Corporate restructuring trend emerges in UAE

Author: Kirsty Tuxford | Date: 13 Apr 2016

Organisations are re-shuffling senior employees as part of succession plans, but acquisitions are also on the increase

Several major organisations with offices in the UAE have recently revealed significant restructuring plans, many of which include senior level.
 
Telecoms provider Etisalat has a new CEO, Saleh Abdullah Al Abdooli. Barclays has restructured its Middle East corporate banking organisation and cut about 150 jobs. ADNOC has restructured its 90-person IT department, bringing in people with a deeper understanding of big data, customer experience (CX), mobility, and the cloud. And Dubai Holding has announced board changes and leadership appointments in its Tecom Group, with Ayesha Sultan named the new group CEO.
 
So many instances of widescale changes add up to an emerging trend of corporate restructuring, reports Links Group, which specialises in business set-up and formation of new organisations in the Middle East. In the first quarter of 2016, Links Group has seen an increase in enquiries from foreign companies who already have a presence in the UAE but are reviewing their current structure.
 
“Succession is one of the key reasons,” says Wayne Merrick, group head of consulting at Links Group. “Boards of directors want to ensure that the UAE entity of the organisation is not at risk and has a robust corporate nominee as the local shareholder. We have seen a large number of enquiries for corporate restructuring in Dubai, Abu Dhabi and Qatar.”
 
In the UAE, the Commercial Companies Law requires onshore organisations to be 51 per cent owned by UAE nationals or 100 per cent by GCC nationals. Organisations concerned with following the law are frequently seeking advice from consultancies, says Merrick. “Our corporate nominee approach to local partnerships extends beneficial ownership protection to the foreign shareholder by making the local nominee partner a corporate entity controlled by strict governance processes, as opposed to dealing with an unknown individual,” explains Merrick. “In this way, the foreign shareholder can retain full operational control of their UAE organisation. This is a structure often favoured by multinationals and investors because it satisfies their due diligence requirements.”
 
Many restructuring enquiries are related to a rising number of acquisitions of organisations in the region. It can be a complicated process. “Typically, clients will engage a law firm to undertake the necessary due diligence process when working on an acquisition,” says Merrick. “Where some sellers come unstuck is having to declare their 51 per cent shareholder as a single individual. Irrespective of what side agreements may be in place, this ownership structure presents a risk to the prospective buyer. A corporate nominee model that assures beneficial ownership rests with the foreign entity, and which is tightly controlled by a corporate governance framework, not only satisfies due diligence criteria but also streamlines succession and/or transfer of the asset. If looking to be acquired, an organisation should put in place a corporate nominee structure.”