Dubai publishes first ever code for small business corporate governance

The code represents the first case of Dubai addressing corporate governance standards according to Alan Wood, a Dubai-based expert in corporate law at Pinsent Masons, the law firm behind Out-Law.com.

He said, though, the United Arab Emirates is still "playing catch-up" compared to countries such as the UK and US.

Publication of the code was announced by Economic Sector Committee chairman Shaikh Ahmed bin Saeed al Maktoum at the first Conference for Corporate Governance for SMEs to take place in Dubai.

Hawkamah, the Regional Institute for Corporate Governance, which developed the code in conjunction with the Government, said in a statement last month that the aim of the code was to make companies realise that corporate governance procedures were "not just something good to follow but a must-have".

Wood said that the principles in the Code were based around "less tangible concepts of behaviour rather than black letter law", in the same way as similar guides in the UK and US.

"What will be interesting is to see to what extent the much-promised new UAE Companies Law will take forward that parallel stream of black letter law in terms of directors' duties, shareholders' rights and so on to reflect the UAE's emergence as a significant financial hub," he said.

Dubai SME will publish guidance for SMEs at various stages of growth to provide more information at a later date, it said.

Wood said that the Code reflected the particular challenges affecting businesses operating in Dubai, such as the relationship between 'free zones' – areas of economic priority which have a unique legal status - and the 'mainland'.

"The guidance recognises the breadth of companies and businesses which fall under the definition of 'SME' and the special factors relevant in Dubai as a result of the existence of the free zones as well as the mainland. It also acknowledges the special challenges faced by family businesses," Wood said.

The new Code is part of a wider programme of awareness-raising and compliance training which will be developed by Dubai SME in partnership with other organisations, Hawkamah said.

Abdul Baset al Janahi, Chief Executive Officer of Dubai SME, said that good corporate governance would "open new doors" for companies who embraced the new regime.

"Without proper governance practices, companies will be unable to function optimally, especially in this new world order," he said.