General UAE Legal Questions LawCabinet Resolution No. (36) of 2022 Regulating the Activity of Operating a Crowdfunding Platform

Article (1) Definitions For the purpose of applying the provisions of this Resolution, the following words and expressions shall have the meanings assigned thereto respectively, unless the context requires otherwise: State : The United Arab Emirates. The SCA : The Securities and Commodities Authority. Board : The SCA Board of Directors. Market : A stock market licensed by the SCA in the State. Rulebook : The Rulebook of Financial Activities issued by the SCA. Crowdfunding : A funding mechanism that enables a fund seeker to collect amounts from investors for the purpose of funding his project via the Platform, in return for capital shares of a company incorporated or to be incorporated for im…

Article (2) Scope of Application The provisions of this Resolution shall apply to all persons and procedures related to the Crowdfunding in the State, including free zones.

Article (3) Entities Prohibited from Seeking Crowdfunding The entities mentioned below shall be prohibited from seeking Crowdfunding via the Platform: 1. Joint-stock companies; 2. Mutual funds; 3. Entities engaging in activities within the securities, insurance or banking sector; 4. Companies intending to use the crowdfunding to grant loans or invest in other existing companies; and 5. Repealed by Cabinet Resolution No. (139) of 2023 Amending Certain Provisions of Cabinet Resolution No. (36) of 2022 Regulating the Activity of Crowdfunding Platform’s Operator.

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Article (4) License of the Operator 1. The business activities of crowdfunding platform's operator may only be practiced in the State after obtaining a license from the SCA. 2. In order to get a crowdfunding platform operator license, the following conditions shall be fulfilled: a. The license applicant shall be a Market licensed by the SCA, a company incorporated in the State pursuant to the laws in force, or any other legal form approved by the SCA; b. The paid-up capital of the license applicant shall not be less than (AED 1,000,000) one million dirhams; c. The fees prescribed by the SCA to practice the crowdfunding platform operator's business shall be paid; and d. Fulfilling the require…

Article (5) Operator's Obligations vis-a-vis the SCA The Operator shall have the following obligations towards the SCA: 1. Conclude an agreement with the Fund-Seeker, which sets out the rights and obligations of both parties and communication channels between them, in such a manner that does not conflict with this Resolution. 2. Refrain from funding, assisting or inducing any investor to invest in the funding requests submitted to the Platform or negotiate over the conditions thereof, prefer one investor over another or induce an investor to exclusively invest in certain funding requests. 3. Refrain from investing in funding requests on behalf of the investor. 4. Refrain from making an inves…

Article (6) Operator's Obligations vis-à-vis Investors The Operator shall have the following obligations vis-à-vis the investors: 1. Conclude an agreement with the investor according to the conditions set forth in the Rulebook, including, in particular, the information related to the investment in funding requests and a proof confirming the investor's acknowledgment of being aware of the investment risks, including the impermissibility to sell or assign shares to other investors after the company is incorporated except in pursuance of the laws applicable in the State. 2. Disclose to the investors their rights to retract their investment decisions and the mechanisms of withdrawal from project…

Article (7) Obligations of the Fund Seeker The Fund Seeker shall: 1. Obtain from Competent Authorities initial approvals necessary for its project intended to be offered on the Platform; 2. Promptly disclose, throughout the funding request period and according to the Operator's procedures, the below information: a. All information related to the Fund Seeker or their management, financial statements, business plan, objective of the project, the maximum and minimum amount sought for the project and the proposed offer period, which shall not exceed (15) fifteen business days but may be extended for the same period in accordance with the procedures of the Operator and without prejudice to intere…

Article (8) Rights of the Operator, Investor and the Fund Seeker 1. The Operator shall be paid a fee by the Fund Seeker to enable them to offer any of their requests on the Platform according to the agreement concluded between them. 2. The Fund Seeker may reoffer the funding request on the Platform, be satisfied with the amount pooled or cancel the funding request in the following cases: a. In case the investor retracts his investment decision; b. The investor fails to pay the funding amount following the expiry of the time limit given to him; or c. Expiration of the offer period without covering the minimum target amount. 3. The investor may retract his investment decision and recover the f…

Article (9) Control and Inspection 1. The SCA may take all necessary actions for supervision, control and inspection purposes, in accordance with the controls and resolutions issued by it in this regard. 2. The SCA may establish the controls, limitations or procedures necessary for applying this Resolution, so as to avoid any legal, technical or operational risks. 3. The SCA shall have the competence to receive complaints related to the operator activity, in accordance with the controls and resolutions issued by it in this regard. The SCA may investigate any violations detected by the inspection process or contained in complaints received by the SCA.

Article (10) Penalties 1. If the provisions of this Resolution or the regulations, resolutions, controls or circulars issued in implementation hereof are violated, the SCA may impose any of the following penalties: a. Serve a warning upon the violator; b. Impose a fine on the violator of not less than (AED 100,000) one hundred thousand dirhams and not more than (AED 1,000,000) one million dirhams, plus a fine equivalent to profits realized or losses avoided by the violator; or c. Suspend the Operator from practicing the activity, revoking the Operator's license or imposing penalties on its employees, in accordance with Chapter I of the Rulebook of Financial Activities issued by the SCA. 2. T…

Article (11) Executive Resolutions The SCA shall issue the resolutions, circulars and forms necessary for implementing the provisions of this Resolution.

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Article (12) Publication and Entry into Force This Resolution shall be published in the Official Gazette, and shall enter into force (60) sixty days following its publication date. Mohammed bin Rashid Al Maktoum Prime Minister Issued by Us Dated: 10th Ramadan 1443 AH, Corresponding to: 11th April 2022 AD

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