Corporate Governance Requirements for DFSA/FSRA Regulated Firms

For firms regulated by the Dubai Financial Services Authority (DFSA) or the Financial Services Regulatory Authority (FSRA), corporate governance requirements are structured to ensure that companies operate with transparency, accountability, and in the best interest of shareholders. Below are some of the key corporate governance requirements for DFSA and FSRA regulated firms.

Board of Directors Accountability:

The Board is collectively responsible for ensuring that the company’s business is managed carefully and soundly. This area emphasizes the Board’s role in guiding the company’s strategic direction and monitoring its management.

Division of Responsibilities:

There must be a clear division between the Board’s role in setting the company’s strategic aims and the senior management’s role in implementing these strategies. This separation ensures that the Board can objectively oversee management without conflicts of interest.

Board Composition and Resources:

The Board and its committees must have the right mix of skills, experience, and independence to effectively oversee the company’s operations. Moreover, they must have access to the necessary resources and information to make informed decisions.

Risk Management and Internal Controls:

The Board must ensure that the company has a strong framework for managing risks, internal controls, and compliance. This includes having well-integrated systems that allow the company to identify, assess, and manage potential risks effectively.

Shareholder Rights and Effective Dialogue:

The Board must safeguard shareholders’ rights and ensure they can exercise them effectively. This includes promoting open and effective communication with shareholders and other key stakeholders to prevent any abuse of minority shareholders.

Financial Position and Prospects:

The Board is responsible for ensuring that the company’s financial reports provide an accurate, balanced, and understandable assessment of its financial position and prospects. This involves maintaining strong internal controls over financial reporting.

Remuneration:

The Board must establish remuneration structures and strategies that align with the long-term interests of the company. This is to ensure that the compensation policies incentivize long-term performance rather than short-term gains.

Directors’ Duties:

Directors are required to act in good faith and with due diligence in carrying out their responsibilities. They must prioritize the interests of the company and its shareholders.

Fair Treatment of Shareholders:

The company must implement provisions to ensure that all shareholders are treated fairly. This includes rules related to communication, voting rights, and conflict of interest management.

Conflict of Interest Management:

Senior management and related parties are subject to restrictions on dealing with company securities and entering transactions with the company, particularly during closing periods.

These provisions help to reinforce the overall governance framework, ensuring that the company operates in a fair, transparent, and accountable manner.

Conclusion:

The regulatory requirements for corporate governance set by the DFSA and FSRA are designed to ensure that companies are managed in a way that promotes long-term success and protects shareholders’ interests. By following these requirements, regulated entities can build trust with investors and maintain a stable and sustainable business model. Understanding these requirements is essential for any company operating under the DFSA or FSRA’s regulatory requirements, as it also forms the basis for sound corporate management.

Disclaimer: The purpose of this publication is to create awareness and has been written in general terms. This publication is not for any specific situation and therefore no opinion should be drawn from it for any particular circumstances. Limitless Consulting recommend that the reader of this publication should refer to the official documents referred in the document, seek appropriate professional advice for any particular situation and accepts no liability for any loss as a result of any information mentioned in this publication.