New corporate rules to be implemented from May

Abu Dhabi: New corporate governance regulations tightening independence rules for board members and external auditors and stipulating fines against violators will go into effect next May, the Ministry of Economy said on Tuesday.

The new rules will apply to companies listed on UAE capital markets, including those partly owned by the government.

Beginning from May, company board members will be prohibited from engaging in significant financial dealings with firms in which they have a controlling interest.

The new rules define a significant financial transaction as that which exceeds 5 per cent of the paid capital of the company served by the board member, or Dh5 million, whichever is less.

External auditors that go over the company's fin-ancial results and other accounting activities will also be prohibited from engaging in activities such as conducting valuations.

The new rules also call for the creation of an "internal control department" in each company to be charged with risk management and enforcing the implementation of corporate governance rules.

Abdullah Al Turaifi, executive chairman of the Securities and Commodities Authority, said the new rules seek to "boost the level of exposure and transparency by finding an internal monitoring system in public joint stock companies listed on any of the local UAE stock markets, like the systems in international financial markets, but in a way that will fit the UAE's socio-economic situation."

The Ministry said it will reprimand violators first with a warning letter and then the suspension of trading on the markets, delisting and finally issuing monetary fines.