KHALEEJ TIMES, Thursday, Sep 12, 2019 | Muharram 13, 1441
SCA plans platform for unprofitable companies
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
"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.
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