ADGM Paving the Way for UAE Capital Market Growth

On 2 November 2020, the Board of the Securities and Commodities Authority (SCA) issued Resolution no. 25/RM of 2020 (Resolution) that amended the provisions of SCA Resolution no. 11/RM of 2016 on the Regulation of Offering and Issuance of Shares of Joint Stock Companies. Under the Resolution, it became possible for companies registered in UAE free zones, one of them being Abu Dhabi Global Market (ADGM), to offer their shares for public subscription in the UAE outside of their free zone of incorporation if they satisfy the relevant requirements. The collaborative efforts between the SCA and the Registration Authority (RA) of ADGM, solidified by the signing of a MoU on 21 September 2021, have significantly streamlined the integration of ADGM entities into the broader UAE capital markets.

“This development expands the scope for companies in UAE free zones, particularly those in ADGM, to make their shares available for public subscription in the broader UAE market, extending beyond their original free zone boundaries. In addition, it will contribute to an increase in IPOs and direct listings on the country’s stock exchanges, effectively sustaining market momentum and offering greater opportunities to investors that attract foreign investment inflows”, said Arvind Ramamurthy, Chief of Market Development, ADGM. 

Companies incorporated in ADGM are generally not subject to any withholding tax or restrictions on the repatriation of profits and can benefit from corporate tax concessions and any applicable Double Tax Treaties between the UAE and foreign governments. Further, ADGM companies are permitted to have 100% foreign ownership and benefit from ADGM’s legal system, which is based on the English common law.  Since the passing of the Resolution, several businesses have taken advantage of the new rules to utilise ADGM Public Limited Companies (PLCs) as their listing vehicles. The structure typically consists of a listed holding company incorporated in ADGM, with operating subsidiaries in UAE or abroad.

In 2022, the UAE accounted for 3 of the 10 largest initial public offerings globally, of which 2 were companies incorporated in ADGM and listed on the Abu Dhabi Securities Exchange (ADX), namely, Borouge PLC and Americana Restaurants PLC. In addition, ADNOC Gas PLC, which by market capitalisation represented the single largest IPO globally in the first quarter of 2023, was also incorporated as an ADGM company and listed on the ADX. Other notable ADGM companies that have been listed on the ADX include ADNOC Logistics & Services PLC, Bayanat AI PLC, Burjeel Holdings PLC, Fertiglobe PLC, Invictus Investment Company PLC and Presight AI Holding PLC.

“As the capital markets in the UAE attract both local and foreign capital, ADGM remains well-positioned as an attractive jurisdiction for companies seeking to access the UAE capital markets and benefit from its strong opportunities. Both Abu Dhabi and ADGM recognise the strategic importance they bring along and have focussed efforts on providing an enabling ecosystem, including a business-friendly regulatory environment, a robust legal framework based on the direct application of the English Common Law, world-class commercial infrastructure, and its agile and innovative platform,” he added.

Looking ahead, with the benefits that come with establishing in ADGM combined with the growing success in the development of capital markets in the UAE that is attracting local and foreign capital, it is expected for the trends described above to continue.

Arvind Ramamurthy, Chief of Market Development, ADGM, stated, “Abu Dhabi has accounted for 14% of global initial public offerings in the first quarter of 2023, underscoring the robustness of its capital markets. Notably, the UAE’s capital secured the third position worldwide¹ by attracting USD 3 billion in IPO proceeds during the same period. This achievement highlights the compelling role played by innovative ecosystems in Abu Dhabi, fostering growth and attracting businesses and investments, making it a destination.”