Legal changes impacting the capital market and joint-stock companies in the UAE



Federal Law No. 32 of 2021 on Commercial Companies (“New CCA”) entered into force on 2n/a of January 2022 to fully replace Federal Law No. 2 of 2015 on Commercial Companies (“Former CCA”).

The New CCL incorporates a significant number of changes to the provisions governing joint-stock companies (“JCS”) and also introduced new business concepts aimed at facilitating the growth of the capital market in the UAE (“United Arab Emirates”) by providing greater flexibility in public offering, demerger, merger and demerger operations.

New company vehicles

The new CCL introduced the concepts of special purpose acquisition companies (“PSPC”) and special purpose vehicles (“SPV”) which are generally recognized in jurisdictions favorable to mergers and acquisitions, such as the United States. However, despite the new CCL introducing the concepts of SPACs and SPVs, SPACs are exempt from the provisions of the new CCL to the extent and in the manner prescribed by the SPAC Regulations (identified below). In addition, it should be noted that SPVs may also be exempted from the provisions of the new CCL if a special provision to this effect is included in the SCA decision on the regulation of this legal vehicle.

Special Purpose Acquisition Companies

In light of recent developments in commercial and corporate legislation, the UAE has become one of the first countries in the Middle East to allow the establishment of SPAC. A SPAC is a non-operating publicly traded company newly formed for the sole purpose of acquiring or merging with an existing target company using the proceeds of the IPO.

This new framework provides an alternative opportunity for private companies to transform into public limited companies with a more flexible regulatory framework and lower fees compared to traditional IPOs. Previously, a regional target company, such as certain technology companies, was usually acquired by a US-listed SPAC. Nevertheless, the current SPAC framework now allows a SPAC to be created and listed in the same region as the potential target companies, which can result in cost savings and operational efficiencies.

SCA Chairman of the Board of Directors Resolution No. 1 of 2022 on the Rules of Special Purpose Acquisition Companies (“PSPC regulations”) governs the legal and regulatory framework for SPACs to be incorporated in the UAE, a few key features of which have been summarized below:

  • Market capitalization: The issued capital of SPAC, immediately after the public offering, must not be less than AED 100 million;
  • Representation of sponsors: the participation of the sponsors in the SPAC must not be less than 3% and must not exceed 20% of the issued share capital of the SPAC;
  • Crook: At least 90% of subscription proceeds must be deposited in an escrow account within two (2) business days of receipt of subscription monies by investors. Proceeds from the escrow subscription may only be used to fund the acquisition, repay investor monies and pay escrow account fees.
  • Sponsor Requirements: sponsors must not be insolvent, must have sufficient experience to manage the SPAC and must not have been convicted of an honor crime.

Special Purpose Vehicles

In contrast, the SPV is specifically recognized under the New CCL as a company incorporated for the purpose of separating the obligations and assets relating to a specific financing transaction from the obligations and assets of its parent company. SPVs can be used in credit transactions, borrowings, securitizations, bond issues and risk transfers associated with insurance, reinsurance and derivatives transactions.

This new business vehicle allows the transfer of risks associated with certain business operations through the segregation of activities and carve-outs. Typically, SPVs are used to undertake risky projects while reducing any negative financial impact on the parent company and its investors.

As noted above, it remains unclear at this time whether SPVs will remain subject to the provisions of the new CCL and the SCA has yet to issue the regulations that will govern the creation and operations of this entity. However, until the SCA issues such SPV regulations, they will continue to be regulated by the provisions of the new CCL.

Business Corporations Division

The New CCL has allocated a new chapter to deal with the demerger of joint-stock companies. It is now possible to split joint-stock companies by separating assets from related activities and items on two or more legal persons under conditions, limitations and procedures to be issued by the Ministry of the Economy or the SCA, as the case may be. be, each in his jurisdiction.

The division can be either:

  1. Vertical division, in which the JSC will divide the shares, assets and liabilities by forming a new subsidiary. The parent company will fully own the subsidiary; Where
  1. Horizontal divisionin which a JSC splits into two companies, with the shares of the new companies being held by the same shareholders.

In either case, the new CCL requires the board of directors of the JSC that wishes to divide its shares, assets, liabilities and business to prepare a “draft of division” detailing the mode of division, the reasons for the division , the proportion of the division and such other details as may be prescribed by the Ministry of the Economy or the SCA. Such proposed division must then be submitted to the general assembly of the JSC for approval and a special resolution must be adopted in this regard. Once the SCA or the Ministry of Economy, or other prescribed competent authority, has issued a “Certificate of No Objection”, the JSC may proceed with the execution of the “Dividing Project”.


The new CCL contains a number of important provisions that are likely to bring major changes to the way state-owned companies conduct business and improve investment opportunities in UAE-incorporated companies in the future. Such an increase in investment opportunities in local target companies by international investors will strengthen the UAE’s position as a global business and trade hub.


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