New UAE Stock Ownership Rules

The United Arab Emirates’ market regulator unveiled a major overhaul of stock ownership rules in the Gulf Arab state, 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 30 per cent or more of a listed company in the UAE.

It was not clear when the guidelines would come into effect.

The regulator can reject proposed transactions if it deems them to be against the interests of shareholders or the economy.

The move comes a month after Abu Dhabi state fund Aabar Investments said it had accumulated a 20.8 per cent stake in Dubai contractor Arabtec Holding through different subsidiaries.

Aabar’s chairman – who is also Arabtec chairman – was quoted by a local newspaper at the time as saying the fund had a 53 per cent position. A stock market source told Reuters Aabar owned 53 per cent of Arabtec.

The new rules require an investor 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.

“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 UAE, classified as a frontier market by index complier MSCI, lacks a proper takeover code which makes mergers of publicly listed companies difficult. Gauging ownership levels in some listed companies is complicated by cross holdings through affiliates and separate vehicles which can belong to the same entity.

Calls for more governance and transparency heightened after the Aabar/Arabtec moves with the construction firm’s shares more than doubling this year.

Aabar, which tried to buy Arabtec for $1.7 billion in a failed 2010 takeover, has not disclosed what its intentions are with regard to the stock build up and minority investors have been concerned their interests would be overlooked.

Last year, the UAE postponed draft regulations on its nascent asset management industry, which were seen as a key step for investor protection and boosting market confidence, after market players voiced concerns that some of the proposals lacked clarity, sources said.