Readiness Considerations

The corporate governance requirements for a company listed on Nasdaq Dubai are similar to those applicable in the UK. The DIFC Markets Law, which is administered by the DFSA, imposes an overarching governance principle, requiring a company to have a corporate governance framework which is adequate to promote prudent and sound management in the long-term interests of the company and its shareholders.

The overarching principle imposed by the Markets Law is supported by seven subsidiary governance principles, which have the force of binding rules. They are designed to provide flexibility so that a company may achieve the outcome intended by the principles whilst taking into account the nature, scale and complexity of its business – a “comply or explain” approach:

• Board of Directors: Every listed company must have an effective Board which is collectively accountable for ensuring sound and prudent management.

• Division of responsibilities: A separation must be maintained between the functions of setting a company’s strategic aims and oversight on the one hand, and day-to-day management of the business on the other.

• Board composition and resources: The Board and its committees must have the appropriate balance of skills, experience, independence and knowledge of the company’s business, as well as adequate resources, including access to expertise as required and timely and comprehensive information relating to the affairs of the company.

• Risk management and internal control systems: The Board must ensure that the company has an effective and well defined risk management, internal control and compliance framework.

• Shareholder rights and effective dialogue: This principle refers to the safeguarding of shareholder rights and protection of minority shareholders from abuse or oppression.

• Position and prospects: The Board must ensure that the company’s financial and other reports present an accurate, balanced and understandable assessment of the company’s financial position and prospects by ensuring that effective internal risk control and reporting requirements are in place.

• Remuneration: The Board must ensure that the company has remuneration structures and strategies that are well aligned with its long-term interests.

The Markets Rules contain other corporate governance provisions, including the duty of Directors to act in good faith and on an informed basis and to exercise due diligence in discharging their functions.

Information that was previously shared only with a small stakeholder base as a private company needs to be made available to a much wider base when a company is public. Understanding what information needs to be disclosed, and when, is a fundamental element of transitioning from being a private to public company.

Management should assess the company’s ability to comply with ongoing obligations such as publishing annual financial statements or interim financial information within exchange reporting timeframes. In addition, management will need to assess adequacy of internal financial processes and controls as a public company.

Investors will keenly assess the management team and their credentials for taking the business they invest in to the next level. Accordingly, it is important as part of the listing preparation that the Board critically assesses company management and determines if changes or enhancements need to be made and where.

The current group structure should be reviewed to to optimise reporting lines, make use of beneficial tax jurisdictions and streamline legal structures. This generally allows management to better explain the company’s equity story.