The United Arab Emirates has issued a new law that eases rules governing initial public offerings.
The new rules allow companies to sell as little as 30 percent of their equity, compared with at least 55 percent under the older rules. Businesses can also sell as much as 70 percent of their equity in an IPO and be able to use a book-building process to price their shares, the official WAM news agency said on its website on Tuesday. Previous regulations didn’t allow a book-building process.
The older rules hindered initial public offerings as some companies were reluctant to sell 55 percent of their equity. Emaar Properties PJSC, Dubai’s biggest publicly traded developer, received a waiver from the market regulator when it sold 15 percent of its subsidiary Emaar Malls Group PJSC in an IPO in September through a book building process.
The new law will “modernise company rules and move the U.A.E. towards best international practice and standards,” Husam Hourani, managing partner at law firm Al Tamimi & Co., said by e-mail from Dubai. “It is expected to encourage financial markets and new IPO activity on U.A.E. markets.”
The changes are part of The Commercial Companies Law No. 2 of 2015, which includes 378 articles, and was issued by President Sheikh Khalifa bin Zayed Al Nahyan, WAM said.
The new law says companies must also offer at least 20 percent of the shares in an IPO to retail investors and at least 60 percent to qualified institutional investors, WAM said. While the old law made it mandatory for companies to sell only new shares to the public, they can now also sell their existing equity, according to WAM.