UAE companies law eases flotations, seeks more investment

The United Arab Emirates hasissued a long-awaited companies law that loosens rules coveringstock market flotations and aims to attract more investment bymoving corporate regulation closer to international standards.

Officials had discussed the law for at least six years andit went through multiple drafts as the Arab world'ssecond-biggest economy balanced its desire to attract moreforeign capital with protecting local business interests.

The law reduces the minimum "free float" of shares incompany flotations on the UAE's two main stock markets to 30percent from 55 percent, aiming to encourage company owners togo public, state news agency WAM reported on Wednesday.

Previously, they could only sell less than 55 percent oftheir firms if they had obtained a waiver from regulators or bylisting on the smaller NASDAQ Dubai.

Company owners will also for the first time be able to carryout floats by selling existing shares, rather than by issuingnew equity.
And flotation prices will be allowed to be set bybook-building, or obtaining indicative bids from fund managers,rather than through a fixed-price evaluation method.

The new law also contains dozens of articles seeking to makelimited liability and joint stock firms simpler to manage andmore attractive to investors, while strengthening corporategovernance in areas such as company loans to directors.

A late draft of the law seen by Reuters last year providedfor companies' documentation to be made publicly available, astep towards a more transparent corporate environment. WAM didnot say whether this provision was included in the final versionof the law.

The law is less radical than some had hoped. Foreignersgenerally cannot own more than 49 percent of any UAE company,unless it is incorporated in a special "free zone". Officialshad at one stage intended to use the companies law to ease thatrule, but the reform was scrapped under political pressure.

Earlier this week, however, economy minister Sultan binSaeed al-Mansouri said the UAE was at an advanced stage ofdrafting a foreign investment law that would allow 100 percentforeign ownership of businesses in some sectors.

He did not specify the sectors or say when the law might bepassed.