According to Securities and Commodities Authority (the "SCA”) chairman of board resolution NO (01) of 2022, and in line with the new UAE Commercial Companies Law No (32) of 2021, the UAE has adopted a regulatory framework for Special Purpose Acquisition Companies ("SPACs"), which can now list on a securities market in UAE (namely, the Abu Dhabi Securities Exchange or the Dubai Financial Market),
This series of articles provides an overview of the key provisions in the SPAC regulations (the "Regulation") applicable in the UAE. It is anticipated that the SCA will issue further implementing regulations relating to SPACs and we are monitoring these developments closely.
WHAT IS THE MEANING OF "SPAC”?
SPAC is a public shell company formed by a sponsor to: (i) raise capital, primarily through an IPO and concurrent private placement, with the majority of such funds held in a trust or escrow account; and (ii) realize an acquisition, in whole or in part, or a merger with a target business (a "Business Combination" or "de-SPAC") within a given timeframe, usually within 12 to 24 months following the IPO (the "Liquidation Window").
In an IPO, the SPAC typically offers units to investors (with each unit comprising public shares and warrants).
Once the SPAC has identified an initial de-SPAC opportunity, the sponsor negotiates with the target company and approval of the de-SPAC is typically sought from the SPAC's shareholders.
Upon a successful de-SPAC, the combined company becomes a publicly traded company carrying on the target operating company's business. If a SPAC cannot consummate a de-SPAC within the Liquidation Window, the proceeds from the trust or escrow account are returned pro rata to the SPAC's shareholders and the SPAC is liquidated.
WHAT THE SCOPE OF APPLICATION AND THE DEFINITION OF SPAC ARE?
SPACs are exempted from certain provisions of the UAE Commercial Companies Law and the SCA IPO Regulations5, with the Regulation applying to SPACs (including SPACs under incorporation) and all persons and procedures relating to them (As applicable). A SPAC will need to be a public joint stock company ("PJSC") and approved to be classified as a SPAC by the SCA.
WHAT ARE THE STEPS TO ESTABLISH SPAC?
The chart below showing A brief outline of the Steps from incorporation to listing:
A public joint stock company must meet certain criteria in order to be designated as a SPAC, including ensuring that:
a) the issued share capital of the SPAC upon incorporation is at least AED 100,000 (approximately USD 27,000).
b) the issued share capital of the SPAC immediately following the public offering is at least AED 100,000,000 (approximately USD 27,000,000); and
c) the proposed sponsors meet certain requirements.
Stay tuned for the next article to know more about SPAC Regime in the UAE.
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