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Q&A on the impact of the new decree by law and articles of association
Q3. What is the impact of the Decree Law on Etisalats articles of association?
The issuance of the Decree Law, under which Etisalat legal form was converted from Corporation to Public
Joint Stock Company, requires to be followed by the issuance of a new Articles of Association. The Commercial
Companies Law necessitates from all the companies, which are subject to its provisions, to have an Articles of
Association determining the rights, duties and powers of the shareholders and members of the board of
directors. Such Articles shall also define, from amongst other matters, the terms and conditions for holding
the meetings of the Board of the Directors and the General assembly, and the controls and rules of engaging
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the external auditor and setting its fees. As an exception to the provisions of the Commercial Companies Law
with regard to the party concerned with issuing the Articles of Association, namely the General Assembly, the
Decree Law vested such powers with the Cabinet, whereas the General Assembly is entitled to enter any future
amendments to such Articles subject to obtaining the required approvals from the competent regulatory
authorities.
Q4. Will Etisalat Group be subject to the UAE Commercial Companies Law?
Yes unless otherwise stated in the New Law or New AoA, Etisalat as a UAE public joint stock company will be
subject to the provisions of Federal Law No. 2 of 2015 and its amendments (the Commercial Companies
Law).
Q5. What is the process for implementing the changes contemplated by the New Law?
Etisalat Group shall undertake the procedures required to implement and align its status with the changes
contemplated by the New Law, within one year, provided that such period may be renewed by a decision of
the Special Shareholder.
Q8. Will the UAE Federal Government decrease its shareholding in Etisalat Group?
In accordance with the New Law and the New AoA, the Government Shareholder shall at all times own at least
51% of Etisalat Groups issued share capital unless otherwise approved by the Special Shareholder.
Q9. How many Board seats can the Government Shareholder appoint directors to?
The Government Shareholder is entitled to appoint one Board member for each 8.5% of Etisalat Groups share
capital that it owns. At its current ownership level of 60%, it has the right to appoint seven out of Etisalat
Groups eleven Board members.
Q11. Given the new Decree Law, what is the process for Non-UAE Nationals to own Etisalat Groups
shares?
Following setting of the Non-UAE Nationals criteria in the ADX systems based on the guidelines issued by
Etisalat Groups board of directors and the subsequent announcement by Etisalat Group to the Abu Dhabi
Stock Exchange (ADX), Non-UAE Nationals will be allowed to purchase shares on the ADX.
Q12. Will the Non-UAE Nationals have the right to dividends distributed by the company to
shareholders?
The Non-UAE Nationals will have the same rights to receive dividends as other ordinary shareholders of
Etisalat Group. Any payment of dividends by Etisalat Group is subject to the recommendation of the Board
and the approval of the general assembly.
Q13. Are pre-emption rights of Etisalat Groups shareholders (whether UAE or Non-UAE Nationals)
impacted?
The pre-emption rights of Etisalat Groups shareholders (both UAE and Non-UAE Nationals) with respect to
the issuance of ordinary shares are not impacted. Certain capital increases, however, are not subject to such
pre-emption rights (such as a sale of shares to a strategic partner, converting certain debt to equity or issuing
shares as part of an employee share incentive scheme).
Q14. Once Non-UAE Nationals are permitted to acquire shares in Etisalat Group, what safeguards
are in place to ensure this right will not be withdrawn?
Any change to the New Law may only be made by the enactment of further legislation amending or repealing
it.
On Tuesday, September 15th, 2015, Non-UAE individuals (foreign individuals, foreign corporate entities, UAE
free zone entities and UAE incorporated entities) will start trading in Etisalat Groups shares on Abu Dhabi
Stock Exchange (ADX).
Q16. What is the maximum number of shares a Non-UAE National is entitled to hold?
No shareholder (i.e. UAE national or Non-UAE Nationals), together with its Associated Persons (as defined
below) are allowed to own more than 5% of the issued share capital of Etisalat Group without the approval of
the General Assembly and Special Shareholder. In addition to this, voting at the General Assembly by any
shareholder (other than the Special Shareholder), together with its Associated Persons, is capped at 5% and
no proxy holder may in that capacity represent more than 5% of shares.
Associated Persons means: (i) with respect to legal/judicial persons, the entities controlling them (through
direct or indirect ownership of at least 50% of the voting rights in such entities), or controlled by them or
where they are jointly controlled by an entity; and (ii) with respect to natural persons, the spouse and children
of such person.
Q18. Does the ownership limit of 20% include strategic foreign investors who are Non-UAE
Nationals?
While the changes allow Non-UAE Nationals to participate in the shareholding of Etisalat Group, it does not
make a distinction between strategic and other investors and it imposes a general limit of 20% on the NonUAE Nationals ownership of Etisalat Group.
Q19. What are the rights of the Non-UAE Nationals in the General Assembly meetings?
Non-UAE Nationals have the right to receive an invitation to attend the General Assembly of the Company but
without the right to call for the General Assembly meeting, be counted in the quorum, or vote on its
resolutions. Non-UAE Nationals may not participate in the discussions of the General Assembly unless the
chairman of the General Assembly gives permission to do so during the relevant meeting.
Q22. Are the Restricted Shares owned by Non-UAE Nationals considered a separate class of
shares?
No, the Restricted Shares owned by Non-UAE Nationals are ordinary shares that are subject to certain
restrictions set out in the New AoA. The restrictions on the shares owned by Non-UAE Nationals will be lifted
if and when those shares are owned by UAE nationals.
Q25. Are there any restrictions on the legal form of Non-UAE National?
The Non-UAE Nationals may be a natural person or a judicial/legal entity. For the avoidance of doubt, UAE
free zone entities (including those wholly-owned by UAE nationals) wishing to own shares in Etisalat Group
shall also be considered non-UAE Nationals.
Q26. Would a local UAE company with foreign ownership be considered as "Non-UAE National?
A UAE onshore entity that is not wholly-owned by UAE nationals (or owned by other UAE onshore entities
that are wholly-owned by UAE nationals) will be considered non-UAE National.
Q27. Would a foreign entity (e.g. Cayman Islands or BVI incorporate company) wholly-owned by
UAE nationals be considered non-UAE National ?
Entities incorporated outside of the UAE will be considered non-UAE Nationals, even if all of the shareholders
are UAE nationals.
Q28. Would international and regional organizations operating in the UAE be considered Non-UAE
Nationals?
Yes, international and regional organizations operating in the UAE would be considered Non-UAE Nationals
unless they are wholly-owned by UAE nationals, the Federal UAE government or a local Emirate government
and are legally established onshore in the UAE.
Q29. Would an entity established and registered in a free zone in the UAE and wholly-owned by
UAE nationals be considered as a UAE person or a Non-UAE National?
Entities established offshore, including UAE free zones, will be considered Non-UAE Nationals, even if they are
wholly-owned by UAE nationals.
Q32. Can Etisalat Group borrow money or raise debt in the capital markets following the
implementation of the changes?
Etisalat Group may continue to borrow money and/or issue debt securities (including bonds, sukuk and
convertible debt), but in some cases approval by a special resolution issued by the General Assembly of
shareholders and the consent of the Special Shareholder may be required.
ADDITIONAL QUESTIONS
Q33. There is reference to a UAE operating company. Is this something that is being implemented
by Etisalat Group?
A UAE operating company is to be formed and the UAE assets and licenses will be transferred to this
company. At this time, the Board is considering the impact of such a re-organization and Etisalat Group will
provide an update in due course to address such decisions if they are taken. The goal of Etisalat Group is to
create an efficient and pragmatic structure that will help support the success of the company for the years to
come.
Q34. Is there a limitation on how many shares a shareholder and its affiliates or family can directly
or indirectly own?
As discussed in Q16 and other than the Government Shareholder, no shareholder, together with its
Associated Persons, may own more than 5% of Etisalat Groups share capital without the approval of the
General Assembly and the Special Shareholder. In addition, no shareholder other than the Government
Shareholder may hold more than 5% of Etisalat Groups voting rights in the General Assembly.
Q36. What are the voting requirements for special resolutions of the General Assembly?
There are two types of General Assembly resolutions: ordinary resolutions and special resolutions. Ordinary
resolutions are passed by a simple majority of the shares represented at a quorate General Assembly
meeting and special resolutions are passed by at least 75% of the shares represented at a quorate General
Assembly meeting. Non-UAE Nationals are not entitled to vote in the General Assembly.
Q37. What is the role of Special Shareholder upon the liquidation of Etisalat Group?
The Special Shareholder is granted the priority right to purchase all or a portion of Etisalat Group's assets
upon liquidation.
In addition, the Special Shareholder has the right to manage Etisalat Group's telecommunications network
during the period of the companys liquidation, bankruptcy, or insolvency or if the license issued to Etisalat
Group to operate its telecommunications network in the UAE or provide telecommunications services
therein is revoked or expired.
The Special Shareholder will also have the right to receive compensation for the costs and expenses incurred
in the course of managing the company assets during such period, which shall be considered a government
debt and take priority over other creditors.
Q38. Are there any additional disclosure requirements for the FIs?
The Company shall comply with the disclosure requirements as stipulated on the ADX, where no distinction
has been drawn between the UAE and Non-UAE Nationals in this context. For instance, the Company shall
disclose the names of the shareholders whose stake, together with their minor children, reaches 5% or more
of the Companys shares. The Company shall abide by such requirement whenever the shareholding reaches
1% of the Companys share over and above the afore-said 5%.
It is worth mentioning that the New Articles of Association stipulates that any natural person or legal person
becoming an owner or acquiring directly or indirectly 5% or more of the ordinary shares in the Company,
individually or through his Associated Persons, shall notify the ADX in this regard, subject to any lesser
percentage or requirement determined by law and the applied regulations. Under Decision No (3/R) of 2000
concerning the Regulations as to Disclosure and Transparency passed by the Board of Directors of Securities
and Commodities Authority in the UAE, certain shareholding limits are currently required to be disclosed. For
example, Article No. 3 of the above Decision requires any natural person whose shareholding along with his
minor children reaches 5% or more of the listed Companys shares shall immediately notify ADX of the same.
Article No. 4 of the above Decision requires any legal person whose shareholding reaches 5% or more of the
listed Companys shares shall immediately notify ADX of the same. Article 5 requires any natural person whose
shareholding along with his minor children 10% or more of the shares of the listed Companys affiliates, sister
companies or allied companies shall immediately notify ADX of the that. The same is applicable to any legal
persons. Article 6 of the above Decision requires that every natural person or corporate person owning 10%
and more of the Companys shares and intends to buy 20% or more of the shares of a listed company shall
notify the Authority thereof before submitting the purchase order for execution inside the market hall. The
CEO of SCA may reject the order if he believed that the transaction will be detrimental to the interests of the
market or the national economy.
Q40. Is it possible to obtain the foreign ownership percentage in Etisalat Group at any point of
time?
Trading in Etisalat Groups shares and the shareholder register is managed by the ADX.
Q41. Will new share certificates be issued post amending the legal status of Etisalat Group from a
Corporation to a Public Joint Stock Company?
Share certificates will be kept in electronic format through the ADX and will reflect the current status of
Etisalat Group.