What defines foreign holding in listed companies?

Clarity needed on holding by foreign firms owned by nationals

DUBAI/December 22-2020: The recent statement made by Damac Properties disputing the data on foreign holding in the company may require the authorities to clarify on the ‘definition of foreign holding’ in the context of the listed companies in the country.

Damac Properties, headed by Hussain Sajwani, has recently questioned a report that claimed the company has 33.80 per cent foreign holding on the ground that a big chunk of the said foreign holding pertains to the company chairman Sajwani’s own investments made through entities owned by him overseas, and hence can’t be treated as foreign holding.

The confusion regarding the norms defining foreign holding gains significance now as several reputed companies listed on both Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) have in the recent past announced decision to raise foreign holding ceiling in their companies.

While DFM seems to recognise all shares held by entities outside the UAE as foreign holding, Damac wants to count all shares owned by the entities owned by nationals as onshore holding, irrespective of the domicile of these entities.

“The core question that begs clarity is..if and when one could use the domiciity of the beneficial owner, rather than that of the legal entity, which has direct ownership,” notes, Raj Madha, a financial analyst, who has worked in several international markets.

Stock exchanges’ view on foreign holding

While the Dubai Financial Market (DFM) official data states that Damac Properties has foreign holding at 33.87 per cent, the company maintains that its chairman alone holds 72.22 per cent in the company, out of which, 54 per cent is held onshore.

“While 18 per cent of chairman’s holding is owned by his own companies registered in foreign jurisdictions, and about 54 per cent held by him onshore, his own holding comes to a little over 72 per cent, which essentially comes under domestic investment,” the statement argued.

Driving this argument further, the company revealed that over and above the 18 per cent shares Damac insists to be treated as domestic holding, another close to 13 per cent is held through companies in foreign jurisdictions owned by Sajwani’s family members, which too, by extending the same argument, should fall under onshore holding.

Thus, Damac wants to establish that all these 31 per cent shares held by the chairman or his family members through companies incorporated overseas, are onshore shares by the virtue of the fact that these overseas companies are owned by nationals.

Greater clarity needed

Unless stock exchanges or more precisely, the market regulator, bring in clarity on what defines foreign ownership, promoters of several companies will continue to remain in the dark as to the effective level of foreign ownership in their companies.

The DFM companies with higher foreign ownership include, Aramex (47.11 per cent), Emaar Properties (35.53 per cent), Tabreed (47.50 per cent), Union Properties (20.91 per cent), etc – (data pertains to position a week back).

 

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