Special Purpose Acquisition Companies (Spac) Regime In The Uae – part (2)

November 22, 2023 by
Ahmed Hatem

In Part (1) of this series we went through some of the key provisions in the SPAC regulations as per Securities and Commodities Authority (the "SCA”) chairman of  NO (01) of 2022, and in line with the new UAE Commercial Companies Law No (32) of 2021.

Today we will complete what we started in Part (1), by clarifying the rest of the key provisions in the SPAC regulations.

What are SPAC Prospectus Requirements?

A SPAC's draft prospectus shall be prepared in accordance with the requirements of the SCA IPO Regulations, and shall also include the following SPAC-specific information: 

a)  information relating to the shares and warrants to be issued by the SPAC. 

b)  the factors that make an investment into the SPAC different from investments in other companies (including related risks). 

c)  the redemption rights available to investors of the SPAC. 

d)  any sectors or industries which the SPAC proposes to focus on for the Business Combination / de-SPAC. 

e)  the Liquidation Window (and any extension which the SPAC proposes); and 

f)  any potential conflicts of interest between the sponsors, managers, and investors (including how any potential conflicts will be addressed). 

Do you need to appointment an Advisors / Subscription Receiving Institutions? 

A SPAC needs to appoint a Listing Advisor, a Financial Advisor and one or more Subscription Receiving Bodies (i.e., a legal person in the UAE that receives subscription money from investors) for the purposes of conducting the public offering. These roles are separate to, and independent from, that of a Sponsor and their responsibilities are set out in the SCA IPO Regulations. 

How the investors offer should be made?

The offer of shares and warrants may be made to professional investors and / or retail investors (or a combination of both), and the SPAC's prospectus should specify the minimum and maximum thresholds applying to the subscription of each type of investor as part of the public offering. 

If the offer of the shares and warrants is not fully subscribed, the SPAC may, with SCA approval, extend the subscription period by a period not to exceed 10 business days. If, after such extension, the offer of the shares and warrants is not fully subscribed, the offer shall be deemed cancelled and the SPAC will not be listed on the Market. 

How are the proceeds handled?

A SPAC must ensure that at least 90% of the proceeds are, within two business days of receipt, credited to an escrow account (or a trust account). The proceeds may only be used for certain purposes such as funding a de-SPAC, meeting redemption requests by investors and returning proceeds to investors following a failure to complete a de-SPAC. The Regulation is currently unclear as to what the remainder of the proceeds may be used for, and we believe that the SCA's implementing regulations may provide further details once issued. 

What are De-SPACs Steps? 

The chart below showing A brief outline of De-SPACs Steps.

What is de-SPAC time frame? (Liquidation Window).

A SPAC must complete a de-SPAC within the earlier of: (i) the time limit proposed by the SPAC in its prospectus; or (ii) 24 months after the listing date. 

The Liquidation Window may be extended up to 36 months from the listing date by a majority vote of the investors' shares adopted at a general assembly of the SPAC (subject to prior approval from the SCA). 

The Liquidation Window may be extended up to 36 months from the listing date by a majority vote of the investors' shares adopted at a general assembly of the SPAC (subject to prior approval from the SCA). 

Please see the below section "Failure to Effect a de-SPAC" for the consequences of not effecting a de-SPAC within the Liquidation Window. 

How de-SPAC will be completed?

Prior to undertaking any de-SPAC, a SPAC must provide all relevant information on the proposed de-SPAC (including, but not limited to, information relating to the target, the valuation of the target and consideration for the de-SPAC): 

(a) totheSCAusingtheprescribedformandobtainingthepriorapprovaloftheSCAforthede-SPAC; and 

(b) to the shareholders in a shareholders' circular for the purposes of obtaining the approval of the shareholders representing at least 75% of the shares represented at the SPAC's general assembly meeting. 

A de-SPAC will not be able to be completed unless the fair market value of the target or targets (collectively), as determined by an independent advisor approved by the SCA, is equal to or greater than 80% of the value of the funds in the escrow/trust account as at the date the de-SPAC is completed (excluding the value of the underwriting commissions as specified in the prospectus, and taxes payable in connection with any interest arising from the funds deposited in the escrow/trust account). 

The Regulation defines an "acquisition target" as a commercial enterprise established inside or outside the UAE (with the exception of public joint stock companies listed on a local or foreign market). 

Can the investor redeem his shares?

Any investor may require the SPAC to redeem his shares as follows: 

a)  where the SPAC's general assembly has determined to extend the time period within which the SPAC may complete a de-SPAC and the investor has voted against the general assembly's decision; or 

b)  once the de-SPAC is completed and consummated. 

Any shares redeemed pursuant to the above circumstances shall be for such amount as determined in the prospectus (which shall be calculated as a pro rata share of the IPO proceeds held in the escrow/trust account, plus any accrued interest or profit). 

What are the consequences of failure to effect a de-SPAC?

If a SPAC fails to complete a de-SPAC within the applicable time limit, the SPAC's directors must complete certain actions, including: 

a)  notify the SCA and the Market in writing of such failure. 

b)  take all necessary steps to refund the amounts from the escrow/trust account to all investors pro rata to their shareholdings; and 

c)  appoint one or more liquidators to effect a voluntary liquidation of the SPAC within 30 business days of such failure. 

For further assistance or information contact or email Al Safar & Partners. on +97144221944 reception@alsafarpartners.com  www.alsafarpartners.com .