New Public Private Partnerships Law
Public-private partnerships (“PPPs”) between the Federal Government and the private sector for strategic government projects involving the provision of a public service or the operation of a public facility are regulated by a new regime, with effect from 1 December 2023.
Federal Law No.12 of 2023 Regulating the Partnership between the Federal Public and the Private Sectors (“PPP Law”), together with the accompanying Partnership Projects Guidebook (which is yet to be published), regulate matters related to PPPs, including feasibility studies, project selection and approvals, tendering methods and procedures (a two-stage method and a direct appointment method) and the terms of project agreements. It also regulates governing law and dispute resolution matters.
A PPP may take one of the forms specified in the PPP Law or another form that may be specified in the Partnership Projects Guidebook.
Project companies established by the private sector partner(s) in the UAE may be wholly owned by foreign investors, in accordance with the foreign investment regime.
New UAE Beneficial Ownership Regulation
UAE companies must comply with revised rules on the disclosure of their ultimate beneficial owners, in accordance with UAE Cabinet Resolution No.109 of 2023 On the Regulation of the Real Beneficiary Procedures (the “UBO Regulations”). The UBO Regulations came into force in November 2023 and repeal and replace the previous regime set out in UAE Cabinet Resolution No.58 of 2020. The UBO Regulations form part of the UAE’s anti-money laundering and counter-financing of terrorism (AML/CFT) initiatives and should increase standards of transparency of ownership structures, including in the case of complex arrangements.
The UBO Regulations apply to corporate entities that are licenced or registered in the UAE, including in the non-financial free zones. There are exemptions for companies that are wholly owned by a Federal or Emirate government or their subsidiaries and companies in the financial free zones of the DIFC or ADGM, which have separate regimes.
Companies to whom the UBO Regulations apply must take reasonable measures to obtain and maintain accurate and up to date information on beneficial owners, and record of details of beneficial owners in a Beneficial Owners’ Register.
A Beneficial Owner is a person who ultimately owns or exercises control over a legal entity, directly or through a chain of ownership or control, or other indirect means or on whose behalf transactions are conducted or who exercises ultimate control over a legal entity or a legal arrangement.
Companies must update their Beneficial Owners’ Register in the event of any changes to their beneficial owners and must disclose any such changes to the Registrar. Penalties may be imposed for failure to comply, which may include warnings, fines or licence suspension.
UAE Central Bank Recovery Planning Regulation
Financial institutions in the UAE are required to plan effectively to manage periods of financial difficulty and facilitate recovery in accordance with a dedicated insolvency and rescue framework issued by the UAE Central Bank. The Recovery Planning Regulation (UAE Central Bank Circular No.4 of 2023) was issued on 30 October 2023.
The Recovery Planning Regulation applies to banks and financial institutions in the UAE, including banks and insurance companies in the UAE, branches of foreign banks and branches of foreign insurance companies and any other licensed financial institutions designated by the UAE Central Bank.
Financial Institutions must have a recovery plan in place by 30 June 2024. Minimum requirements for the contents of a recovery plan include, among other things, a range of recovery options to restore viability (together with detailed preparatory arrangements for each option), stress testing scenarios and business continuity arrangements. Recovery options are capital, liquidity, restructuring and other measures a financial institution can implement in response to stress or expected stress to restore or maintain its viability or financial position.
The recovery plan must be submitted annually to the UAE Central Bank and reviewed on a regular basis (at least annually for domestic systemically important banks, and generally otherwise at least every two years for other financial institutions).
Failure to comply with the Recovery Planning Regulation may result in penalties being imposed, which may include supervisory action and administrative or financial sanctions.
Amended SCA Corporate Governance Code
Public joint stock companies whose securities are listed on the Dubai Financial Market (DFM) or the Abu Dhabi Securities Exchange (ADX) must comply with revised corporate governance rules issued by the Securities and Commodities Authority (the “SCA”) in January 2024. The corporate governance rules are set out in SCA Board of Directors’ Decision No.(3/RM) of 2020 (the “Governance Code”), the most recent amendments to which are set out in SCA’s Board of Directors Decision No.(2/R.M) of 2024.
The Governance Code applies to listed UAE companies, their board members, managers, chairman, and auditors (except for banks and financial institutions that are subject to the regulation of the UAE Central Bank). The framework of rules addresses matter such as board composition, board meetings and resolutions, registers of insiders and related parties, investor relations, auditors, committees and risk and compliance matters.
Key areas that have been updated in the latest changes to the Governance Code include:
- at least one third of the members of the Board must be non-executive and independent;
- a Managing Director may not act as the chief executive officer or general manager of any other company;
- minimum qualifications for the Secretary of the Board of Directors require a university degree and relevant practical experience; and
- the definition of related parties is extended to include a company’s parent company and its significant shareholders.
The revised Governance Code also expressly confirms that companies in free zone companies and financial free zone companies are exempt.
New Finance Companies Regulations regulate BNPL
"Buy-now, pay-later" (“BNPL”) activities are regulated by the UAE Central Bank for the first time pursuant to the new Finance Companies Regulation (“Finance Companies Regulation”) issued in September 2023 (UAE Central Bank Circular No. 3/2023). The Finance Companies Regulation repealed and replaced the previous Finance Companies Regulation issued in 2018.
Under the new framework, BNPL activities are regulated as a form of “Short-Term Credit”, defined as any credit granted to a borrower for a period of not more than twelve months, for the express purpose of purchasing specified, identifiable goods or services, without interest being charged, a lien being placed against collateral, or a security deposit being required from the borrower.
“Restricted Licence Finance Companies” may offer Short-Term Credit facilities, and Finance Companies may contract with agents to offer Short-Term Credit facilities. A licence is required to carry out these activities in the UAE. Generally, a license for a Restricted Licence Finance Company will be granted for an initial period of three years (which is renewable for subsequent three-year periods).
The provision of Short-Term Credit facilities is subject to caps on the amount of credit that may be made available to a borrower, caps on the total fees charged to a borrower and providers must comply with consumer protection rules published by the UAE Central Bank.
Revised moveable assets registration fees
The fees applicable to registrations relating to security over moveable assets on the UAE’s online moveable assets register, the Emirates Integrated Registries Company (the “EIRC”), have changed with effect from February 2024. Movable assets may be mortgaged in accordance with Federal Law No.4 of 2020 on securing the rights in moveables and related implementing regulations, set out in Cabinet Decision No.29 of 2021, as amended by Cabinet Decision No.129 of 2023.
The fees payable to register security with the EIRC are now tiered according to the period of the notice (less than 12 months, 12-24 months, 2-5 years, 5-10 years or 10 years or more), rather than a flat fee of AED 100, as previously. The list of actions capable of being registered with the EIRC for which the EIRC charges a fee is also more detailed and now includes, for example, the registration extension and enforcement actions.
UAE Federal Supreme Court decision restricts compound interest
The UAE Federal Supreme Court has affirmed statutory restrictions on compound interest set out in Federal Law No. 50 of 2022 (the “Commercial Transactions Law”) and Federal Decree Law No.14 of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities (as amended) (the “Banking Law”).
In Appeal No.1254 of 2023 issued on 10 January 2024, the Federal Supreme Court dismissed an appeal against a judgment of the lower court for payment of principal and interest under a credit facility in which an expert’s report was determined to be flawed for several reasons, including because the basis of the interest calculation involved compounding interest.
The Commercial Transactions Law expressly prohibits the charging of compound interest. Prior to the enactment of the new Commercial Transactions Law in 2022, compound interest was not expressly regulated and the UAE courts had reached different conclusions in relation to the validity and enforceability of compound interest provisions. An amendment to the Banking Law also enacted in 2022 (Federal Law No. 23 of 2022) provides that banks and financial institutions may not charge compound interest.
