Groundbreaking Agreement To Create UAE's First Corporate Governance Code

by Lorys Charalambous, for LawAndTax-News.com, Cyprus

05 July 2006

Hawkamah, the Institute for Corporate Governance in the Gulf region, and Emirates Securities and Commodities Authority (ESCA) have signed a groundbreaking memorandum of understanding (MoU) to develop the first ever corporate governance code for listed companies in the UAE.

The MoU was signed by Abdulla Al Turaifi, CEO of ESCA and Dr Nasser Saidi, Executive Director of Hawkamah.

ESCA is the first capital market authority in the region which will develop and introduce corporate governance codes for listed companies consistent with international standards and best practice. The framework for the codes will include the principles of transparency, disclosure, protection of investor and shareholder rights, responsibilities of the board and the importance of independent directors, as well as financial reporting in accordance with international accounting and auditing standards.

It is hoped by the authorities that the introduction of good corporate governance principles and practice will contribute to building investor confidence in financial markets and listed companies.

The MoU has three broad objectives, including: highlighting of public awareness as regards corporate governance in securities and commodities markets of UAE; the exchange of information concerning corporate governance in such markets between the parties concerned; and customizing training programmes to accommodate the relevant cadres in the markets, brokerage companies, and listed companies in the field of corporate governance applications.

Mr. Abdullah Al-Turifi commented: "These codes will help build confidence in business organizations and its host economy and provide strong incentives for international trade and investment in both.”

He added that the signing of the memorandum would combat current challenges met by both capital markets and regulating authorities.

"Such an agreement will be a further tool to ensure justice and transparency in capital markets," he noted.

According to Dr Omar Bin Sulaiman, Governor of the Dubai International Financial Centre, the MoU represents "a very significant move" for the UAE and the region.

"Not only will the MoU help establish the first ever corporate governance code for capital markets in the UAE, but will also catalyze the need for reform in other regional markets," he stated.

“This MoU is also very significant for the DIFC because it marks a major step forward in achieving our key objective – working towards regional development and economic diversification and growth. The best way to achieve this growth and diversification is through improving the performance and health of our corporations. It is achievable only by implementing sound governance practices," he added.

Dr Saidi stated that the signing is in line with the objective of developing robust capital markets in the UAE.

"This is also the first step towards bridging the corporate governance gap between international and regional capital markets and moving towards economic and financial integration through the alignment and harmonization of corporate governance standards," he observed.

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