1. 1.1 The Central Bank is seeking to enhance the organization, development and regulation of Finance Companies in the United Arab Emirates (U.A.E.) in the context of the overall organization of the financial sector.
    
2. 1.2 In introducing this Regulation the Central Bank wishes to ensure that Finance Companies in the U.A.E. are:
    
   1. a. Operating within transparent and well-defined organizational structures and operations;
       
   2. b. Prudently managed within a framework of permissible activities; and
       
   3. c. Equipped with the necessary financial resources and internal risk management systems.
       

1. 2.1 The objective of this Regulation is to provide a regulatory framework in which Finance Companies can operate and develop within the overall U.A.E. financial sector in a robust and prudent manner. The framework set out in this Regulation is aimed at:
    
   1. a. Protecting the customers of Finance Companies;
       
   2. b. Protecting Finance Companies; and
       
   3. c. Enhancing the overall stability of the financial sector.
       
2. 2.2 This Regulation is issued by the Central Bank pursuant to the powers vested in the Central Bank Law.
    
3. 2.3 Where this Regulation includes a requirement to provide information or to take certain measures, or to address certain items listed at a minimum, the Central Bank may impose requirements, which are additional to the list provided in the relevant article.
    

1. 3.1 This Regulation applies to all Finance Companies except where specifically mentioned otherwise in this Regulation. All branches of any Finance Company operating in the U.A.E. shall be regarded together as one Finance Company.
    

The following terms and phrases shall have the definitions assigned to them for the purpose of this Regulation:

1. Affiliate: an entity that, directly or indirectly, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity;
    
2. Aggregate Funding: the total amount of debt capital that a Finance Company borrows from external sources, including its Parent. This includes, but is not limited to, borrowings from other financial institutions, issuing of bonds and other Islamic Finance debt instruments;
    
3. Aggregate Liabilities: the total amount of on-balance sheet and off-balance sheet liabilities of a Finance Company;
    
4. Central Bank: the Central Bank of the United Arab Emirates established under Federal Law No. (10) of 1980;
    
5. Central Bank Law: Federal Law No (10) of 1980 concerning the Central Bank, the Monetary System and Organization of Banking and its amendments;
    
6. Commercial Companies Law: the Federal Law No. (2) of 2015 concerning Commercial Companies;
    
7. Confidential Data: account or other information relating to a Finance Company customer or employee, who is or can be identified, either from the confidential data or from the confidential data in conjunction with other information that is in, or is likely to come into, the possession of a person, organization, or process that is granted access to the confidential data;
    
8. Controlling Influence: the relationship between a parent company and a subsidiary, where the parent holds a minimum of 50% of the subsidiary’s share capital or has control over it via, for example, the composition of the board of directors, or via a similar relationship between any natural or Juridical Person or company;
    
9. Credit Exposure: the value of a funded and unfunded exposure and unused committed lines that are subject to any credit risks, such as default or credit rating downgrade;
    
10. Duty of care: the duty of a member of the board of directors to act on an informed and prudent basis in decisions with respect to the Finance Company;
     
11. Duty of loyalty: the duty of a member of the board of directors to act in the interest of the Finance Company;
     
12. Financing: permitted activities as referred to in Article 10 of this Regulation;
     
13. Finance Company: a conventional finance company and/or an Islamic Finance Company;
     
14. Fitness and Probity or Fit and Proper: professional requirements and personal integrity requirements addressed to the board of directors and Senior Management in this Regulation;
     
15. Foreign funding: any borrowing or acceptance of deposits from any corporate entity incorporated outside of the U.A.E. and its free zones;
     
16. Free Zone: all free zones in the UAE except the financial free zones;
     
17. Higher Sharia’a Authority: the Authority established by the Central Bank to ensure implementation of Islamic Sharia’a provisions at financial institutions carrying on their entire activities or part thereof in accordance with Islamic Sharia’a provisions;
     
18. Independent member of the board: a member of the board of directors who does not have any management responsibilities within the Finance Company and is not under any undue influence, internal or external, political or ownership, that would impede the board member’s exercise of objective judgment, including but not limited to a relationship with the Finance Company, any of its Senior Management, external auditor, significant shareholders, subsidiaries or affiliates that could lead to financial or other benefit, in addition to other conditions that the Central Bank may specify from time to time;
     
19. Islamic Finance Company: a Central Bank licensed company engaged in financing activities whose memorandum and articles of association include a commitment to apply Sharia'a provisions and to conduct its activities as per those provisions;
     
20. Juridical Person: a Juridical Person in accordance with Article 92 of Federal Law no. 5 of 1985 Concerning the Issuance of the Civil Transactions Law. For the purpose of this Regulation, this definition only refers to Juridical Persons in the U.A.E.;
     
21. License: authorization issued by the Central Bank to conduct the business of Finance Companies;
     
22. Licensee: a Juridical Person licensed by the Central Bank to conduct Financing activities per the provisions of this Regulation;
     
23. Material Business Activity: an activity of the Finance Company that has the potential, if disrupted, to have a significant impact on the Finance Company’s business operations or its ability to manage risks effectively;
     
24. Parent Company: an entity (the 'first entity') which:
    1. holds a majority of the voting rights in another entity (the 'second entity');
        
    2. is a shareholder of the second entity and has the right to appoint or remove a majority of the board of directors or managers of the second entity; or
        
    3. is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity.

       or;

    4. if the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity.
        
25. Principal Shareholder: any shareholder of a Finance Company who owns, directly or indirectly, 5% or more of shareholdings of a Finance Company;
     
26. Related Entities: any of the following:
    1. Two or more natural or Juridical Persons who, unless shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others, or can exercise a Controlling Influence over the other party in making financial and operating decisions; or
        
    2. Two or more natural or Juridical Persons between whom there is no relationship of control but who are to be regarded as constituting a single risk because they are so inter-related that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties;

1. aa. Senior Management: the executive management of the Finance Company responsible and accountable to the board of directors for the sound and prudent day-to-day management of the Finance Company, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer and heads of the compliance and internal audit functions;
    
2. ab. Subsidiary: an entity (the 'first entity') is a subsidiary of a Finance Company (the 'second entity') if the second entity:
    
   1. holds a majority of the voting rights in the first entity;
       
   2. is a shareholder of the first entity and has the right to appoint or remove a majority of the board of directors or managers of the first entity; or
       
   3. is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity.

      or;

   4. if the second entity is a subsidiary of another entity which is itself a subsidiary of the second entity;
       
3. ac. U.A.E. Banks: all banks licensed by the Central Bank.
    

1. 5.1 This Regulation replaces all previous Central Bank regulations with respect to finance companies including the following:

1. 6.1 The conducting of Financing activities in the U.A.E. is prohibited unless licensed by the Central Bank to do so.
    
2. 6.2 Conducting Financing activities is restricted to Juridical Persons. The application must specify the range of activities for which the License is requested and must include the following:
    
   1. 6.2.1 A statement identifying the nature and scope of the types of activities, mentioned in Article 10 of this Regulation, that a new Finance Company proposes to undertake. In addition, the statement must specify any plans the applicant may have with regard to the future developments of these kinds of business, as well as details regarding the applicant's arrangements related to managing its business.
       
   2. 6.2.2 A feasibility study identifying the target market, the services to be provided, the business model and the strategy of the Finance Company, in addition to a three-year feasibility study that includes at least the following:
       
      1. Financing activities and products to be launched;
          
      2. Estimated financial statements, projected annual revenue and expenses, financial margins and targeted growth rates, taking into account Central Bank requirements according to Article 11 and Article 12 of this Regulation;
          
      3. Projected start-up costs and financing thereof;
          
      4. Projected ongoing financing of operations;
          
      5. The risk factors;
          
      6. A summary of the corporate structure, legal form and corporate governance standards adopted by the Finance Company;
          
      7. Branches to be established by the Finance Company; and
          
      8. A recruitment plan with the projected number of employees, including those of U.A.E. nationality. The Central Bank may set specific requirements for the share of employees of the Finance Company who are U.A.E. nationals.
          
   3. 6.2.3 The names, addresses, nationalities and share holdings of the shareholders, in addition to a certified copy of the memorandum and articles of association after the completion of the establishment procedures, as per the provisions of the Commercial Companies Law. For the shareholders who are U.A.E. nationals, U.A.E. identity cards are required in addition to a list of family members and their relationship to the founding members. For expatriate shareholders, passport and valid residency visa copies and U.A.E. identity cards are required. If the founding members are Juridical Persons, then constitutional documents duly legalized are required.
       
   4. 6.2.4 Organizational structure showing the main departments, sections, lines of reporting, authorities and responsibilities. This structure should be appropriate, balanced, and acceptable to the Central Bank.
       
   5. 6.2.5 Curriculum vitae of persons recommended for board of directors and Senior Management positions. The Central Bank may decide to interview nominees.
       
   6. 6.2.6 A certificate issued by a U.A.E. Bank indicating that the license applicant holds at least 25 million United Arab Emirates Dirhams of its paid up capital in deposits; in addition, an undertaking to deposit the remaining balance of the minimum required paid-up capital immediately after obtaining a preliminary approval from the Central Bank.
       
   7. 6.2.7 A letter of unconditional guarantee by one of the U.A.E. Banks, issued to the Central Bank, for an amount equivalent to the minimum required paid-up capital. This letter of guarantee must be renewable automatically until the required minimum paid-up capital is paid in full. The letter of guarantee shall be released upon the request of the founding shareholders in the following cases:
       
      1. Payment of the required minimum amount of paid-up capital in cash;
          
      2. Withdrawal of the License application; or
          
      3. Rejection of the License application by the Central Bank.
          
   8. 6.2.8 An undertaking to abide by the provisions of the Central Bank Law, the Commercial Companies Law and Federal Law No. (6) of 1985 regarding Islamic Banks, Financial Institutions and Investment Companies as well as the provisions of this Regulation and any decisions, instructions, directives, circulars or correspondence issued by the Central Bank with regard to Financing activities.
       
   9. 6.2.9 An undertaking to make available records and documents to be supervised, examined and reviewed by the Central Bank, as well as an undertaking to comply with all anti-money laundering laws and regulations and any other resolutions or instructions issued by the Central Bank in this regard.
       
   10. 6.2.10 Any other information and/or documents requested by the Central Bank for the purpose of deciding on the application for a License.
        
3. 6.3 The applicants might apply for either a conventional finance company License or an Islamic Finance Company License. As such, Islamic windows in conventional finance companies are prohibited.
    
4. 6.4 The legal form of a Finance Company must be in one of the forms stipulated in the Commercial Companies Law. It shall be subject to Central Bank licensing, supervision and examination, as per the provisions of the Central Bank Law.
    

1. 7.1 The Licensee must commence licensed activities, specified in its License according to Article 10 of this Regulation, within a maximum of 12 months from the date of notification of approval of License.
    
2. 7.2 The License shall be granted for an initial period of three years and shall be renewable for same periods unless otherwise required by the Central Bank. A Finance Company must apply to the Central Bank for License renewal no later than two months before the expiry date of the existing License.
    
3. 7.3 The License shall contain the terms deemed appropriate by the Central Bank.
    
4. 7.4 The Central Bank may take any action deemed appropriate to ensure the sound functioning of the Finance Companies.
    

1. 8.1 The Central Bank may approve or refuse the License application after reviewing the application and obtaining all requested information.
    
2. 8.2 The Central Bank shall notify the applicant of its decision in writing, with reasons provided in the event a License application is refused, within fifteen days after the date of the decision of the Central Bank’s board of directors.
    

1. 9.1 The Central Bank may, at any time, through a decision by its board, cancel, change, restrict, impose or withdraw any condition imposed on a License. The Finance Company shall have the right to comment with regard to the reasons for such cancellation, alteration, restriction, imposition or withdrawal. The Central Bank shall not be obliged to but may consider such comments at its sole discretion.
    
2. 9.2 The Central Bank may, through a decision by its board, revoke or withdraw a License of a Finance Company in the following cases:
   1. If the Finance Company violates any provision of this Regulation, or the provisions of the Central Bank Law, or any other applicable laws, regulations, decisions, instructions, directives, circulars or correspondence issued by the Central Bank, including regulations regarding anti-money laundering / combating the financing of terrorism requirements; or if the License requirements are not met or cannot be met;
       
   2. If the Central Bank is provided with false, misleading or inaccurate information by the Finance Company or by those acting on its behalf, including its managers, supervisors or auditors;
       
   3. If the interests of the current or potential customers of the Finance Company are at risk, whether due to the manner in which the Finance Company conducts its business or intends to conduct its business, or for any other significant reason;
       
   4. If an order to liquidate the business of the Finance Company or of its Parent is issued by any competent judicial authority;
       
   5. If a court receiver, or any other similar officer is appointed to oversee the business of the Finance Company;
       
   6. If a bankruptcy order against the Finance Company is issued;
       
   7. If the Finance Company has not commenced operations within twelve months from the date of notification of approval of the License;
       
   8. If the Finance Company ceases to operate for a period of twelve consecutive months;
       
   9. If the Central Bank determines that the Finance Company is unable to repay debts that are due, or that asset values are less than its liabilities, after taking into consideration current and future claims;
       
   10. If the concerned local authorities have withdrawn any licenses granted by them to the Finance Company;
        
   11. If the Finance Company conducts any business activity from premises other than those approved by the Central Bank;
        
   12. If the Senior Management of the Finance Company is not deemed Fit and Proper; and
        
   13. In any additional case determined by the Central Bank at its sole discretion.
        
3. 9.3 A Finance Company wishing to cease or suspend any of its licensed activities must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.
    
4. 9.4 Any Finance Company that fails to comply with the applicable anti-money laundering / combating the financing of terrorism laws and regulations and any other resolutions or instructions issued by the Central Bank in this regard, will be penalized in accordance with the prevailing laws and regulations.
    
5. 9.5 In case a Finance Company is not compliant with any of the provisions of this Regulation, the Central Bank shall have the sole authority to consider imposing fines, penalties or any such action on the Finance Company at the sole discretion of the Central Bank.
    

1. 10.1 A company can apply for a License to conduct one or more of the following types of activities:
   1. Retail finance, including personal loans, credit cards and vehicle loans;
       
   2. Mortgage finance, including residential mortgages and commercial mortgages;
       
   3. Wholesale finance, including loans to large corporate borrowers, small and medium-sized enterprises, micro-financing, finance and operating leasing and wage protection schemes;
       
   4. Pre-paid cards; and
       
   5. Distribution of third party products as an agent; provided that the Finance Company received approval from the relevant competent authority for the distribution of the third party products concerned.
       

   The licensing application must state the products within each activity that the Finance Company intends to offer to its customers.

2. 10.2 The board of the Central Bank can review the list of permitted activities specified in Article 10.1 of this Regulation and amend it.
    
3. 10.3 The financing activities of an Islamic Finance Company are those provided under Article 10.1 subject to compliance with Islamic Sharia'a provisions.
    
4. 10.4 A Finance Company may only accept deposits from Juridical Persons and only issue certificates of deposit to Juridical Persons. A Finance Company is strictly prohibited from accepting deposits or loans from individuals and from opening accounts of any kind, excluding loan accounts and in any form on behalf of individuals.
    
5. 10.5 A Finance Company is permitted to borrow from U.A.E. Banks. A Finance Company may receive Foreign funding provided that adequate hedging is in place to mitigate the currency risk. Foreign funding must not exceed 25% of the sum of Aggregate Funding and deposits of a Finance Company.
    
6. 10.6 A Finance Company must have its License updated in order to conduct any activity outside of those specified in the License of the Finance Company.
    
7. 10.7 A Finance Company must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in the License of the Finance Company.
    
8. 10.8 Consistent with Articles 10.1a, 10.1b and 10.1c of this Regulation, the Finance Company may extend advances and loans to Juridical Persons and individuals based in the U.A.E. and offer revolving credit facilities, open letters of credit and issue letters of guarantee to Juridical Persons.
    
9. 10.9 Consistent with Article 10.1d of this Regulation, the Central Bank shall approve the request of a Finance Company to act as a program manager for the reloadable prepaid cards programs of a U.A.E. Bank with the following conditions:
    
   1. Escrow accounts (pool accounts) should be ring-fenced from deposits of the Finance Company;
       
   2. The U.A.E. Bank remains responsible for anti-money laundering / combating the financing of terrorism compliance and reporting functions;
       
   3. The U.A.E. Bank remains responsible for ensuring that appropriate systems and controls are in place to monitor all transactions;
       
   4. The board of directors of the Finance Company should oversee the business risks;
       
   5. The Finance Company is responsible for ensuring anti-money laundering / know-your-customer procedures, specially initial know-your-customer procedures, are in place and operate effectively;
       
   6. The Finance Company must ensure that its anti-money laundering / know-your-customer procedures are in line with the anti-money laundering / know-your-customer procedures of the U.A.E. Banks.
       
   7. The Finance Company must screen every transaction against money laundering and terrorism financing for amounts that exceed the threshold as per the law or regulation concerned or any notice issued by the Central Bank.
       
   8. The Finance Company should ensure that procedures are in place on pool account operation, reconciliation controls and independent audit reviews; and
       
   9. The Finance Company must abide by all relevant laws and regulations at all times, in this regard.
       
10. 10.10 In keeping with Article 10.4 of this Regulation, a Finance Company may accept deposits from Juridical Persons and issue certificates of deposit to Juridical Persons, provided that:
     
    1. They are term deposits only, with a minimum tenor of thirty days;
        
    2. Any deposit accepted is subject to a robust asset and liability management; and
        
    3. A single party deposit does not exceed 20% of the total amount of all accepted deposits and certificates of deposits of a Finance Company.
        
11. 10.11 A Finance Company may only participate in the share capital of the following companies. Companies concerned must be incorporated in the U.A.E. or its free zones:
     
    1. Brokerage Companies;
        
    2. Money Exchange Companies;
        
    3. U.A.E. Banks; and
        
    4. Finance Companies.
        
12. 10.12 Any single participation mentioned in Article 10.11 of this Regulation must not exceed 10% of the Aggregate Capital Funds as defined in Article 11 of this Regulation and the aggregate participation in the capital base of the companies mentioned in Article 10.11 of this Regulation must not exceed 25% of the Aggregate Capital Funds of the Finance Company.
     
13. 10.13 Any participation in any finance sector company mentioned in Article 10.11 of this Regulation must not exceed 25% of the share capital of the investee. This restriction does not apply to companies supporting operational activities of the investing Finance Company.
     
14. 10.14 A Finance Company may place deposits in U.A.E. Banks and obtain certificates of deposit from U.A.E. Banks provided that:
     
    1. The number of U.A.E. Banks, in which the Finance Company places its deposits is greater than or equal to four; and
        
    2. Any such deposit or certificate of deposit placed in any U.A.E. Bank does not exceed 10% of the Aggregate Capital Funds of the Finance Company.
        
15. 10.15 A Finance Company must obtain approval from the Central Bank in order to issue bonds or sukuks. Bonds and sukuks of a Finance Company must be denominated in United Arab Emirates Dirham or United States Dollar only.
     
16. 10.16 A Finance Company is prohibited from financing a borrower which is not an entity incorporated in the U.A.E or its free zones, or a U.A.E. resident, or where the mortgaged assets are not in the U.A.E.
     
17. 10.17 A Finance Company is prohibited from conducting any money-exchange business and from entering into any unhedged foreign exchange contracts.
     
18. 10.18 A Finance Company must not purchase or acquire any immovable property, except for immovable property that may be used as premises for its operations.
     
19. 10.19 Article 10.18 of this Regulation shall not prevent a Finance Company from securing a debt on any immovable property and in the event of default in payment of the debt, from entering into a settlement agreement with the relevant borrower and as a result holding that immovable property for realization by sale or auction within three years from the date such ownership was established. The said period could be extended by the Central Bank based on justification acceptable to the Central Bank.
     
20. 10.20 Article 10.18 of this Regulation shall not apply to Islamic Finance Companies, which may own property including immovable property and goods as part of an underlying financing contract with a borrower.
     
21. 10.21 Article 10.18 of this Regulation shall not apply to such property as may from time to time be explicitly approved in advance by the Central Bank.
     
22. 10.22 A Finance Company must not engage in any activity for which it is not licensed under applicable laws and regulations.
     

1. 11.1 Aggregate Capital Funds consist of the following items:
    
   1. Paid-up capital;
       
   2. Reserves, excluding revaluation reserve; and
       
   3. Retained earnings.
       
2. 11.2 The following items must be deducted from Aggregate Capital Funds:
    
   1. Accumulated losses; and
       
   2. Goodwill.
       
3. 11.3 The minimum required paid-up capital for a Finance Company is 150 million United Arab Emirates Dirham.
    
4. 11.4 In the event that Aggregate Capital Funds of a Finance Company fall below 150 million United Arab Emirates Dirham, the Finance Company must present a plan to rectify the shortfall to the Central Bank within 30 days of the occurrence of the shortfall. The plan must be approved by the board of directors of the Central Bank.
    
5. 11.5 U.A.E. national ownership of a Finance Company must comprise at least 60% of total paid-up capital.
    
6. 11.6 The amount of Aggregate Liabilities of a Finance Company must be limited to 100% of its Aggregate Capital Funds during the first two years of operation. Thereafter, approval may be sought from the Central Bank to allow the value of Aggregate Liabilities to increase to 200% of the Aggregate Capital Funds; up to 300% after four years; up to 500% after seven years; and up to 700% after ten years. A Finance Company may, for the purpose of this calculation, deduct from Aggregate Liabilities any of the following items:
    
   1. Cash collaterals;
       
   2. Bank guarantees from U.A.E. Banks; and
       
   3. Sovereign guarantees.
       

   The items listed under the letters a, b and c of this Article must be legally enforceable.

7. 11.7 A Finance Company should allocate at least 10% of its annual net profits to the establishment of a statutory reserve until such point as that statutory reserve equals 50% of its paid-up capital.
    
8. 11.8 Shareholders of a Finance Company must not withdraw an amount exceeding their share of the annual net profit identified in the provisions of the Commercial Companies Law.
    
9. 11.9 A Finance Company must obtain approval from the Central Bank for any proposed dividend distribution and they must do so before announcing the proposed dividend publicly in a press announcement or by other means of communication and prior to submitting a proposal for a distribution of profits for shareholder approval.

1. 12.1 The following items may be considered as Liquid Assets:
    
   1. Cash held in a U.A.E. Bank;
       
   2. Certificates of deposit issued by the Central Bank held via a U.A.E. Bank;
       
   3. Short-term deposits with a U.A.E. Bank with maturity up to 30 days; and
       
   4. UAE Federal and local government bonds, which must not exceed 30% of the total amount of Liquid Assets.
       

   Encumbered cash held as collateral by a Finance Company is not considered as Liquid Assets.

2. 12.2 To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their Aggregate Liabilities in Liquid Assets. A Finance Company may, for the purpose of this calculation, deduct from Aggregate Liabilities any of the following items:
    
   1. Cash collaterals;
       
   2. Bank guarantees from U.A.E. Banks; and
       
   3. Sovereign guarantees.
       

   The items listed under the letters a, b and c of this Article must be legally enforceable.
   
   12.3 Consistent with Article 12.2 of this Regulation a Finance Company must not hold more than 25% of its Liquid Assets in a single U.A.E. Bank.

3. 12.4 Customer deposits of a Finance Company are not subject to cash reserve requirements.
    

1. 13.1 A Finance Company’s Credit Exposure to a single borrower or group of Related Entities is considered as a Large Credit Exposure, where its value is equal to or exceeds 7% of the Finance Company’s Aggregate Capital Funds. For the purpose of calculating the value of a Large Credit Exposure, a Finance Company may consider whether to deduct any of the following items:
    
   1. Provisions;
       
   2. Cash collaterals;
       
   3. Bank guarantees from U.A.E. Banks; and
       
   4. Sovereign guarantees.
       

   The items listed under the letters b, c and d of this Article must be legally enforceable.
   
   13.2 The aggregate amount of Large Credit Exposures must not exceed 100% of the Aggregate Capital Funds of a Finance Company.

2. 13.3 In addition to Article 13.2, the Central Bank has defined maximum permissible Credit Exposure limits, as shown in Table 1 below.
    

Table 1: Maximum Credit Exposure Limits

1. 13.4 Where a Principal Shareholder is also a member of the board of directors of a Finance Company, Credit Exposures will be considered within the Principal Shareholders' Credit Exposure limits.
    

1. 14.1 A Finance Company must develop its own principles and policy for corporate governance, have them approved by its board of directors and provide the Central Bank with a copy thereof. The corporate governance policy must, at a minimum, include the following items:
   1. A description of the organizational structure, including all departments and positions as well as their duties and responsibilities;
       
   2. Controls for independence and segregation of duties;
       
   3. Roles, responsibilities, and composition of the board of directors and, if applicable, its committees;
       
   4. Remuneration and compensation policies;
       
   5. Conflict of interest controls;
       
   6. Integrity and transparency controls;
       
   7. Controls ensuring compliance with applicable laws and regulations;
       
   8. Methods for maintaining confidentiality of information;
       
   9. Controls for the protection of corporate assets; and
       
   10. Delegation of authority.
        

Founding shareholders

1. 14.2 Each founding shareholder must satisfy Fit and Proper requirements defined by the Central Bank. In particular, a founding shareholder must not have:
    
   1. Been convicted of any crime that violates honor or ethics, or that involves violence;
       
   2. Failed to honor financial liabilities to any bank or creditor;
       
   3. Declared bankruptcy or failed to reach a settlement agreement with creditors;
       
   4. Had properties confiscated; or
       
   5. Been placed under court receivership, unless he has been rehabilitated or pardoned by the relevant authorities.
       
2. 14.3 The number of founding shareholders of a Finance Company should be in line with the Commercial Companies Law.
    

Responsibility of the board

1. 14.4 Members of the board of directors of the Finance Company must act with integrity, exercising their Duty of Care and duty of loyalty.
    
2. 14.5 Members of the board of directors of the Finance Company are responsible for ensuring effective control over the Finance Company’s entire business. Members of the board of directors of the Finance Company must ensure that a Finance Company has a robust corporate governance policy commensurate with its risk profile.
    
3. 14.6 Members of the board of directors of the Finance Company are responsible for approving and overseeing implementation of the Finance Company’s strategic objectives and its risk management function, compliance function and internal and external audit.
    
4. 14.7 Members of the board of directors of the Finance Company are responsible for the organizational structure of the Finance Company, including specifying the key responsibilities and authorities of the board and the Senior Management including the heads of the risk management, compliance and internal audit functions.
    
5. 14.8 Members of the board of directors of the Finance Company are responsible for overseeing Senior Management, ensuring that the Finance Company’s activities are carried out in a manner consistent with the business strategy, corporate governance framework, remuneration and other policies approved by the board of directors of the Finance Company.
    

Board composition and qualification

1. 14.9 The board of directors of a Finance Company must have no fewer than five members. At least 60% of the board members must be experienced in the finance and banking business. At least 60% of board members of an Islamic Finance Company must have knowledge of the Islamic finance and banking business.
    
2. 14.10 The majority of the board of directors of a Finance Company must be U.A.E. nationals. The board must be chaired by one of the board members who is a U.A.E. national.
    
3. 14.11 All of the members of the board of directors must be non-executives. There must be no overlap between the function and role of the board and general management. A person holding a position in Senior Management must not hold a board position.
    
4. 14.12 At least 1/3 of the members of the board of directors must be independent members in order to facilitate effective oversight of the Finance Company. Collectively, the board members must have knowledge of all significant businesses of the Finance Company. The board members must have an appropriate balance of skills, diversity and expertise commensurate with the size, complexity and risk profile of the Finance Company.
    
5. 14.13 A Finance Company must have a clear and rigorous process for identifying, assessing and selecting candidates for the board of directors of the Finance Company. At a minimum, board members must meet the following Fit and Proper requirements:
    
   1. Possess the necessary knowledge, skills and experience; and
       
   2. Have sufficient time to fully discharge their responsibilities.
       
6. 14.14 The board members of a Finance Company must satisfy Fit and Proper requirements defined by the Central Bank. In particular, a board member must not have:
    
   1. Served as an auditor of a Finance Company while concurrently serving in the board of directors of the same Finance Company;
       
   2. Been terminated from any senior executive position in a company engaged in financial activities on the basis of disciplinary matters or on the basis of a disciplinary action based on a court judgement;
       
   3. Been convicted of any crime that violates honor or ethics, or that involves violence;
       
   4. Failed to honor financial liabilities to any bank or creditor;
       
   5. Declared bankruptcy or failed to reach a settlement agreement with creditors;
       
   6. Had properties confiscated; or
       
   7. Been placed under court receivership, unless he had been rehabilitated or pardoned by the relevant authorities.
       
7. 14.15 A Finance Company must obtain approval from the Central Bank prior to nominating or appointing members to its board of directors.
    
8. 14.16 A Finance Company must obtain approval from the Central Bank prior to any membership changes in its board of directors.
    

Board committees

1. 14.17 To cover areas requiring special expertise, the board of directors of a Finance Company must form board committees. Said committees must at a minimum include a separate board Audit Committee and a separate board Risk Management Committee. Where board committees are set up, they must be chaired by an Independent Member of the board of directors and must not be chaired by a member of the Senior Management or an external party.
    

Credit committee

1. 14.18 To review and approve substantial loans, the board of directors of a Finance Company is encouraged to establish a credit committee of no fewer than three members. Significant loans must be reviewed and approved by the board of directors. Finance Companies must decide on the definition of substantial and significant loans individually, based on the size of the Finance Company and its scope of activities.
    

Sharia’a supervision committee of an Islamic Finance Company

1. 14.19 The memorandum and articles of association of an Islamic Finance Company must state the appointment of a Sharia'a supervision committee, of no less than three members from among Islamic doctrinal specialists, who have previous experience in the area of Islamic financing.
    
2. 14.20 The Sharia'a supervision committee must ensure that the conduct and transactions of an Islamic Finance Company are in accordance with Islamic Sharia'a provisions. The articles of association of an Islamic Finance Company must specify the method by which the said committee is formed and the manner in which it conducts its duties and functions.
    
3. 14.21 The Sharia'a supervision committee must be responsible and accountable for all its decisions, views and opinions related to Sharia'a matters. While the board of directors of a Finance Company bears the ultimate responsibility and accountability on the overall governance of the Islamic Finance Company, the Central Bank expects the board of directors of a Finance Company to be guided by the Sharia'a supervision committee on compliance with all Sharia'a decisions, views and opinions applicable to the business of the Islamic Finance Company.
    
4. 14.22 In case a dispute or conflict arises between the Sharia’a Supervision Committee and the management of the Finance Company, the committee must refer the matter to the Higher Sharia’a Authority for decision.
    
5. 14.23 An Islamic Finance Company must ensure that its corporate governance framework adequately provides for:
    
   1. Compliance with Sharia'a provisions;
       
   2. The role of the Sharia'a supervision committee in the governance of the Islamic Finance Company;
       
   3. The rights of investment account holders and the processes and controls for protecting their rights; and
       
   4. Transparency of financial reporting in respect of investment accounts.
       
6. 14.24 An Islamic Finance Company must ensure compliance with any direction or guidance issued by the Higher Sharia'a Authority with respect to its Sharia'a governance framework.
    
7. 14.25 An Islamic Finance Company must immediately notify the Central Bank and the Higher Sharia'a Authority if it becomes aware of any material information that may negatively affect the Fitness and Probity of a Sharia'a supervision committee member.
    

Senior Management

1. 14.26 Any nominee for Senior Management must satisfy Fit and Proper requirements defined by the Central Bank. In particular, members of Senior Management must not have:
    
   1. Been dismissed from a previous job on the basis of disciplinary action;
       
   2. Been convicted in any crime that stains honor or ethics, or that involves violence;
       
   3. Failed to honor financial liabilities to any bank or creditor;
       
   4. Declared bankruptcy or failed to reach a settlement agreement with creditors;
       
   5. Had properties confiscated; or
       
   6. Been placed under court receivership, unless they had been rehabilitated or pardoned by the relevant authorities.
       
2. 14.27 The nominee for a Senior Management position of a Finance Company must, at a minimum, meet the following professional requirements:
    
   1. Be theoretically and practically familiar with the Financing business;
       
   2. Have appropriate academic and professional qualifications; and
       
   3. Adequate experience in the finance field for not less than ten years. The Central Bank may, at its own discretion, reduce periods of experience.
       
3. 14.28 The nominee for a Senior Management position of an Islamic Finance Company must, at a minimum, meet the following professional requirements:
    
   1. Be theoretically and practically familiar with the Islamic Financing business;
       
   2. Have appropriate academic and professional qualification; and
       
   3. Adequate experience in the finance field for not less than ten years. The Central Bank may, at its own discretion, reduce periods of experience.
       

   On a case-by-case basis, the Central Bank shall have the right to exempt the nominees from such conditions upon the sole discretion of the Central Bank.

4. 14.29 The post of the chief executive officer of a Finance Company or his equivalent must be separated from other roles within the group of companies that the Finance Company belongs to, with authorities and responsibilities defined by the board of directors. The chief executive officer or his equivalent is responsible for reporting significant transactions, major decisions and activities to the board of directors of the Finance Company.
    

1. 15.1 The Finance Company must establish written organizational policies and procedures, which must be reviewed annually and communicated to employees in a timely manner. At a minimum, the organizational policies and procedures must include the following items:
   1. Extension of credit;
       
   2. Risk management, assessment, handling, monitoring and disclosure thereof;
       
   3. Information technology and security;
       
   4. Internal audit;
       
   5. Compliance with relevant laws, regulations and instructions;
       
   6. Remuneration and incentives, including remuneration and incentives of Senior Management and remuneration of the board members; and
       
   7. Outsourcing of business activities.
       
2. 15.2 In keeping with provisions of Article 10 of this Regulation, a Finance Company must demonstrate that it has developed sound risk management policies and controls and adequate internal policies and procedures for each product offered by the Finance Company.
    
3. 15.3 A Finance Company must have an appropriate and balanced organizational structure, showing the main departments, sections, lines of reporting, authorities and responsibilities; the structure should be acceptable to the Central Bank.
    
4. 15.4 The segregation of duties must be maintained to ensure the application of the generally accepted policies and procedures for protecting the assets and funds of a Finance Company, and avoiding fraud and embezzlement. Executive positions must not be combined in such a way that they might introduce a conflict of interest.
    

Additional Requirements for internal policies and procedures of an Islamic Finance Company

1. 15.5 The management of an Islamic Finance Company must be responsible for observing and implementing Sharia'a rulings and decisions made by the Sharia'a supervision committee. The Finance Company is required to have procedures in place to ensure that any Sharia'a issues arising in the course of business are referred to the Sharia'a supervision committee for decisions, views and opinions.
    
2. 15.6 A Finance Company must adhere to the Fit and Proper criteria that govern appointment, replacement and termination of members and chairmen of the Sharia’a Supervision Committee.
    
3. 15.7 An Islamic Finance Company must take the necessary steps to ensure that proper systems and controls are in place in order to ensure Sharia'a provisions are complied with at all times, including but not limited to the following:
    
   1. An Islamic Finance Company must prepare procedure manuals for the operations duly approved by their Sharia'a supervision committee as well as the board of directors or in the case of branches of an Islamic Finance Company operating in the U.A.E., by their head office;
       
   2. An Islamic Finance Company must prepare a full set of documents pertaining to the investment and financing products relating to its operations. The full set of the documents duly vetted by their Sharia'a supervision committee must be maintained by the company. Similarly, all documents in respect of new schemes offered by the Islamic Finance Company must also be prepared and maintained before the launching of the scheme;
       
   3. All documents, including, but not limited to, ledgers, registers, pay-in-slips, cheques, receipts and passbooks used in an Islamic Finance Company must be appropriately marked, so as to easily distinguish them from the documents pertaining to a Conventional Finance Company; and
       
   4. An Islamic Finance Company must undertake an internal Sharia'a review on the operations of the company at least annually.
       

Extension of credit

1. 15.8 A Finance Company must draw up policies and procedures for finance, which, at a minimum, must include the following items:
    
   1. classification of credit worthiness;
       
   2. Procedures for dealing with declining credit rating and non-performing loans;
       
   3. Acceptable collaterals and the basis for assessing its value;
       
   4. Monitoring, administration and enforcement of collateral; and
       
   5. Risk provisioning.
       
2. 15.9 Finance Companies must establish and maintain regular procedures for classifying the loans and advances that they extend to their customers in accordance with the regulations and guidelines of the Central Bank. These requirements on the classification of loans and their provisions may occasionally be updated by the Central Bank.
    
3. 15.10 Upon obtaining the borrower's consent, the Finance Company must review the consumer’s credit record to verify the consumer’s solvency, ability to repay and credit behavior and document such verification in a credit file.
    
4. 15.11 A Finance Company must have a credit approval matrix for the extension of credit according to the type and amount of the credit. The credit approval matrix must be approved by the board of directors of the Finance Company. The decision to approve or reject credit must be in accordance with the authority granted in the credit approval matrix.
    
5. 15.12 The Finance Company must follow a sound method with written, transparent and clear procedures to assess credit worthiness of the applicants and their ability to repay. The board of directors of the Finance Company must approve these procedures and review them at least once every two years and update the same if necessary. The Finance Company must apply these procedures before extending credit and document the same in the credit file.
    
6. 15.13 Credit Exposure risks must be assessed and risk rated prior to making the decision to extend credit. The risk classification must be reviewed at least once a year.
    
7. 15.14 The Finance Company must specify procedures for early detection of risks to identify credit exposures that manifests clear signs of increased risk and develop quantitative and qualitative indicators for early identification of risks.
    

Risk management function

1. 15.15 A Finance Company should establish a clear, written risk management policy that is approved by the board of directors of the Finance Company. The risk management policy must address all relevant risks, taking into account the full range of business activities conducted by the Finance Company. At a minimum, the policy must include the following risks:
    
   1. Credit risks;
       
   2. Market risks;
       
   3. Asset-liability mismatch risks;
       
   4. Liquidity risks; and
       
   5. Operational risks, including information technology and security risks.
       
2. 15.16 The risk management function must be functionally independent of the risk generating business lines and is responsible for the design, maintenance and ongoing development of the risk framework within the Finance Company. The risk management function must not report hierarchically or functionally to any person or function that is directly responsible for risk generation. The risk management function must have appropriate access to the board of directors of a Finance Company.
    
3. 15.17 A Finance Company must set appropriate procedures for the identification, assessment, management and monitoring of risks and prepare risk reports thereon.
    
4. 15.18 A Finance Company must prepare a quarterly risk report to be discussed by the board of directors after being reviewed by Senior Management.
    

Information Technology and Security

1. 15.19 The technical facilities and systems of a Finance Company must be sufficient for the operational needs, business activities and risk exposure of the Finance Company.
    
2. 15.20 A Finance Company must maintain all business documents, records and files in an orderly, transparent and safe manner and ensure the completion and periodic updating of these files. Said documents, records and files must be retained for at least a period of five years from the date of termination of the relationship with the customer.
    
3. 15.21 Information technology systems and related processes must be developed to ensure data availability, integration, integrity and confidentiality. Such systems must be periodically assessed by the Finance Company in accordance with relevant regulations and standards and must be tested prior to launching and after introducing any modification thereto.
    
4. 15.22 The Finance Company must use its information technology infrastructure to enhance its ability to retrieve all know-your-customer and transactions records in a timely manner.
    
5. 15.23 The Finance Company must develop a business continuity plan that ensures alternative solutions that will enable the recommencement of operations within a reasonable time in the event that they are disrupted.
    

Internal audit function

1. 15.24 The Finance Company must have an internal audit function that reports directly to the board of directors of the Finance Company. This function must be independent and its employees must not be assigned any other responsibilities.
    
2. 15.25 The internal audit function must operate according to a comprehensive audit plan. The audit plan must be approved by the board of directors of the Finance Company and reviewed annually. Major activities and operations, including those related to risk management and compliance must be audited at least annually.
    
3. 15.26 The internal audit function must prepare and submit to the board of directors a written report on its activities on a quarterly basis.
    

Compliance function

1. 15.27 A Finance Company must comply with all applicable laws and regulations, decisions, instructions, directives, circulars, correspondence and policies. To prevent violations, a Finance Company must implement adequate measures and controls.
    
2. 15.28 A Finance Company must have an independent compliance function that ensures the compliance of the Finance Company with all applicable laws, regulations, decisions, instructions, directives, circulars, correspondence and policies.
    
3. 15.29 A Finance Company must create the role of a compliance officer, which has a direct reporting line to the board of directors of the Finance Company. The compliance officer must be appointed by the board of directors. The compliance officer must be independent in carrying out his assigned duties and must not be assigned any other responsibilities. The compliance officer must submit a quarterly report on compliance to the board of directors.
    
4. 15.30 A Finance Company must have a board approved written compliance policy. This compliance policy sets out the powers, obligations and responsibilities of the compliance function, as well as compliance programs and related procedures, including arranging regular anti-money laundering / combating the financing of terrorism training programs for the staff.
    
5. 15.31 The Finance Company must set adequate internal policies and procedures to combat financial crimes, specifically money laundering and terrorism financing. A Finance Company must report any suspicious transactions, activities or operations to the Anti-Money Laundering and Suspicious Cases Unit of the Central Bank in a timely manner.
    

Remuneration and incentives

1. 15.32 The Finance Company must ensure that it has an adequate number of staff who are experienced and qualified to meet the operational needs, business activities and risks of the Finance Company. Staff remuneration and incentives must be fair, in line with the risk management strategy of the Finance Company and not give rise to any potential conflict of interest.
    

Outsourcing

1. 15.33 A Finance Company must ensure that all outsourcing agreements include appropriate provisions for the safeguarding of confidential data. These include, but are not limited to, contractual provisions to ensure that a service provider in possession of confidential data may not provide any other party with access to the confidential data without first obtaining the specific authorization of the Finance Company.
    
2. 15.34 A Finance Company must ensure that it retains ownership of all data provided to a service provider, including but not limited to confidential data and has unfettered access to all data, including the right of return of all data and records for the duration of and at the termination of any outsourcing agreement.
    
3. 15.35 Finance Companies must have a process for determining the materiality of outsourced business activities. The process must consider the potential of the outsourced activity, if disrupted, to adversely affect the Finance Company’s operations or ability to manage risks.
    
4. 15.36 The outsourcing of Material Business Activities must be approved by the board of directors of the Finance Company, a committee of the board or designated senior officers.
    
5. 15.37 A Finance Company must apply for and receive a notice of no-objection by the Central Bank prior to entering into an agreement to outsource a Material Business Activity, whether to a related party or third party.
    
6. 15.38 While all requests for no-objection will be considered on their individual merits, the Central Bank will not permit the outsourcing to a third party of core activities, key management and control functions of the Finance Company including, at a minimum, the following items:
    
   1. Senior Management oversight;
       
   2. Credit management and decisions;
       
   3. Risk management;
       
   4. Compliance;
       
   5. Internal audit; and
       
   6. Management of the risk taking functions.
       
7. 15.39 Every agreement governing an outsourced business activity must include an explicit provision giving the Central Bank, or an agent appointed by the Central Bank, access to the service provider. The provision must include the right to conduct on-site visits at the service provider if the Central Bank considers this necessary for supervisory purposes and require the service provider to provide directly to the Central Bank, or an agent appointed by the Central Bank, any data or information required for supervisory purposes, upon request by the Central Bank.
    
8. 15.40 A Finance Company must not enter into an outsourcing agreement with a third party or related party that involves the storage of Confidential Data outside of the U.A.E. A Finance Company may, however, enter into an outsourcing agreement with a third party that involves the storage of Confidential Data in the U.A.E. Free Zones.
    
9. 15.41 For any outsourced Material Business Activity, the internal audit function of the Finance Company must provide independent assurance similar to that required if the activity was undertaken by the Finance Company.
    
10. 15.42 The internal audit function must regularly review and report to the board of directors of a Finance Company on compliance with the outsourcing policies and procedures of the Finance Company.
     
11. 15.43 For any outsourced Material Business Activity, the compliance function of the Finance Company must review and report to Senior Management or the board of directors of a Finance Company on the observance by the service providers of all applicable compliance policies of the Finance Company.
     
12. 15.44 An Islamic Finance Company must ensure that its outsourcing policies and arrangements are consistent with Sharia’a provisions.
     
13. 15.45 An Islamic Finance Company must ensure that its policies and procedures for the assessment of any proposed outsourcing arrangement specifically consider operational and reputational risks from failure by the service provider to adhere to Sharia’a provisions.
     
14. 15.46 A Finance Company must report to the Central Bank on its outsourcing arrangements in the format and frequency prescribed by the Central Bank.
     
15. 15.47 A Finance Company must provide upon request any specific information with respect to outsourcing arrangements that the Central Bank may require.
     
16. 15.48 A Finance Company must immediately notify the Central Bank when it becomes aware of any material breach of the terms of an outsourcing agreement, or other development with respect to an outsourced business activity, that has, or is likely to have, a significant impact on operations, reputation or the financial condition of the Finance Company or otherwise lead to the disclosure of confidential information.
     

1. 16.1 The commercial name of a Finance Company must not include the terms "bank", "investment company", "commercial company" or any other term that might suggest anything outside the scope of the Financing activities outlined in Article 10 of this Regulation.
    
2. 16.2 A Finance Company must provide its borrowers with sufficient and transparent information, including costs and risks associated with the loan, to enable the borrower to make an informed assessment of the suitability of the loan to their needs and financial circumstances.
    
3. 16.3 A Finance Company must adhere to the Central Bank’s regulations regarding loans offered to customers. There should be transparency in preparing and publishing all fees, charges and interest rates (or profits) including the method of calculating interest / profit.
    
4. 16.4 Borrowers should be provided with information setting out the total cost of the loan during the loan period. The borrower must sign each page of the loan documentation and be given a copy signed by both the Finance Company and the borrower.
    
5. 16.5 A Finance Company must use official documents on all transactions when dealing with its customers.
    
6. 16.6 A Finance Company must follow Central Bank guidelines for banks and finance companies pertaining to consumer protection. These guidelines are occasionally updated by the Central Bank.
    

1. 17.1 A Finance Company must strictly adhere to the following credit reporting requirements:
    
   1. Provide credit information of borrowers to the Al Etihad Credit Bureau and any future credit information agencies established for this purpose in U.A.E. on at least a monthly basis unless otherwise required by the law or the Central Bank; and
       
   2. Request credit information of borrowers from the Al Etihad Credit Bureau and any future credit information agencies established for this purpose in U.A.E. before extending credit to an individual borrower.
       

Reporting to the Central Bank

1. 18.1 The financial year of the licensed Finance Company must commence on 1^st January and end on the 31^st of December (except in the year of formation, which commences on the registration of the Finance Company in the commercial registry and ends on the 31^st of December of the next year, provided it does not exceed eighteen months).
    
2. 18.2 A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31^st March every year. The Central Bank will review the financial statements and give its approval for their publication.
    
3. 18.3 A Finance Company must publish on its website or in a newspaper of broad circulation its audited annual accounts. Such publications must occur prior to 30th April of every year.
    
4. 18.4 A Finance Company must provide the Central Bank with a list of its board members and their shareholding in the Finance Company annually, as well as an annual list of shareholders with shareholdings of 5% or more.
    
5. 18.5 A Finance Company must provide the Central Bank with supervisory return forms on a regular basis, as specified by the Central Bank. For the purpose of calculating reporting requirements regarding Aggregate Capital Funds, Finance Companies must ensure that any capital increase has been validated by an external auditor.
    
6. 18.6 A Finance Company must provide the Central Bank with any statements, information or statistics regarding any specific period required at any time; these should conform to the records of the company. All information shall be considered confidential and treated on that basis.
    

Prior approval by the Central Bank

1. 18.7 The licensed Finance Company must strictly adhere to the following:
    
   1. Not to make any changes to its name, legal form or capital without prior written approval from the Central Bank;
       
   2. Not to merge or consolidate with any other person or entity, without the prior written approval of the Central Bank;
       
   3. To conduct its business from independent and appropriate premises; relocation is not allowed without prior approval from the Central Bank;
       
   4. Not to open any branches except after obtaining prior approval from the Central Bank. In this case, consideration shall be given to the financial position of the Finance Company and its past compliance with regulatory requirements where applicable;
       
   5. Issue all correspondence and documentation in the name of the entity and duly signed by authorized persons;
       
   6. Make no amendments to its Memorandum and Articles of Association without the approval of the Central Bank;
       
   7. Obtain prior approval from the Central Bank for the appointment of Senior Management;
       
   8. Obtain prior approval from the Central Bank before commencing any additional activities apart from those specified in Article 10.1 of this Regulation;
       
   9. Obtain prior approval from the Central Bank before commencing third party product distribution activities;
       
   10. Obtain prior approval from the Central Bank before incorporating any subsidiary; and
        
   11. Not to incur any encumbrance on any of its assets without prior approval from the Central Bank.
        
2. 18.8 Any changes in the Finance Company’s shareholdings of 5% or more require prior approval from the Central Bank.
    

1. 19.1 A Finance Company must appoint a statutory external auditor acceptable to the Central Bank, maintain proper accounting records and submit statements concerning these records to the Central Bank on the required forms.
    
2. 19.2 The person nominated as external auditor of a Finance Company should be theoretically and practically familiar with the finance business and should have relevant managerial experience.
    
3. 19.3 A Finance Company must obtain approval from the Central Bank prior to appointing an external auditor. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.
    
4. 19.4 A Finance Company must not provide financing, facilities or open any accounts for its external auditors.
    
5. 19.5 A Finance Company must rotate their external audit firm at least every 6 years subject to the conduct of a procurement procedure. In addition, a Finance Company must rotate their external audit firm’s partner in charge of the audit every 3 years.
    
6. 19.6 The Central Bank may require a Finance Company to replace its external auditor or change the partner of its external auditor or may appoint another external auditor at the expense of the Finance Company in the following cases:
    
   1. If required by the size and nature of its business;
       
   2. If the external auditor commits a violation of a professional nature;
       
   3. If there is a reason to believe that the external auditor has a conflict of interest; or
       
   4. If the integrity of the finance sector or governance considerations and the protection of stakeholder’s interest so requires.
       

1. 20.1 The Central Bank shall conduct periodic examinations of the business of the Finance Company to ensure the soundness of the financial position of the Finance Company and the application of the provisions of this Regulation as well as any other laws mentioned in this Regulation and instructions issued by the Central Bank.
    
2. 20.2 The Central Bank may from time to time conduct examination of the Finance Company and of any branch or subsidiary operating in the U.A.E. or abroad to ensure the soundness of its financial position and compliance with the Articles of this Regulation and/or any other directives prescribed by the Central Bank.
    
3. 20.3 Whenever the Central Bank has reason to believe that a person is conducting Financing activities without a License, the Central Bank may depute its examiner to check the books of accounts and records of that person in order to ascertain whether or not that person has violated or is violating any Articles of this Regulation.
    
4. 20.4 For the purpose of an examination by the Central Bank, a Finance Company must provide full access to its accounts, records and documents and must give such information and facilities as may be required to conduct the examination.
    
5. 20.5 If any accounts, records or documents as required for proper execution of an examination are not produced by the Finance Company, the board of directors and the Senior Management of the Finance Company shall be held responsible by the Central Bank.
    
6. 20.6 Should the Central Bank's examination reveal that the operations of a Finance Company are unsound, the Central Bank may appoint a qualified person to advise and monitor the Finance Company. The advisor's emoluments shall be paid by the Finance Company.
    

1. 21.1 This Regulation shall apply to all Finance Companies licensed after the issuance of this Regulation. With regard to existing Financing Companies, they will have to adjust their provisions in accordance with the Articles of this Regulation during a period not exceeding three years of its publication date.
    
2. 21.2 Finance Companies availing of the three-year transition period according to Article 21.1 of this Regulation are required to renew their License on an annual basis. The Central Bank may amend the requirement of this Article for Finance Companies that are deemed by the Central Bank to be substantially in compliance with this Regulation and where the Central Bank has no major regulatory concerns about the Finance Company.
    
3. 21.3 Existing Finance Companies will also be required to provide the Central Bank with a detailed adjustment plan to comply with the Articles of this Regulation within six months of the issuance of this Regulation.
    

1. 22.1 The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.
    

1. 23.1 This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one month from the date of publication.