The operations and guidelines pertaining to Public Joint Stock Companies have also undergone changes under the New Law, with the major changes being:
Director's Remuneration: This is restricted to a maximum of 10% of the financial year's net income (calculated after depreciation and reserve deductions). A board member may be given a lump sum fee not exceeding AED 200,000 at the conclusion of the financial year if the firm has not made profits for that year; this may change by the company's constitutional documents and approval by the General Assembly.
Replacement of Director: If a director resigns before the end of their term, the board has the authority to appoint a substitute within 30 days, who must be introduced to the General Assembly at its first meeting for approval or to appoint someone else. If the new director is approved, he or she will serve the remainder of the prior director's term. If the board fails to appoint a director during the time allotted, the board must hold an election to elect a new director at the first meeting of the General Assembly, and the newly chosen director will serve for the remainder of the predecessor's tenure.
Requirements for Contributions from the Founders': The New Companies Law has repealed the minimum and maximum percentages of capital whereby the founders of a Public Joint Stock Company may subscribe to additional shares upon public sale. Rather than being obligated to subscribe to a minimum of 30% and a maximum of 70% before the invitations to the public subscription, the founders may now subscribe to new shares up to the percentage specified in the prospectus and subject to the SCA's requirements.
Conversion to a Public Joint Stock Company: The New Companies Law no longer needs a 10% net operating profit test in the two years before the conversion application.
Sale of Part of Public Joint Stock Company Shares during Conversion: The proportion of shares that can be offered for sale while converting from a private joint-stock company to a public joint-stock company is no longer limited by the New Companies Law (the maximum limit on a sale of shares was set at 70 per cent under the Old Companies Law). The SCA will now determine the proportion of the total sale shares and new shares being issued as part of an IPO on conversion.
Changes to Founders Share Trading Rights: The founders of a PJSC are no longer restricted from selling their shares after the converted business is listed, as per the New Companies Law. Moreover, the founders of a PJSC are no longer confined from trading their shares after the converted business is listed.
Changes to Subscription Period:
- There is no longer a mandatory minimum duration for the general public to subscribe for shares in an IPO (10 days in the Old Companies Law), and the term now refers to the period mentioned in the companies' prospectus, which cannot exceed 30 working days. On application to the SCA, the subscription period for the IPO may be prolonged for an extra period, but not beyond the final date set forth in the prospectus. This changes the Old Companies Law's stringent stance, which prohibited any extension to 10 business days.
- After the subscription time has expired, the founders of a PJSC may subscribe for any unsubscribed shares in the listings offered, subject to SCA restrictions. Previously, the founders were only able to subscribe for up to 70% of the shares, and if there were any remaining unsubscribed shares, the PJSC's formation would be cancelled.
- Additionally, the New Companies Law eliminates the prohibition on PJSC founders trading their shares after the converted PJSC is listed.
Issuing Discounted Shares: A PSJC can now issue shares at a discount if the market price of the shares drops below the nominal value, subject to SCA permission and the adoption of a special resolution.
Nominal Value of Shares: The value of a PJSC's shares can now be specified. As a result, you are no longer limited to a minimum of AED 1 and a maximum of AED 100. The nominal price of shares is currently determined solely by the Articles of Association.
Division of a PJSC:
- Under the New Law, a PJSC can divide certain of its assets, liabilities, rights, and obligations
- Horizontally - in which the same shareholders own directly the shares of the resulting company pro-rata to their shareholding in the parent company; or
- Vertically - in which the shareholders of the parent company own the new shares through the new division subsidiary.
- These provisions intend to further facilitate spin-off and demerger transactions.