The United Arab Emirates' market regulator unveiled a major overhaul of stock ownership rules, in a bid to force more disclosure in takeover deals and boost transparency. The new regulations by the Securities and Commodities Authority (SCA) requires buyers to inform the stock market if they intend to buy more than 30 per cent of a listed company.
The proposed rules allow the SCA to reject proposed transactions if it deems them to be against the interests of shareholders or the economy. Investors will also be required to pool together all holdings in a specific company - whether held by family members, companies and affiliates - and inform the regulator if the ownership is above the stipulated five per cent mark.
June 15, 2012
Analysis and Forecast: Decreasing Risk
The proposed introduction of new laws are overdue. There has been a number of cases of share dealings and takeovers with alleged lack of transparency. The most recent was when Abu Dhabi government fund Aabar Investments announced that it had accumulated a 20.8 percent stake in Dubai contractor Arabtec Holding through different subsidiaries, bringing its holdings in the company to over 53 percent. Smaller investors in Arabtec have expressed deep concern about the move.
Once the laws become effective, it will give the UAE markets proper takeover rules, and will remove a major hurdle in the attractiveness of the local markets to institutional as well as foreign investments. With the UAE hoping to be upgraded to “emerging market” status from the current “frontier market” status by the index compiler MSCI, such law will add to the confidence of potential investors.
The proposed rules therefore present a lowering of the economic risk and a potential boast to competitiveness.