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KHALEEJ TIMES, Thursday, Sep 12, 2019 | Muharram 13, 1441

SCA plans platform for unprofitable companies

Emirates: The UAE's Securities and Commodities Authority (SCA) is considering a host of measures including a secondary platform on the exchange to host unprofitable firms, mandating at least one female on the boards of listed companies as well as mandating appropriate expertise, knowledge and independence standards for the board of directors, a senior official said on Wednesday.

These measures will help strengthen investor confidence in the markets and improve profile among the foreign institutional investors to attract more capital as well as highly-skilled talent in to the corporate's board members.

"With the intention of improving investor transparency, a key proposal by SCA has been to issue draft regulations for setting up a secondary platform on the exchange which will host unprofitable companies. Such companies are required to provide a restructuring plan and will be monitored in the watch-list," said Dr Obaid Al Zaabi, CEO of Securities and Commodities Authority and vice-chairman of the UAE Financial Restructuring Committee.

"SCA is now considering reviving its corporate governance code by mandating at least one female on boards of listed companies for 20 per cent as target, adopting the application of comply or explain principle, dual governance structure, mandating appropriate expertise, knowledge, competencies, skills and independence standards for board of directors including their training and evaluation, specifying the functions of the Secretary to the Board," he said while addressing the Corporate Restructuring Summit in Dubai on Wednesday.

Vijay Valecha, chief investment officer at Century Financial, said providing a secondary trading platform for loss making companies assumes considerable significance in this regard, considering around 35 per cent companies posted loss.

"Loss-making companies generally find it tough to raise debt capital since banks tend to be conservative. However, equity markets provide a great avenue for raising capital as equity investors have more risk appetite. Another advantage of such a platform is that loss-making companies can be segregated which makes it easier for investors to understand the risk," Valecha said.

While speaking to reporters on the sidelines of the conference, Al Zaabi said one initial public offering will hit the UAE markets by the end of this year, most likely in December. 

"We are receiving a lot of applications but at the end of the day the decision go to public rests with the company," he said, adding that most of the interest is coming from the real estate and financial sector firms.

Dr Obaid Al Zaabi warned that governance framework for listed companies, especially in countries with large capital markets, has seen significant progress but advancements in improving governance of private family-owned businesses has been noticeable slower.

"While some have embraced a culture of better governance, others are remaining with practices that are dangerously ill-suited to the region's increasingly complex and globally-integrated economic environment. Financing, legal and ownership structures, board composition and transparency and disclosure makes implementing sound principles of corporate governance a challenging task in Mena region," he said.

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