial Markets when their profits, financial returns or assets in Dubai reach a certain threshold.

3. All Dubai Companies and UAE Companies that are required to list their shares on the Dubai Financial Markets in accordance with the Decree have a period of one (1) year from the date of entry into force of the Decree to adjust their positions.

Listing of shares of Dubai Companies

In accordance with Decree No. 3 of 2021 on the mandatory listing of shares of Joint Stock Companies on the Securities Exchanges in the Emirate of Dubai (“Decree”), all Dubai Companies are mandated to primarily list their shares on the Dubai Financial Markets. Following the listing of shares on a Dubai Financial Market, Dubai Companies shall not be precluded from listing their shares on any financial market outside Dubai, as a secondary listing.

Listing of Other UAE Companies

In accordance with the Decree, all public joint stock companies that are established outside Dubai, but inside the UAE, excluding public joint stock companies, which are incorporated under federal legislation (“UAE Companies”) and which have branches, assets or activities in Dubai, are also required to list their shares on the Dubai Financial Markets where:

(i) their annual profits or financial returns from carrying on their activities in Dubai reach fifty percent (50%) or more of their total annual profits or financial returns; or

(ii) assets owned in Dubai reach fifty percent (50%) or more of their total assets.

The listing is required to be made within one year from the date on which the relevant threshold is reached.

The Decree does not prevent any UAE Company from listing its shares on the Dubai Financial Markets, irrespective as to whether its profits, financial returns or assets have reached the relevant threshold.

Listing of Foreign Companies

Foreign companies established and licensed outside the UAE with branches, assets and activities in Dubai are entitled to list their shares in the Dubai Financial Markets as either a primary or secondary listing in accordance with applicable rules and regulations of the Dubai Financial Markets; however, this is not mandatory.

Adjustment of Position and Penalties

All Dubai Companies and UAE Companies required to list their shares on the Dubai Financial Markets in accordance with the Decree have a period of one (1) year from when the Decree comes into force (being from 4 February 2021) to adjust their positions. However, such deadline may be extended by the Dubai Economy and the relevant supervisory authorities of the financial free zones and the economic free zones (“Licensing Authorities”) if deemed necessary.

The Decree states that the listing is required to be made within one year of its issuance. This means that the securities of the concerned companies will need to be ready for trading on the Dubai Financial Markets within such period. The process of listing takes time and this period should be taken into account by companies seeking to meet the deadline under the Decree.

If any company is found to be in breach of the Decree, the Licensing Authorities may, at their discretion, take action against such company, including the suspension or cancellation of the licence of the company until such time as the position is adjusted in accordance with the Decree.

The Decree does not affect other forms of companies such as limited liability companies, unless such companies are undertaking an IPO.

Conclusion/Recommendation:

The Decree changes the existing listing rules by directing the primary listing choice of companies falling within the ambit of the Decree to the Dubai Financial Markets (i.e. a choice between the Dubai Financial Market and Dubai NASDAQ). As a consequence, in addition to the prospect of fresh listings, it is anticipated that relevant existing listed companies will migrate to the Dubai Financial Markets.

To further understand the implications of the Decree on your business, please contact Ahmad Sergieh, Partner, Head of Corporate, Dubai a.sergieh@hadefpartners.com, Bilal Snaineh, Senior Legal Consultant b.snaineh@hadefpartners.com or Sundus Khan, Associate S.Khan@hadefpartners.com