United Arab Emirates Securities and Commodities Authority
The Governance Code applies to Public Joint-Stock Companies listed on the ADX or the DFM and does not apply to foreign companies listed on such markets. Public companies established in UAE free zones that are able to list on the DFM and are so listed must also comply with the Governance Code (pursuant to the DFM Regulations for Listing Free Zone Companies).
From 14 March 2021 it is now mandatory for UAE Public Joint Stock Companies (PJSCs) listed on either the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM) to have at least one female board member.
This follows one of several decisions made by the United Arab Emirates Securities and Commodities Authority (SCA) at its Board meeting on 14 March 2021 (SCA Decision). In order to promote diversity in the UAE and beyond, since 2016 SCA has stipulated a minimum female representation requirement of 20% on the board of directors of a PJSC. A PJSC must also disclose the percentage of female board representation in its annual governance report, together with a requirement for the PJSC’s board to establish policies concerning gender diversity.
These requirements are set out in Articles 9(3) and (4) of the SCA corporate governance rules under Chairman of SCA Board Decision No. (03 R.M.) of 2020 concerning adopting the Corporate Governance Guide for Public Joint Stock Companies (Governance Code). The Governance Code, which was published on 27 February 2020 and came into force on 28 April 2020, repealed the previous corporate governance rules (Chairman of SCA Board Decision No. (7 R.M) of 2016 concerning the Standards of Institutional Discipline and Governance of Public Shareholding Companies).
The Governance Code introduced new corporate governance rules for PJSCs in line with international best practice which aim to promote accountability, fairness, gender diversity and transparency. While compliance with all of the obligations of the Governance Code are mandatory, exceptionally, compliance with Article 9(3) of the Governance Code was on a “comply or explain” basis whereby non-compliance was acceptable as long as this was reasonably explained in the PJSC’s annual report and governance report.
However, pursuant to the SCA Decision and the subsequent change to the Governance Code through the issuance of Chairman of SCA Board Resolution No. (08/R.M) of 2020 concerning amendment to the Corporate Governance Guide for Public Joint-Stock Companies, it is now mandatory to appoint at least one female member to the Board of all UAE PJSCs and there is no longer the possibility of making disclosure around non-compliance with such requirement. The minimum female representation requirement of 20% on the board of directors of a PJSC on a comply or explain basis has fallen away.