Chapter Twenty-three: Corporate Governance in Dubai
Dubai, in the United Arab Emirates, is emerging as a modern financial hub, with ambitious, well-constructed and far-reaching plans to expand it’s presence in the international financial arena.
Other emerging economies around the world are also rapidly moving to flex their fiscal muscle and in response to the fast economic growth within the Middle East, the UAE has recently shifted its focus to the implementation and enforcement of stronger corporate governance. Key regulators in the UAE have strengthened the regulatory requirements with enhanced laws, guidelines and decrees to bring the UAE in line with global best practices.
For the non-oil producing regions in the Middle East, an evolution of the laws and regulations enforcing corporate governance has been a necessary shift in policy-making, in a strong bid to attract more foreign investment.
Dubai launched its Dubai Urban Master Plan 2040 earlier this year and it essentially outlines a solid emphasis on the development of economic growth powered by more infrastructure. The goal is not only to offer greater employment opportunities and stimulate the economy but also to develop an ultra-modern, globally attractive destination for visitors, businesses, and investors.
Currently, in the UAE, corporate governance is predominantly focusing on listed companies. A policing of compliance to the regulations has been strengthened, with steep penalties in cases of contravention of the rules. Not only the corporation itself, but its board of directors, management, and even the company auditors can be held liable for contraventions.
These recent developments in the UAE, with corporate governance requirements being introduced to better regulate private sector companies, also include financial and banking institutions which are regulated by the UAE Central Bank. The Securities and Commodities Authority (SCA) has introduced a Corporate Governance Code which dictates how companies must operate. The major features of this code include:
- A minimum of one-third of the board’s directors must be independent
- the chairman and managing director must be two different individuals
- A meeting of the board of directors must occur at a minimum every two months
- An audit committee must be appointed
- A nomination and remuneration committee must be formed
- There must be a corporate compliance officer appointed
- An internal control system must be established to evaluate all implementations
- An annual report must be submitted to the SCA
The UAE Central Bank also upholds minimum standards of conduct that require separation of ownership and control, and separation of the board committees, to meet international standards. The bank stipulates regulatory provisions, including the following:
- The appointment of an independent chairman, and CEO.
- A separation between the role of directors and the role of management
- The appointment of senior personnel must be subject to approval by the bank
- The establishment of a Corporate Standards Manual
The UAE has also committed to the Common Reporting Standard (CRS) developed by the OECD to implement a global standard for the automatic exchange of financial account information, in order to increase tax compliance.
The overall shift in the introduction and greater regulation and stability in corporate governance in the UAE has established an enviable foundation for companies in Dubai to conduct business and sustain growth by safeguarding internationally acceptable business practices. Investors can be confident that they are operating in a modern financial environment that will promote their interests and provide lucrative new opportunities. The new standards ensure that all stakeholders can benefit from an assurance of the long-term growth and sustainability of their interests.
When you need expert guidance in entering the market or calculating promising investment opportunities in one of the world’s most business-friendly environments, you can rely on Dubai’s Turnkey Family Office to provide reliable business consultancy services. Contact us at https://www.turnkeyfo.com/
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