Another benefit is increased public awareness of the company, as an IPO often creates publicity by making products known to a new group of potential customers. This can subsequently lead to an increase in the company's market share. An IPO can also be used by founders as an exit strategy. Many venture capitalists have used IPOs to profit from successful companies that they helped to create.

Legislations in relation to IPO

The key legislation is the Federal Law No. 2 of 2015, as well as Amended Decision No. (25/Chairman) of 2020, which regulates the public offering and issuance of shares in publicly traded companies. There are three financial exchange markets in the UAE: Dubai Financial Market (DFM), Abu Dhabi Securities Exchange (ADX), and NASDAQ Dubai.

The ADX and DFM are governed and regulated by the Securities and Commodities Authority’s supervisory authority (SCA) and it has the power to establish and enforce the laws, rules, and standards to which the ADX and DFM must comply. These two exchange markets work closely with the SCA to protect investors and provide an optimal trading platform for securities trading. Both the ADX and DFM operate like an exchange-traded marketplace for trading securities, including stocks issued by publicly traded companies. NASDAQ Dubai, on the other hand, is regulated by the Dubai Financial Supervision Authority (DFSA) as a securities supervisor as it is under the jurisdiction of the Dubai International Financial Center (DIFC).

The conditions for listing the IPO in the UAE

The key point states that the company must operate for at least two financial years, with the initial capital of not less than thirty (30) million dirhams; the founders must not own less than 30% and not more than 70% of the total issued share capital of the company; the company must have an annual operating profit and distribution profit of not less than 10% of the issued capital of the company for the two financial years preceding the conversion.

In the UAE, the authorities, which are responsible for regulations in licensing of public limited companies are the SCA, the ADGM Financial Services Regulatory Authority (FSRA), the Independent Regulator of Financial Services (DFSA) from DIFC, and the Department of Economic Development (DED), reviewing all applications for the establishment of publicly traded companies, as per the Ministerial Council Resolution on Services no. (3/3) of 2007, Session no. (1). 

UAE laws and regulations state that a company must have the legal form of a Public Limited Company (PLC) in order for the company to offer its shares to the public. Usually, it is typical for limited liability companies (LLCs) to convert their legal form and become a public limited company in order to offer their shares to the public, and usually, companies carry out this process in order to raise their capital in the world markets.

The IPO is a complex process, and the country is actively leveraging the tools to maximize foreign investments, including the Venture Capital structuring (VC), and Special Purpose Vehicle (SPV), which we have highlighted in our article, dedicated to VC.

If you would like advice or assistance concerning the IPO listing in the UAE, kindly contact us. 

Marsel Shadmanov

Head of Corporate Services at Garant Business Consultancy DMCC

Phone +971 4 421 4335

Email info@garant.ae