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Compliance Corner: United Arab Emirates, SPACs

Editorial Staff

26 January 2022

These “blank cheque” entities, which have boomed in the US – until recently – are also taking root in Europe, the Middle East and Asia. 

The United Arab Emirates' Securities and Commodities Authority has given the green light to a regulatory framework for special purpose acquisition companies, entities that have already boomed in the US. This will be the first time a Gulf state has made such a move.

The regulation also allows sponsors abroad to apply for approval to list their SPACs on the Abu Dhabi Securities Exchange (ADX), according to a statement yesterday from the Abu Dhabi Media Office. 

Jurisdictions are competing to attract SPACs, or “blank-cheque” companies. They are raised by issuing shares to finance acquisitions, offering an alternative exit route strategy for business creators. In the US, the sector has boomed, although it has also drawn regulatory frowns because of the sheer pace of capital-raising. SPACs have been able to list in Hong Kong – an important IPO market – since 1 January. 

New UK rules stipulating how UK-based SPACs operate took effect from 10 August last year, with the express idea of boosting the sector. (See here for an overview of the SPACs story.)

“The Abu Dhabi Securities Exchange (ADX) welcomes the Securities and Commodities Authority (SCA)’s approval of the region’s first Special Purpose Acquisition Company (SPAC) regulatory framework, paving the way for the listing of the first SPAC on the ADX this year,” ADX said in a statement.

“Created with attractive incentives and an innovative share structure, the UAE SPAC regulations provide sponsors with a seamless and efficient process to take companies public,” ADX said.

The organisation said that SPAC sponsors must raise at least AED 100 million ($27.22 million) in the initial public offering and units sold will comprise warrants that give investors and sponsors the right to convert them into shares. To protect investors, once the IPO is complete a SPAC must ensure that 90 per cent of proceeds are placed in a non-interest-bearing account.