The Securities and Commodities Authority presented seven common questions that are traded strongly when companies turn into a "public shareholding".

She also clarified that family companies and small and medium-sized enterprises that take the form of "limited liability companies" can list on the financial market by converting them into "private joint stock" companies.

Listed on the market

The Authority clarified in an awareness bulletin, "Emirates Today" obtained a copy of it, that small and medium-sized enterprises that take the form of "limited liability companies" can list in the financial market by converting them into private joint stock companies, according to the procedures of the Ministry of Economy, then Listed on the financial market.

She continued: «Family companies that take the form of limited liability companies can list in the financial market without being offered for public subscription by converting them into private joint stock companies, according to the procedures of the Ministry of Economy, then listing in the financial market.

Important questions

In its publication, the Securities and Commodities Authority presented the most important questions about the process of transforming companies into a "public shareholding", namely:

1 Will the founders lose control of ownership and management of the company if it becomes a “public shareholding”?

A: The companies law was keen on ensuring the continuity and success of companies transformed into a public shareholding company, and providing them with a safe investment environment attractive to investment and supportive of investor confidence, through achieving a balance and encouraging founders to convert, so that the founders were allowed to retain 70% of the company’s shares, And put a ratio of not more than 30% of its shares for public subscription, ensuring that the founders retain control of ownership of the capital and the majority of the Board of Directors.

2 Can some partners recover a portion of the money they invested in the company while achieving an appropriate return?

A: The mechanism for trading the shares of the capital of the public shareholding company in the financial markets provides a specific market value for the company, which reflects the market’s assessment of the company's operating components and its financial position of assets and liabilities, which represents an easy way to exit at a fair price, in the event that some shareholders want to reduce their contribution to the company, And avoid disputes that may occur in evaluating the price of the security and the complexities associated with arranging the transfer of ownership, as is the case in other companies where it is very difficult to sell shares to others.

3 Are there several legal conditions for converting into a public joint stock company?

A: The basic conditions for converting into a public joint stock company according to the Commercial Companies Law No. (2) for the year 2015 are limited to the following:

- The value of the shares or shares issued was paid in full, or the shares of the partners were fully fulfilled.

To be a local company that has been established for two fiscal years.

Achieve a net operating profit, which can be distributed to shareholders, with an average of not less than 10% of the capital, during the two previous fiscal years to request the transfer.

To issue a special decision or its substitute to convert the company into a “public shareholding”.

The capital after the conversion is not less than 30 million dirhams.

4 How is the company evaluated if it is converted into a 'public shareholding'?

A: The company is evaluated as an in-kind share, and the basic price of the evaluation is determined by a financial consultant chosen by the authority from its financial advisors accredited to it, and the share price is determined using the Book Building mechanism where qualified financial institutions perform the pricing process through the record of subscription orders. .

5 What is the maximum allowable public subscription of the company’s shares when it becomes a “public shareholding”?

A: The maximum allowed limit is 30% of the company's capital.

6 Are there restrictions on the founders ’trading of shares after the company turns into a“ public shareholding ”and listing its shares on the stock market?

A: The founders are prohibited from trading their shares before publishing the company's balance sheet for two fiscal years from the date of listing the company in the financial market.

7 Is it possible for founders to sell part of their stake when the company becomes a “public shareholding”?

A: A company wishing to convert to a "public shareholding" may sell through a public offering a percentage of no more than 30% of its capital after the evaluation.

The legal framework

The Securities and Commodities Authority confirmed that the Authority’s regulations and decisions regarding converting to a public shareholding company, public offering and listing in the market are consistent with the legal framework established by Federal Law No. (2) of 2015 regarding commercial companies, as well as with the nature and characteristics of the public shareholding company, the most important of which is public subscription The company shares by the public, according to international best practices.

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