Capital markets counsel for issuers that have to live with the listing afterwards.

Venue: the onshore and free-zone split, and why it decides everything else

The defining structural feature of UAE capital markets is that there is no single UAE market. There are two regulatory worlds operating side by side in the same city block.

Onshore, the Securities and Commodities Authority is the federal regulator. It approves prospectuses for public offerings, licenses market intermediaries, supervises the Dubai Financial Market and the Abu Dhabi Securities Exchange, and enforces market-conduct rules. An issuer listing onshore is almost always a public joint stock company incorporated under the federal Commercial Companies Law. Its constitutional documents, shareholder approval thresholds, board composition and disclosure duties are set by federal law and SCA regulation. Disputes go to the onshore courts, in Arabic.

In the financial free zones, the position is different in kind. The DIFC has its own civil and commercial law, its own regulator in the Dubai Financial Services Authority, its own English-language common-law courts, and Nasdaq Dubai as its exchange. ADGM operates the same model with the Financial Services Regulatory Authority and ADGM Courts, and applies English common law directly. Companies incorporated there are not UAE onshore companies; SCA rules do not govern them.

Consequences follow immediately. Foreign-ownership restrictions embedded in an onshore issuer’s articles have no free-zone equivalent. Prospectus liability is framed differently. Index inclusion, retail participation and local institutional demand are strongest onshore; international institutional investors and sponsors familiar with English-law documentation often prefer the free zones. Sukuk and international bonds are frequently listed on Nasdaq Dubai even where the group sits onshore, because the listing venue for a wholesale debt instrument is a distribution decision rather than a governance one.

None of this is answered by asking which exchange has better volumes. It is answered by asking which legal system the issuer, its shareholders and its future disputes should sit in for the next decade. The structural differences that survive the pitch are these:

What an onshore IPO actually requires

An onshore IPO has four workstreams that run in parallel, and only one of them is the prospectus.

Corporate. The group must be reorganised into a listable structure: assets consolidated under a single holding entity, minority and founder arrangements regularised, licences transferred, related-party contracts documented on arm’s-length terms, and the entity converted to a public joint stock company. Where a group has grown through free-zone and mainland entities in parallel, this stage is substantial.

Financial. Audited accounts on an accepted reporting basis for the required historical periods, with restatements where the historic audit was prepared for a lender rather than a public market. Carve-out financials are common and slow.

Regulatory. The prospectus and listing application go to the SCA, with the exchange running its own admission process in parallel. Review of a complete submission is measured in weeks rather than months, but the phrase doing the work in that sentence is complete. Incomplete filings do not queue; they restart.

Offer structure. Free float, tranche design and lock-ups are commercial decisions with regulatory boundaries. The federal companies regime historically required a majority of capital to be offered to the public. That position has been progressively relaxed to let founders retain far more, and the regulator retains discretion to approve lower offered percentages — which is why several of the largest recent UAE listings priced on floats well below the historic statutory floor. Because the applicable minimum turns on the issuer’s category and on any exemption granted, it must be confirmed for the specific transaction rather than assumed from a prior deal.

The practical point for a board: the SCA review is a gate, not the critical path. The critical path is whichever workstream is furthest behind, and it is usually corporate or financial.

The privatisation wave and what it changed

The last several years reset the UAE market. Dubai committed to listing a series of state-linked entities, and utilities, toll-road and mobility assets came to the DFM in quick succession. Abu Dhabi ran a parallel programme, listing energy-chain and industrial subsidiaries on the ADX. The effect was to convert two exchanges with thin free floats and limited sector coverage into markets with genuine large-cap depth, index relevance and a functioning institutional bid.

Three consequences matter for anyone now considering an issuance.

The precedent set is a government-issuer precedent. Those transactions priced on small floats, with sovereign-linked credit, regulated or contracted revenue, and unusual investor confidence in the counterparty. A private issuer that models its float, its valuation or its retail tranche on those deals is comparing itself to an entity investors were pricing on a different basis.

Disclosure expectations moved up. Investors who participated in those offerings now expect that standard of financial and operational disclosure from every issuer. The market read of a thin prospectus has hardened.

Post-listing scrutiny is real. A market with meaningful institutional ownership produces analyst coverage, questions about guidance, and pressure on dividend policy. Several issuers built dividend commitments into their equity story and now carry them as a governance constraint. Committing to a distribution policy in the prospectus is a decision to be taken by the board with its treasury and its lenders in the room, not by the bookrunners at the roadshow.

The window is open. It is not indefinitely open, and issuers that cannot execute inside a window should say so early rather than run costs against a date they will miss.

Debt capital markets and sukuk

UAE issuers are among the most active in the global sukuk market, and Dubai has deliberately positioned itself as a listing venue for Islamic paper. In practice most wholesale conventional and Islamic issuance by UAE groups is done under international-style documentation, on English or New York law, listed on Nasdaq Dubai, an onshore exchange, or an international venue, and cleared internationally.

Sukuk structuring turns on the asset, not the label. Ijara structures depend on identifiable leasable assets and a defensible transfer. Wakala structures depend on the composition of the investment portfolio — in particular the proportion of tangible assets to receivables, because Sharia standards on the sale of debt constrain how a receivables-heavy portfolio can trade. Mudaraba and hybrid structures are used where the underlying is a business or project rather than a discrete asset pool. Getting this wrong at term-sheet stage is expensive: a Sharia Supervisory Board that will not issue a clean pronouncement stops the deal, and boards do not negotiate.

Two further points recur. First, enforcement. Investors ask what happens if the obligor defaults — whether the certificate holders have recourse to assets or only a purchase undertaking against the obligor, and whether that undertaking is enforceable in the jurisdiction where the obligor sits. The honest answer for most UAE sukuk is that the economics are credit risk on the obligor, and the documentation should say so plainly. Second, currency and market. The federal government’s dirham-denominated treasury sukuk programme has begun building a local-currency yield curve, which matters for domestic corporate issuers that previously had no benchmark to price against.

For securitisation, structures typically use a DIFC, ADGM or offshore special-purpose vehicle acquiring the receivables pool. Where onshore receivables are involved, perfection and registration of the security position must be handled under the onshore regime — a step that is frequently discovered late.

Life after listing: continuing obligations

Most of the regulatory risk in a listing arrives after the bell, and it is carried by people who were not in the IPO working group.

An onshore listed company owes continuing obligations to the SCA and to its exchange: periodic financial reporting, immediate disclosure of material information, disclosure of substantial shareholdings and dealings by directors and senior management, corporate governance reporting, and controls on related-party transactions that require board or shareholder approval depending on size and connection. Free-zone listed entities owe an equivalent but separately-drafted set of obligations under the DFSA or FSRA rulebooks. The obligations rhyme; they are not the same, and a compliance manual written for one regime will fail under the other.

The recurring practical failures are unglamorous:

• No disclosure committee. Someone must decide, quickly, whether a development is material and whether it can be delayed. If that decision routes through three departments and outside counsel, the announcement is late.
• Selective disclosure at investor meetings. Management gives a number to an analyst that is not in the public record. This is the single most common way a well-run issuer creates an enforcement problem.
• Related-party transactions treated as business as usual. Groups that were private six months ago continue transacting with affiliates on the old basis, without the approvals the listed structure now demands.
• Insider lists that are not maintained. They are trivial to keep and decisive if conduct is ever examined.
• Guidance given casually. Forward-looking statements made without a documented basis become the benchmark against which later performance is judged.

The fix is structural, not exhortative: a written disclosure policy, a standing committee with authority to publish, a dealing policy with closed periods and clearance, and training for the people who actually speak to the market.

Market abuse, insider dealing and director exposure

Each of the three regimes prohibits insider dealing, unlawful disclosure of inside information and market manipulation, with the SCA supervising the onshore market and the DFSA and FSRA supervising their respective free zones. Onshore, market-conduct breaches can attract administrative sanction from the regulator and, in serious cases, criminal exposure — a distinction that matters enormously to individuals, because a regulatory fine and a criminal referral are not the same event and do not carry the same personal consequences in the UAE.

Directors and senior managers carry three separate exposures that are often conflated:

• Prospectus and disclosure liability for material misstatements or omissions in the offering document and in subsequent announcements.
• Personal conduct liability for dealing while in possession of inside information, or passing it on — including to family members, which is how a meaningful share of cases arise.
• Duty-based liability under company law for conflicts, related-party dealing and failures of oversight.

Investigations begin with trading data. Regulators see the pattern before they see the explanation, and the first request is usually for records, communications and an account of who knew what and when. The quality of that first response frequently determines whether the matter becomes an enforcement action or closes. Boards should assume that personal devices and messaging applications are within scope, and that an insider list assembled after the fact carries little weight.

Where a director faces both regulatory and potential criminal exposure, the two tracks need coordinated handling from the outset. Answering the regulator without regard to the criminal position is a common and serious error.

REITs, funds and sustainable issuance

REITs illustrate the onshore and free-zone split as clearly as anything in this practice. A REIT established in the DIFC is a fund under the DFSA regime — typically a closed-ended public fund required to distribute the substantial majority of its audited net income, managed by a licensed fund manager, and commonly listed on Nasdaq Dubai. An onshore REIT sits under the SCA fund regime instead. The distinction determines who may market the units, to whom, how title to underlying UAE real estate is held, and what a foreign investor can own. Real estate held onshore by a free-zone vehicle raises registration and ownership questions that should be resolved before the fund is formed, not before the first acquisition closes.

Sustainable issuance is now a standing feature of the market rather than a novelty. Green and sustainability-linked bonds and sukuk have been issued by UAE banks, utilities and corporates, and both onshore exchanges publish ESG disclosure guidance for listed issuers, with sustainability reporting embedded in the onshore corporate governance framework. The legal work is less about the label than about the consequences of it: what the framework commits the issuer to, who verifies it, what happens on a missed sustainability performance target, and whether the marketing claims survive scrutiny from investors applying their own regulatory definitions. Greenwashing exposure in this market is primarily contractual and reputational, but the reputational form of it moves credit spreads.

Where capital markets work goes wrong

The failure modes are consistent enough to list.

• Venue chosen for the wrong reason. Picking an exchange for its index or its brand, then discovering that the required corporate form, ownership restrictions or governance regime conflicts with what the shareholders actually want. Reversing this after the reorganisation has begun costs a quarter.
• Restructuring scoped after the timetable is announced. The board sets a listing date, then the corporate and audit workstreams reveal what is genuinely required. Every subsequent decision is made under artificial pressure.
• Related-party arrangements left undocumented. Founder loans, affiliate leases, informal management fees and land held in personal names. Each one is a diligence finding, a disclosure item and, unresolved, a post-listing governance breach.
• A prospectus written to sell rather than to protect. Risk factors drafted as marketing, and forward-looking statements without a documented basis. Both become the exhibits if performance disappoints.
• Sharia sign-off treated as a formality. Structuring a sukuk on assets that do not support the chosen contract, and discovering it when the Supervisory Board declines to issue the pronouncement.
• No disclosure infrastructure on day one. Listing without a disclosure committee, a dealing policy, closed periods or insider lists. The first material development then produces a late announcement.
• Free-float and lock-up mechanics not thought through to expiry. Lock-ups end. If nobody has planned the sell-down, the expiry itself becomes the news.
• Onshore and free-zone rulebooks assumed to be interchangeable. A compliance function built for one regime applied to an entity governed by the other.

Every item on that list is cheap to prevent at structuring stage and expensive to fix afterwards. That asymmetry is the argument for involving counsel before the mandate letters are signed, rather than at the drafting session.

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