Minority Investor Protection
Legal Framework for Minority Investor Protection
The Securities and Commodities Authority (SCA) developed some principles aimed at promoting governance and protecting minority investors through appropriate procedures and initiatives that will serve to urge minority shareholders to take an active part in general meetings of shareholders and in corporate dealings with related parties.
In order to facilitate the exercise of the rights of shareholders, especially minority shareholders of joint-stock companies listed on exchanges operating in the United Arab Emirates, and to ensure their active involvement, SCA identified some rules and regulations to protect these shareholders. The CCL provisions and SCA’s decisions contained a number of ways to protect minority shareholders of listed companies, including:
Access to deals concluded with related parties:
If the company concludes any deals with related parties, shareholders owning 5 percent or more of the shares of that company have the right to:
- Demand access to the company’s books, records, and any other documentation relating to these deals.
- Bring a lawsuit before the competent court involving deals concluded with related parties to oblige the parties to the deal to provide all information and documentation related to the deal, whether such information and documentation directly establish the facts of the lawsuit, are related to these facts, or lead to the discovery of information that helps to uncover the true facts.
- If it is established that the deal is unfair or involves conflict of interest and harms the rest of the shareholders, the competent civil court may rule to call off the deal and oblige the related parties to pay to the company any profits or benefits generated plus the reparations, if damage to the company was proved.
Calling a general meeting of shareholders
SCA, the auditing company, or one or more shareholders owning together a minimum of 20 percent of the shares of a company may, for serious reasons, direct a request to the board of directors to have a general meeting called. In such case, the board must call the meeting within a period of five days from the submission of the request.
Shareholders owning together 10 percent of the shares of a company have the right to call an extraordinary general meeting to have a special resolution passed. To do so, they must direct a request to SCA and must provide all the supporting documents.
Adding items to the agenda of the general meeting
First: before the general meeting is convened and after sending out the notice:
Shareholders owning 5 percent of the shares of a company may direct a request to SCA to place an additional item or more on the agenda of the general meeting within five days from the date the company calls the meeting.
Second: during the general meeting:
- The request to place an item on the agenda must be submitted by a number of shareholders representing together 10 percent of the share capital of a listed company.
- The item must be clear and specific and must not contradict the CCL or the implementing decisions and regulations.
- The request must be made in writing and must be signed by the person submitting it.
- The request must be directed to the chair of the meeting before the discussion of the agenda begins.
- The chair must agree to the addition of the item. The person submitting the request has the right, if the request was turned down, to present it to the general meeting before the discussion of the agenda begins. Additional items may be placed on the agenda by a majority vote of the shares represented at the meeting.
Suspending general meeting resolutions
- SCA may, upon a request from shareholders owning a minimum of 5 percent of the shares of a company, issue a decision to suspend resolutions that inflict damage on these shareholders, favor certain shareholders, or bring particular benefit to the board members or others, if the reasons behind the request are proved to be serious.
- The request to suspend the resolutions will not be considered if submitted after three working days from the date the resolutions are passed.
Important guidelines for helping minority investors to exercise their rights:
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Dear Shareholder,
Did you know that robust governance regulations are central to corporate prosperity and long-term growth? The board of directors must be committed to promoting value that has a direct impact on shareholders while taking into consideration the interests of all parties involved, including shareholders and suppliers, as well as the interests of the society in which the company operates. Therefore, having robust governance standards maximizes access to capital and boosts economic growth. Corporate governance also has social, investment, and environmental dimensions.
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Dear Shareholder,
It is your right to have the chance to discuss with the board of directors the performance of the company and its plan for the coming period at the general meeting. As such, always make sure to take an active part in the meetings and to vote on all resolutions to the company’s advantage and to your advantage as a shareholder.
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Dear Shareholder,
Corporate governance ensures the provision of protection for shareholders while limiting the use of power in a way that contradicts the public good. It facilitates supervision and oversight of corporate performance through defining internal control frameworks and creating specialized committees, thus holding the board accountable to shareholders and holding the company accountable for its practices.
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Dear Shareholder,
Did you know that a number of shareholders owning together a minimum of 10 percent of the shares of a company have the right to add any item to the agenda of the general meeting before the discussion of the agenda begins? The board of directors must comply with the request to add the item. Otherwise, the general meeting will have the right to discuss the addition.
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Dear Shareholder,
Always make sure to regularly review the financial standing of the company and the disclosures posted on its website or on the exchanges’ websites as it is important to have knowledge of all matters relating to the company’s decisions and economic growth. This will help you make calculated decisions.
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Dear Shareholder,
Make sure to routinely examine and read all materials published or announced by the company prior to the general meeting so that you can make informed decisions and your discussions are based on knowledge.
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Dear Shareholder,
Did you know that you are considered a partner at the company and an owner of a stake in all its assets, equivalent to the shares you own? The scope of your liability is based on the stake you own.
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Dear Shareholder,
Did you know that you have the right to receive a copy of the memorandum and articles of association? The legislator obliges companies to post a copy of their memorandum of association on their website, along with any other information or documentation specified bySCA.
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Dear Shareholder,
Did you know that you can have access to the company’s books, records, and any other documentation relating to a deal the company concluded with any related party, subject to permission from the board or approval from the general meeting, or as provided for in the memorandum of association?
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Dear Shareholder,
You can obtain key information about a company from the governance report upon a decision fromSCA. The report includes a presentation of some operations the company conducted during the current year, which shareholders need to know to make their investment decisions. This report is a very important report as it contains key information that may help you to make investment decisions.
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Dear Shareholder,
Did you know that you can run for election to the board of directors of the company and can elect members to its board, in accordance with the terms and conditions provided for inSCA’s rules and regulations and the articles of association of the company?
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If you have any questions regarding your rights as an investor, do not hesitate to contact the Minority Investors Protection Team at the follwing E-mail address:
customerhappiness@sca.ae