The UAE market regulator, the Securities and Commodities Authority, or SCA, has unveiled a new set of share ownership rules in a key overhaul to ensure more candid disclosures in takeover deals.
The new SCA regulations, which are designed to boost transparency in the country’s two stock markets, require buyers to reveal all direct and indirect holdings in listed companies if they planned to buy 30 per cent or more of a listed company in the UAE.
The amended rules require investors to disclose their total holdings above the stipulated five per cent mark. Investors will also have to disclose if they own 10 per cent or more of the shares of a parent company, subsidiary, or affiliate of a publicly listed company.
“The board agreed during the meeting to make adjustments to the disclosure and transparency system in order to develop the legislation governing the functioning of financial markets,” the SCA said in a statement posted on state news agency Wam.
The SCA move comes soon after Aabar Investments of Abu Dhabi accumulated a 20.8 per cent stake in a Dubai-based construction company Arabtec Holding through different subsidiaries.
Under the amended rules, the regulator can reject a proposed transaction if it deems them to be against the interests of shareholders or the economy.
The SCA’s statement did not specify when the reforms would come into effect.
Mohammed Ali Yasin, an Abu Dhabi-based capital markets analyst, hailed the move “as an important amendment to the law that will help bring in more transparency to benefit the market in the long run.”
“I think the way the new rules seek to group investors and related partners will probably give a clearer picture of the ownership of the company and will ensure that a gap in the current law is not used by some investors to accumulate a listed company’s shares without being transparent.”
He said a 30 per cent limit to share buying is also critical “to protect the minority interests as it forces companies to get the permission of the stock market regulator prior to the execution of deals of that scale.”
The new move by the SCA come head of a widely anticipated review of the country’s markets by index complier MSCI for a possible upgrade to emerging market status, which is expected to trigger increased foreign fund inflows.
The UAE, currently classified as a frontier market by MSCI, lacks a proper takeover code which makes mergers of publicly listed companies difficult.
Calls for more governance and transparency heightened after the Aabar-Arabtec move, with the construction firms’ shares more than doubling this year.
In 2011, the UAE postponed draft regulations on its asset management industry, which were seen as a key step for investor protection and boosting market confidence, after market players voiced concerned that some of the proposals lacked clarity, sources said.