This is the second article in a series of articles on corporate governance practices under the best practice principles and the UAE legal system through innovative suggestions of its implementation for your organisation.
Read first article: Importance Of Corporate Governance And Its Basic Principles: What is Corporate Governance?
Read third article: Corporate Governance Regulatory Framework for Non-Listed/ Private Companies in UAE
Significance of a regulatory framework around corporate governance in the UAE:
United Arab Emirates (UAE), an influential player in the Middle East and Africa region and Dubai as the gateway to the world, have created an unparalleled example of success through the innovative vision and brilliant leadership of this great nation. It has cultivated a barren unproductive desert-land into a region brimming with smart technology and economic growth with unique state-of-the-art facilities in all spheres.
Strong adherence to the rule of law played a crucial role in the journey of this Arab nation. The contribution of companies (national or international) to the development of the nation is unprecedented in the world. Moreover, the regulatory eco-system of the country has given more opportunity to grow and to be first in everything as envisioned by the Prime Minister His Highness Sheikh Mohammed Bin Rashid Al Maktoum.
Corporate governance regulatory framework available in the UAE:
Globally, corporate governance is a compliance proposition through a regulatory framework and best practice principles. Some jurisdictions have inculcated the best practice principles into their domestic legislation through mandatory provisions for certain kind of corporations and left as optional for the rest.
The UAE Commercial Companies Law is the master legislation on the point of touching the key areas of the governance of corporations.
In addition, the UAE has Corporate Governance Rules 2016 promulgated by the Securities and Commodity Authority under the power envisaged by master legislation specifically applicable to listed UAE public companies. The regulation is not applicable to banks and so far, it is within the domain of Central Bank rules.
Corporate governane for DIFC Companies:
The corporate governance of DIFC companies is monitored under the DIFC Law No.2 of 2009 read with the general module.
Corproate Governance for ADGM Companies:
The ADGM companies are under the regulatory regime of Companies Regulation and Commercial Licensing Regulation of Abu Dhabi Global Market.
Key Authorities responsible for regulating corporate governance in UAE:
Security and Commodity Authority (SCA), Central Bank and the Department of Economic department are the key authorities responsible for corporate governance. The regulatory framework touches with composition, formation, operation of the board, members, committees, powers and its remuneration, CSR and audits. It also provides a provision for the violation penalty of corporate governance rules by any applicable companies.
However, there is a grey area which can absolutely be termed as optional to best practice for monitoring. Non-listed companies are not bound by corporate governance rules. It is a necessary option for the private companies to have a self-regulatory framework with the spirit of contractual obligation to give strength for the smooth operation of the company under the legal arms.
How can I implement a Corporate Governance Framework for my organization?
This requires the right knowledge of local legal frameworks and the best practices in the market. Hire one of our lawyers to assist you in this process. Contact us now at communications@gulfvakil.com.