Transfer of Significant Shareholding Regulation

Transfer of Significant Shareholding Regulation

Table of Contents
Page
Subject
INTRODUCTION
OBJECTIVE
SCOPE OF APPLICATION
1 Article (1) Definitions 3 2 Article (2) Shareholder Register 6 3 Article (3) Requirement for Approval 6
Article (4) Deeming A Significant or Controlling
Shareholding
5 Article (5) Application for Approval 8 6 Article (6) Decision on an Application 9 7 Article (7) Revocation of Approval 10 8 Article (8) Duty to Report to the Central Bank 11 9 Article (9) Islamic Banking 12 10 Article (10) Enforcement and Sanctions 13 11 Article (11) Interpretation of Regulation 13 12 Article (12) Publication and Application 13

نظــام نقـــل حصص الملكية الكبيرة Regulation Shareholding Significant of Transfer تعميم رقم: 05/2020 05/2020 :No Circular التاريخ: 15/04/2020 15/04/2020 :Date إلــى: كافـــة البـنـوك Banks All :To الموضوع: نقــل حصص الملكية الكبيرة Shareholding Significant of Transfer :Subject

======================================================================== مقدمــة: Introduction The Central Bank seeks to promote the effective and efficient development and functioning of the banking system. To this end, it is necessary to ensure the suitability of Banks’ significant and controlling shareholder/s. In introducing this Regulation, the Central Bank intends to ensure that the transfer of significant shareholding is controlled in line with leading international practices. 1 2018 14 This Regulation is issued pursuant to the powers vested in the Central Bank under the Central Bank Law (Decretal Federal Law No. (14) of 2018)1 . Where this Regulation includes a requirement to provide information or to take certain measures, or to address certain items listed at a minimum, the Central Bank may impose requirements that are additional to the listing provided in the relevant Article. الهــدف: Objective The objective of this Regulation is to establish the minimum acceptable standards for Banks’ approach to transfer of significant ownership with a view to:
i. a.Ensuring the soundness of banks; and و البنوك؛ أوضاع سالمة من التحقق .i
ii. Contributing to financial stability and
protection of retail customers ____________________ _____________________ 1 Article 95 of the law prohibits persons from holding controlling interests or increasing controlling interests in any licensed financial institutions unless Central Bank prior approval is obtained. Article 95 also confers powers on the Central Bank’s Board of directors to issue regulations relating to interests and instances of control.

Scope of Application :التطبــيق نطــاق This Regulation applies to all Banks operating in the UAE and all of the bank’s current and potential shareholders. Banks established in the UAE with significant Group relationships, including Subsidiaries, Affiliates, or international branches, must ensure that the Regulation is adhered to on a solo and Group-wide basis. The branches of international Banks operating in the UAE are required to only notify the Central Bank when there is any change in significant/controlling shareholders (as per the definitions included in this Regulation) of the parent entity. المــادة )1(: تعريفـــات Definitions :)1 (Article Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity. 1. Bank: Any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities. 2. Beneficial shareholder: The natural person exercising or entitled to the rights of a particular direct shareholding. 3. Beneficial shareholding: The particular direct shareholding over which a natural person exercises, or is entitled to exercise, the rights thereof, regardless of whether the natural or legal person is a direct shareholder. 4.
5. Board: The Bank’s board of directors. البنك إدارة مجلس :اإلدارة مجلس .5
Central Bank: The Central Bank of the United Arab Emirates. 6. Central Bank Law: Decretal Federal Law No. (14) of 2018 regarding the Central Bank & Organization of Financial Institutions and Activities. 7.

Control: the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity. 8. Controlling shareholder: One or more beneficial shareholder/s who, directly or indirectly, singly or acting in concert:
9. own/s or control/s more than 50 percent of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares; a) control/s more than 50 percent of the votes related to the sum of the issued ordinary shares and financial instruments convertible into ordinary shares; b) control/s the election of the majority of the directors and/or directs and determine/s the decisions of the board of directors; or c) exercise/s a controlling influence over the policies, strategies, governance, management or financial affairs of a bank, as determined by the Central Bank in its sole discretion. d) In determining the votes which can be exercised at a shareholders’ meeting, all votes related to ordinary shares and all votes related to other instruments which are convertible into ordinary shares must be included. Controlling shareholding: The issued ordinary shares and financial instruments convertible into ordinary shares held by Controlling Shareholders as defined in this Regulation 10. Group: A group of entities which includes an entity (the 'first entity') and:
11.
أ( أي مساهم ُمسيطر للكيان األول؛ first the of Shareholder Controlling any entity; a) any Subsidiary of the first entity or of any Controlling Shareholder of the first entity; and b) ج( أي شركة شقيقة. Affiliate any) c

Significant Shareholder: one or more beneficial shareholder/s who, directly or indirectly, singly or acting in concert; 12. own/s or control/s a shareholding equal to or exceeding five percent (5%) of the sum of the issued ordinary shares and financing instruments convertible into ordinary shares; a) control/s votes equal to or exceeding five percent (5%) of the sum of the votes related to the issued ordinary shares and financial instruments convertible into ordinary shares. b) Significant shareholding: The issued ordinary shares and financial instruments convertible into ordinary shares held by Significant Shareholder. For the avoidance of doubt, a Controlling Shareholder is also a Significant Shareholder, and a Controlling Shareholding is also a Significant shareholding. 13. Islamic Financial Services: Shari`ah compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products (Islamic Windows). 14. Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions. 15. Subsidiary: an entity (the 'first entity') is a subsidiary of another entity (the ‘second entity’) if the second entity:
16. holds a majority of the voting rights in the األول؛ الكيان في التصويت حقوق أغلبية يملك( أ first entity; a. is a shareholder of the first entity and has the right to appoint or remove a majority of the board of directors or managers of the first entity; b.

is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity; c. Or:
if the first entity is a subsidiary of another entity which is itself subsidiary of the second entity. d. المــادة )2( : ســـجل المســاهمين Register Shareholder :)2 (Article The Board is responsible for ensuring that a bank establishes and maintains an up to date shareholder register, and that written records are established and maintained in relation to all the bank’s shareholders and their shareholdings. 1. Banks are required to have in place policies and procedures to ensure that all Significant and Controlling Shareholders are identified and recorded in writing in the shareholders register. 2. المــادة )3(: اإللزام بالحصول على الموافقة Approval for Requirement :)3 (Article ّ A person may not obtain or divest, directly or indirectly, a shareholding in a Bank equal to or exceeding five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares, without first having applied for and received the prior written approval of the Central Bank. 1. ّ A person may not increase, by any margin, a shareholding in a bank above five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares that they may already hold, without first having applied for and received the prior written approval of the Central Bank 2. Prior written notice to the Central Bank is required if a person intends, in relation to a bank, to:
3. obtain or divest a Significant or Controlling Shareholding; or a. obtain or divest the right to exercise voting rights in relation to a Significant or Controlling Shareholding; or b.

increases their shareholding to a level which would result in his aggregate holding qualifying as a Significant or Controlling Shareholding; or c. increases the number of voting rights they are entitled to exercise to a level constituting him as a Significant Shareholder or Controlling Shareholder. d. Should a person obtain or divest a shareholding exceeding five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares in a bank without prior written Central Bank approval, he is required immediately to apply for Central Bank approval. Unless and until Central Bank approval has been obtained, this shareholder is prohibited, in relation to that part of his shareholding which exceeds five percent (5%) of the bank’s issued ordinary shares (excess shareholding), from exercising any related voting right and receiving any related dividend. The Board must ensure that these prohibitions are enforced, and that any related dividends are retained by the bank until a final decision has been made by the Central Bank. 4. A person who obtained a shareholding exceeding five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares in a bank without prior written Central Bank approval may not dispose of the shareholding without the prior written approval and under the direction of the Central Bank. 5. No person is permitted to obtain or increase a Significant or Controlling Shareholding in a Bank, whether held directly or indirectly, unless the person obtains in advance the Central Bank’s prior written approval. Similarly, no person is permitted to obtain or increase voting rights in a bank up to or above a level equivalent to that of a significant or controlling shareholding unless the person obtains in advance the Central Bank’s prior written approval. 6. Banks must notify the Central Bank where a shareholding of (1%) one percent or more of the issued ordinary shares and financing instruments convertible into ordinary shares is obtained. 7.

المــادة )4(: اعتبــار حصة الملكية مؤثــرة أو مســيطرة Controlling or Significant a Deeming :)4 (Article Shareholding The Central Bank may, when it, in its sole discretion considers this to be the substance of the matter, deem that one or more beneficial shareholder/s, singly or acting in concert, is or constitutes a Significant Shareholder or Controlling Shareholder, as the case may be. In this event, the corresponding shareholding/s held will be deemed to constitute a Significant Shareholding/s or a Controlling shareholding/s, as the case may be. 1. Banks are required to provide the Central Bank with sufficient information to identify those persons who control the exercise of a significant or controlling number of voting rights. The Board is responsible for ensuring the Bank’s compliance with these reporting requirements. 2. المـادة )5( : طلب الحصول على الموافقة Approval for Application :)5 (Article An application for Central Bank approval must be in such form and be accompanied by such information as the Central Bank may require. 1. An application for Central Bank approval must contain the following information and address the following issues:
2.
A duly completed questionnaire in the form prescribed by the Central Bank which will include requirements to demonstrate the shareholders appropriate financial standing and reputation; a) A detailed exposition of the applicant’s shareholding/s in the Bank, including all direct and indirect shareholdings, setting out also the names of any nominee shareholder/s and shareholding/s. In addition, the same information must be provided in respect of the shareholding/s in the Bank of any party or parties acting in concert with the applicant; b) Detailed financial information of the applicant entity covering a period of at least 3 years prior to the application date; c)

Any other information reasonably necessary for the Central Bank to reach a decision on the merits of the application. d) The Central Bank considers each application on its own merits, on a case-by-case basis. The applicant must demonstrate to the satisfaction of the Central Bank that it currently meets the criteria and in future will continue to meet the criteria to be a significant or controlling shareholder of a bank. 3. An application for Central Bank approval must be made by and in the name of the (ultimate) beneficial shareholder. Breach of this requirement invalidates any Central Bank approval issued in relation to such an application, and any person involved with such an application is deemed not to be a fit to be a significant or controlling shareholder, officer or director of a bank. 4. Any action or inaction which conceals the true identity of a beneficial shareholder intending to obtain or holding a significant or controlling shareholding invalidates any Central Bank approval issued in relation to that application. Any person involved with such an application is deemed not to be a fit and proper person to be a significant or controlling shareholder, officer or director of a bank. 5. A person who provides the Central Bank with false, fraudulent, fictitious, materially misleading or materially incorrect information in relation to an application is deemed not to be a fit and proper person to be a significant or controlling shareholder, officer or director of a bank. 6. المـادة )6(: البت في طلب الموافقــة Application an on Decision :)6 (Article The Central Bank may approve the application for approval to obtain or divest a Significant or Controlling Shareholding, whether unconditionally or subject to such conditions as it may deem necessary, or refuse the application, in which event the Central Bank must inform the applicant of the reasons for the refusal. 1. The Central Bank may require information from any source and perform such investigation as it considers reasonably necessary to evaluate an application. Banks must provide any information 2.

deemed relevant to an investigation to the Central Bank. The Central Bank will not make a decision on an application unless it has received all the information specified in this Regulation as well as any other information the Central Bank may consider necessary for its review. 3. An applicant must demonstrate to the satisfaction of the Central Bank that the resulting ownership structure will not impede effective Central Bank supervision of the bank and its group (where applicable), or the discharge of the Central Bank’s financial stability mandate, and that the beneficial shareholder is fit and proper. Where a financial institution (whether domestic or foreign) proposes to obtain or divest a Significant or Controlling Shareholding in a Bank, the Central Bank will consider whether:
The institution is supervised by an authority which discharges its mandate in line with international practises; a) The institution’s supervisor applies consolidated or cross-border supervision in relation to the institution; b) The institution’s supervisor will include the acquired entity when performing consolidated and cross-border supervision in relation to the institution; and c) The institution’s supervisor has provided the Central Bank with a written confirmation of its consent or no objection to the proposed transaction. d)
Article (7): Revocation of Approval الموافقــة إلغـــاء :(7 )المـادة
Should the Central Bank determine that it had approved a change in ownership of a significant shareholding based on an application containing misleading or incorrect information, the Central Bank may withdraw its approval and reject the application, modify its approval through the imposition of one or more conditions, or require 1.

the shareholder to dispose of the shareholding subject to the conditions set by the Central Bank. Until an unapproved significant shareholding is divested in accordance with the conditions prescribed by the Central Bank, the shareholder is prohibited, in relation to that part of their shareholding which exceeds five percent (5%) of the bank’s issued ordinary shares (Excess Shareholding), from exercising any related voting rights, and receiving any related dividend. The Board must ensure that these prohibitions are enforced, and that any related dividends are retained by the bank until a final decision has been made by the Central Bank. 2. The requirement that a Significant or Controlling Shareholder be fit and proper is a continuing requirement. The Central Bank may revoke an approval of a Significant or Controlling Shareholder if that shareholder is no longer fit and proper or the Central Bank determines that any of the information provided as part of an application was false, fraudulent, and fictitious or in any other way materially misleading or incorrect. 3.
Article (8): Duty to Report to the Central Bank المركزي للمصرف التقارير رفع وجوب :(8 )المـادة
The Bank must provide the Central Bank with such information as is required in relation to Significant Shareholder/s or Controlling shareholder/s. Failure to comply constitutes a breach of the continuous requirements of this Regulation. 1. Unless and until the situation is regularized to the satisfaction of the Central Bank, a shareholder failing to comply with the reporting requirements of this Regulation must dispose of that part of their shareholding which exceeds five percent (5%) of the Bank’s issued ordinary shares (Excess Shareholding) as prescribed by the Central Bank. They are also prohibited, in relation to such Excess Shareholding, from exercising any related voting right or receiving any related dividend. The Board must ensure that these prohibitions are enforced and that any related dividends are retained by the bank until a final decision has been made by the Central Bank. 2. A Bank must provide the Central Bank with such information regarding its shareholders as is 3.

prescribed in this Regulation or may be required by the Central Bank. A Bank must immediately notify the Central Bank when it becomes aware of a change or proposed change in a Significant Shareholder or Significant Shareholding, or in a Controlling Shareholder or Controlling Shareholding. 4. A Bank must immediately notify the Central Bank when it becomes aware of any material information which may negatively affect the suitability of a Significant or Controlling Shareholder. 5. A foreign bank branch must immediately notify the Central Bank upon becoming aware of any change or proposed change in controlling shareholding or significant shareholding of its parent entity, and provide the Central Bank with such relevant information as it may require. 6. Nominee shareholders are required, upon request by the Bank, to provide the Bank with the name and any other required details of the beneficial shareholder. 7. Banks must take into account the identity of beneficial shareholders when reporting to the Central Bank on significant and controlling shareholder/s and Shareholding/s as required by this Regulation. 8. Banks must obtain from all significant shareholders and controlling shareholders the information required to be submitted to the Central Bank on an annual basis. 9. المـادة )9(: الصيرفة اإلسالمية Banking Islamic :)9 (Article Banks offering Islamic Financial Services must ensure that any Major Transactions they undertake which fall under the scope of this regulation are done so in accordance with the principles of Islamic Shari’ah and any relevant Higher Shari’ah Authority resolutions/fatwas. 1.

Article (10): Enforcement and Sanctions والجــــزاءات االنفــاذ :(10 )المـادة
Violation of any provision of this Regulation and any accompanying Standards may be subject to supervisory action and administrative & financial sanctions as deemed appropriate by the Central Bank. 1. Supervisory action and administrative & financial sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of the Bank, imposition of fines or barring individuals from the UAE banking sector. 2.
Article (11): Interpretation of Regulation النظــام تفســير :(11 )المـادة
The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation. 1.
Article (12): Publication and Application والتطبيق النشر :(12 )المـادة
This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one (1) month from the date of its publication. 1. Abdulhamid Saeed Governor of the Central Bank of the UAE