The Securities and Commodities Authority (SCA) in the UAE has introduced several significant changes to the Corporate Governance Code in recent years. These changes aim to enhance transparency, accountability, and overall corporate governance standards within the UAE. Here are some of the key recent amendments:
- Board Composition and Independence
- At least one-third of the board must be independent directors.
- Clear criteria for determining the independence of board members have been established to avoid conflicts of interest
- At least one women board member.
- Board Membership
- Board Members to possess experience and competence in areas that serve the company's interests.
- Board Committees
- Mandatory establishment of key board committees, including the Audit Committee, Nomination and Remuneration Committee, and Risk Management Committee.
- Specific guidelines on the composition and responsibilities of these committees to ensure they function effectively.
- Report of Audit Committee to the General Assembly is mandatory.
- Audit Committee meeting to be held at least once in each quarter.
- Disclosure and Transparency
- Enhanced requirements for disclosure of financial and non-financial information.
- Companies must provide detailed reports on corporate governance practices and sustainability initiatives.
- Shareholder Rights
- Strengthened mechanisms to protect minority shareholders.
- Improved procedures for calling and conducting general meetings to ensure shareholder participation and engagement.
- Risk Management and Internal Controls
- Companies are required to establish robust risk management frameworks and internal control systems.
- Regular assessments of the effectiveness of these systems must be conducted and reported to the board.
- Board Evaluation
- Mandatory annual evaluations of the board's performance.
- These evaluations must be conducted by an external consultant at least once every three years.
- Remuneration Policies
- Clear guidelines on the remuneration of board members and senior executives.
- Companies must disclose their remuneration policies and any changes to them.
- Sustainability and ESG Reporting
- Increased emphasis on Environmental, Social, and Governance (ESG) reporting.
- Companies are encouraged to integrate ESG factors into their business strategies and report on their sustainability practices.
- Board Secretary
- Board has option to seek external assistance from a legal or natural person with in the country.
- Board may not remove or interfere with the work of Board Secretary or impose penalties or sanctions on them without a resolution of the Board.
- Board to notify the Authority in the event of any decision to remove.
These changes are part of the SCA's ongoing efforts to align the UAE's corporate governance standards with international best practices, thereby fostering a more robust and transparent business environment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.