UAE makes it easier for companies to launch IPOs

New companies law lowers the minimum number of shares a company must float for an IPO from 55% to 30%

The UAE has issued new legislation making it easier for companies to launch initial public offerings.

Under the new rules, businesses will be able to float as little as 30 percent of their shares, a statement on state news agency WAM said. The current level of 55 percent had been perceived as making the UAE unattractive for an IPO.

The lower rate is expected to make it more appealing for business owners to participate in a float because they will retain control of the company, Abdul Aziz Al Yaqout, senior partner at law firm Meysan Partners, told Arabian Business.

“The 55 percent requirement didn’t lead to many, especially family-owned, businesses to take the step of IPOing, so there’s a good opportunity now to IPO; there’s going to be a large number of companies take that step going forward,” Al Yaqout said.

“They want to retain control and [the 30 percent requirement] gives you more flexibility because maybe you only float part of your business to capitalise on it or make money out of it but you don’t lose 55 percent.

“The control issue has been, in my experience, the main barrier to [IPOs in the UAE].”

The new law also allows businesses to use the book-building process to price their shares for the first time.

Individuals also will now be able to establish a private or limited liability company, a change viewed as helping entrepreneurs and encouraging more Emirates to consider their own businesses.

“It simplifies life in many cases because often you have a business that’s already factually owned by one partner [anyway],” Al Yaqout said.

“It also opens the door to make it easier for entrepreneurs and young people. It makes it much less risky because you can establish a company with limited liability [rather than being personally liable].”

Listed companies are also allowed to convert debt to capital for the first time.

The UAE also is at an advanced stage of drafting a foreign investment law that would allow 100 percent foreign ownership of businesses in some sectors, the economy minister said on Monday. Presently, the limit is 49 percent.

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