How to Implement a Division of the Public Joint Stock Companies in UAE? | FlyingColour
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How to Implement a Division of the Public Joint Stock Companies in UAE?

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UAE has introduced new regulations via Federal Decree No. 32 of 2021 relating to the Commercial Companies Law (CCL) with effect from 2nd January 2022 to strengthen its position among other countries.

The most significant amendment made by the government is introducing the concept of Special Purpose Acquisition Companies (SPACs) and their division of assets, liabilities, rights, and obligations.

Special Purpose Acquisition Company (SPAC) as a Public Joint Stock Company (PJSC)?

As the new rules come into force through the New Commercial Company Law, the Federal Decree No. 2 of 2015 and its related amendments stand canceled.

The new Commercial Company Law acknowledged the concept of a Special Purpose Acquisition Company (SPAC) as a Public Joint Stock Company (PJSC).

The Securities and Commodities Authority (SCA) of UAE explains a PJSC as a company that operates solely for mergers and acquisition companies. The SCA will closely monitor the activities of such SPACs and will issue regulations in this regard.

Division of the PJSCs 

The new CCL introduced the division of the PJSCs, which can be done in two ways –

  1. Vertical Division: In this type of division, thePJSC company will divide shares, assets, and liabilities by forming a new subsidiary company. The parent company will own the subsidiary company wholly.
  2. Horizontal Division: It is called a divisionwhen a PJSC splits into two companies with the shareholding percentage remaining the same in both companies.

Procedure for Division of a PJSC

The new regulations provide a detailed procedure to follow when a PJSC intends to divide its shareholding either vertically or horizontally.

  • The new Commercial Company Law requires the board of the PJSC 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 in the new law.
  • Such ‘Division Project’ must be submitted to the General Assembly for approval.
  • After the SCA or the Ministry or any other prescribed competent authority issues a ‘No Objection Certificate’ (NOC), the PJSC can proceed to execute the ‘Division Project.’

The Bottom Line

The introduction of the new regulations is welcomed across the country as they bring positive changes to its operations and activities. It also strengthens and increases the responsibilities of the Securities and Commodities Authority of UAE to observe the commercial activities of such PJSCs and issue rules and regulations in this regard.

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