Legal Changes impacting the Capital Market and Joint Stock Companies in UAE


Federal Law No. 32 of 2021 on Commercial Companies (“New CCL”) came into effect on 2nd of January 2022 to entirely replace Federal Law No. 2 of 2015 on Commercial Companies (“Old CCL”).

The New CCL incorporates significant number of amendments to the provisions governing joint stock companies (“JCSs”) and has also introduced new corporate concepts that aim to facilitate the growth of the capital market in the United Arab Emirates (“UAE”) by offering greater flexibility to public offerings, spin-off, merger and demerger transactions.

New Corporate Vehicles

The New CCL has introduced the concepts of Special Purpose Acquisition Companies (“SPACs”) and Special Purpose Vehicles (“SPVs”) which are commonly recognized in merger and acquisition friendly jurisdictions, such as United States. However, despite the New CCL introducing the concepts of SPACs and SPVs, SPACs are exempted from the provisions of the New CCL to the extent and manner prescribed by the SPAC Regulations (identified below). Further, it is to be noted that SPVs may also be exempted from the provisions of the New CCL if a special provision to that effect is included in the decision of SCA on the regulation of such corporate vehicle.

Special Purpose Acquisition Companies

In light of the recent developments in the commercial and corporate legislations, the UAE has become one of the first countries in the Middle East to allow for the establishment of SPACs. A SPAC is a newly incorporated non-operational publicly listed company with the sole purpose of acquiring or merging with an existing target business by using the proceeds of the initial public offering.

This new framework provides an alternative opportunity for private companies to transform into public shareholding companies with a more flexible regulatory framework and lower fees compared to the traditional initial public offerings. Previously, a regional target business, such as certain technology companies, would typically be acquired by a SPAC listed in the United States. Nonetheless, the current SPAC framework now allows a SPAC to be set up and listed in the same region as potential target businesses, potentially leading to cost and operational efficiencies.

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

  • Market capitalization: The issued capital of the SPAC, immediately upon the public offering, shall not be less than AED 100 million;
  • Sponsors Representation: the shareholding of the sponsors in the SPAC shall not be less than 3% and shall not exceed 20% of the issued share capital of the SPAC;
  • Escrow: At least 90% of the subscription proceeds shall be deposited in an escrow account within two (2) business days of receiving the subscription amounts from the investors. The escrow subscription proceeds can only be used for funding the acquisition, refunding investors amounts and paying escrow account fee.
  • Sponsors requirements: the sponsoring entities shall not be insolvent, must have sufficient experience to manage the SPAC and shall not have been convicted of a penalty of crime against honor.

Special Purpose Vehicles

On the other hand, SPV is specifically recognized under the New CCL as a company established for the purpose of separating the obligations and assets associated with a specific financing operation from the obligations and assets of its parent entity. SPVs may be used in credit transactions, borrowings, securitizations, bond issuances and transfers of risks associated with insurance, reinsurance and derivative operations.

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

As stated above, it is still unclear as of today whether SPVs shall remain subject to the provisions of the New CCL and SCA is yet to issue the regulations that shall govern the establishment and operations of such entity. Nonetheless, until SCA issues such regulations of SPVs, they will continue to be regulated by the provisions of the New CCL.

Division of Joint Stock Companies

The New CCL allocated a new chapter to deal with the division of joint stock companies. It is possible now for joint stock companies to be divided by separating the assets from the activities and related elements over two or more corporate entities according to the conditions, limitations and procedures to be issued by the Ministry of Economy or SCA, as the case may be, each within its jurisdiction.

The division can either be:

  1. Vertical Division, wherein the JSC will divide shares, assets, and liabilities by forming a new subsidiary company. The parent company will own the subsidiary company wholly; or
  1. Horizontal Division, wherein a JSC splits into two companies where the shares of the new companies are owned by the same shareholders.

In either case, the New CCL requires the board of the JSC that desires to divide its shares, assets, liabilities, and activities to prepare a ‘Division Project’ detailing mode of division, reasons for division, the proportion for the division, and any other detail as may be prescribed by Ministry of Economy or SCA.  Such Division Project must be then submitted to the general assembly of the JSC for approval and a special resolution will have to be passed in this regard. After the SCA or the Ministry of Economy, or any other prescribed competent authority, issues a ‘No Objection Certificate’, the JSC can proceed to execute the ‘Division Project’.


The New CCL contains a number of significant provisions that is likely to deliver major changes in the way public companies conduct transactions and will enhance investment opportunities in UAE incorporated companies going forward. Such increase in the investment opportunities in locally based target businesses by international investors shall strengthen the UAE’s position as a global trade and commercial hub.


This publication does not provide any legal advice and it is for information purposes only. You should not rely upon the material or information in this publication as a basis for making any business, legal or other decisions. Any reliance you place on such material is therefore strictly at your own risk.

Author: Lien Haroun


Executive Associate Lien Haroun

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Executive Associate Lien Haroun


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