Cabinet Resolution No. (36) of 2022 Concerning Regulating Activity of the Crowdfunding Platform Operator

§Preamble

The Cabinet Resolution No. (36) of 2022 Concerning Regulating Activity of the Crowdfunding Platform Operator The Cabinet Having reviewed:

- The Constitution;

- Federal Law No. (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market, as amended;

- Federal Decree Law No. (32) of 2021 concerning Commercial Companies;

- Cabinet’s Resolution No. (11) of 2000 concerning the Regulations as to Market Licensing and Supervision.

- Cabinet’s Resolution No. (13) of 2000 concerning the Regulation as to the Functioning of the Securities and Commodities Authority, as amended;

- Based on what is presented by the Chairman of the Securities and Commodities Authority and the approval of the Cabinet Has decided:

Article (1) Definitions In application of the provisions of this Resolution, the following words and phrases shall bear the meanings assigned thereto, respectively, unless the context otherwise requires.

The State: The state of United Arab Emirates.

The Authority: The Securities & Commodities Authority (SCA).

The Board: The Board of Directors of the Authority.

Market: The securities market licensed in the State by Authority. Rulebook:The rulebook of the financial activities issued by the Authority. Crowdfunding: A means that enables the financing applicant to obtain funds from investors for the purpose of financing its project through the platform in exchange for shares in the capital of a company that will be established or a company established to execute this project.

Platform: An electronic operating system programmed to present crowdfunding applications.

Financing Applicant: A natural or legal person who wishes to obtain crowdfunding through the platform.

Operator: The legal person licensed to practice the activity of the operator of the crowdfunding platform in accordance with the provisions of this Resolution. Material change:The occurrence of an accident or change to the financing applicant in its activity, assets, obligations or its ownership structure and other changes that affect the investors rights, their investment goals or cause damage to them.

Professional investor or counterparty:A natural or legal person who is capable of managing its own investments by itself in accordance with the rulebook.

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

Article (3) The entities prohibited from applying for crowdfunding

The entities listed below shall be prohibited from applying for crowdfunding through the platform:

1-Joint stock companies.

2-Investment funds.

3-Entities that operate activities within the securities, insurance, or banking sectors.

4-Companies that intend to use crowdfunding to grant loans or invest in other existing companies.

5- [1]

Article (4) Operator licensing

1. The activity of the crowdfunding platform operator in the State may not be practiced without obtaining a license from the Authority.

2. The following conditions shall be met to obtain a license to practice the activity of operator:

A.The license applicant shall be a market licensed from the Authority or a company incorporated in the State in accordance with the applicable laws or any other form approved by the Authority.

B.The paid-up capital of the license applicant shall not be less than one million (1,000,000) UAE dirhams.

C.The fee prescribed by the Authority to practice the operator activity shall be paid.

D.The requirements specified in the rulebook shall be met, except if the license applicant is a market licensed by the Authority provided that the provision of the license period and renewal shall be applied thereto.

Article (5)

Obligations of the operator towards the Authority 1.Enter an agreement with the financing applicant that includes the rights and obligations of both parties and the channels of communications between them in a manner consistent with the provisions of this Resolution.

2.Refrain from financing, assisting, or soliciting any investor to invest in financing applications presented on the platform, negotiating its terms, favoring one investor over another, or inducing the investor to invest in certain financing applications only.

3.Refrain from investing in financing applications on behalf of the investor. 4.Refrain from investing with more than (10%) of any project presented on the platform.

5.Refrain from placing its own financing applications or any of its parent, subsidiary, or sister companies on the platform except after obtaining the approval of the Authority and in accordance with its terms and procedures. 6.Take into consideration that financing applications are not restricted to specific investment sectors in order to avoid the risks of investment concentrations. 7.Disclose on the platform about the following details:

A.The operator general information including for example: the names of its owners, legal form, capital, members of its board of directors, and the crowdfunding platforms that it manages.

B. The ownership of the operator or the chairman and members of its board of directors, its executive management and any of its employees or partners therein of any shares in the capital of the financing applicant, and any conflict of interests’ cases between any of them with the investors or the financing applicants and the way of managing the same.

C.Minimum and Maximum investment in the platform and the financing applications.

D.Investors rights.

E. The fees payable to the operator from the investor in exchange for investing through the platform F.The procedures agreed upon that will be taken in case there is a violation or non-commitment by the financing applicant.

G.The information related to the platform, its nature, work mechanism, operation, services, and risks.

H.Any other disclosure required by the Authority.

Article (6) Operator's obligations towards investors [2]

The operator undertakes to provide the following to the investors

§Article 1 — Entering into an agreement with the investor as per the conditions specified in

the Rulebook, and to specifically include data related to investment in financing applications. This shall explicitly state the investor’s awareness of the investment

risks, including the inability to sell or transfer ownership to other investors after the company has been established, except in accordance with the applicable laws in the country.

§Article 2 — Disclosing to investors their rights to retract their investment decisions and the

mechanisms for exiting projects funded by them through the platform after investment and execution of the project has taken place, as well as clarifying the difficulty of exiting, all in accordance with the provisions of this resolution.

§Article 3 — Disclosing the mechanisms available to investors to receive distributions of

profits earned on their investments or due to them from the financing applicant.

§Article 4 — Educating the investor on how to invest through the platform and the type of

investment offered to them.

§Article 5 — Ensuring that the investments of an investors– except for professional

investors or counterparties –during a twelve-month period do not exceed, the following amounts:

1. A sum of thirty thousand dirhams (AED 30,000) is for each financing applicant for all requests presented by that applicant on the platform.

2. A sum of one hundred thousand dirhams (AED 100,000) for all financing requests presented on the platform.

§Article 6 — Restricting transactions on the platform to the aggregation of funds for the

purpose of establishing a company or increasing the company’s capital. Refraining from selling or transferring partners’ ownership to other investors after establishment through the platform.

§Article 7 — Retaining the funds deposited by investors in an escrow account with one of

the licensed banks in the country or a licensed foreign bank outside the country, in accordance with the regulations issued by the authority. This retention shall continue until the proposed offer period ends or the offer is closed to complete the required financing.

§Article 8 — Segregation of the operator’s bank accounts from bank accounts where

investors’ monies are held (escrow accounts) when presenting bank balances in the financial statements and accompanying footnotes.

9. The transfer of aggregated funds to the financing applicant shall occur within the agreed-upon period between the parties, following the completion of the required financing in accordance with the provisions of this resolution. This is contingent upon confirming and verifying the financing applicant’s fulfillment of their obligations as stipulated, following the established procedures in the state. The financing applicant must undertake all necessary establishment or capital increase procedures with the relevant authorities in the state.

§Article 10 — Establishing procedures to ensure the financing applicant’s compliance with

their obligations towards investors, including the completion of ownership procedures for their ownership interests.

§Article 11 — Closing the offering immediately upon reaching the maximum required

financing, even if the financing applicant’s proposed offering period has not concluded. Ensure that the aggregated funds do not exceed the maximum target amount.

§Article 12 — Returning funds to the investor within 5 days in the following circumstances

a. From the end date of the offering period without reaching the minimum target amount unless the financing applicant is satisfied with the aggregated amount.

b. From the date of the financing applicant’s failure to fulfill their commitments or a material change occurring, either during or after the offering period.

c. From the date of cancellation of the financing request.

d. From the date of exceeding the aggregated funds beyond the maximum target amount, limited to the surplus funds only.

e. From the date of the investor retracting their investment decision in accordance with the provisions of this resolution.

§Article 13 — Ensuring that there are no material changes in the financing request, the

financing applicant, or the project itself.

§Article 14 — Publishing the business plan, financial feasibility, and economic aspects of

the project related to the financing request on the platform, with a specific and clear presentation. Ensure the accuracy of all documents and procedures related to them.

§Article 15 — Publishing information about the financing applicant on the platform and

communication channels, along with details about other projects previously funded through the platform and their performance, at least 14 days before allowing investors to invest in the project.

§Article 16 — Providing credit information about the financing applicant, the chairman, and

the board members, if the financing applicant is a legal person, provided that it is issued by the Etihad Credit Bureau or the concerned entity if the individual is a foreigner.

§Article 17 — Publishing the applicants’ disclosures on the platform while retaining these

disclosures and verifying their validity and accuracy.

§Article 18 — Immediately disclosing on the platform any errors, misleading information, or

investment risks related to the financing applicant or their projects and investments.

§Article 19 — Promptly disclosing to the investor if the financing applicant decides to settle

for the aggregated amount after the expiration of the offering period without covering the minimum required, within the period specified by the regulatory authority.

§Article 20 — Verifying the absence of any fraudulent activities, deception, or harm to

investors by the financing applicant.

§Article 21 — Rejecting the financing applicant’s offer on the platform or removing their

listing from the platform if it becomes apparent that the financing applicant is compromising the interests of investors or violating the provisions of this resolution or any applicable laws of the state.

§Article 22 — Refraining from providing investment advice to investors, negotiating

financing offered on the platform, or advertising financing requests through any means other than the platform. An exception to this is when the operator advertises financing requests through crowdfunding platforms owned by them

outside the state, in accordance with the conditions set by the Authority.

Article (7) Obligations of Financing Applicant [3]

Financing Applicant Obligations:

1.Obtain preliminary approval from the competent authorities for the intended project to be presented on the platform.

2. Immediately disclose, during the financing request period and in accordance with the operator’s procedures, the specified data below:

a. All information related to the applicant, its management, financial information, business plan, project purpose, minimum and maximum amount required for the project, and the proposed offering period not exceeding 15 working days. It may be extended for the same period, in accordance with the operator’s procedures, without harming the investors’ interests.

b. Any data, information, errors, or material changes related to the applicant or its projects.

c. Interests and any potential or expected investment risks.

d. Mechanisms and procedures for investors to exit the investment, in accordance with the laws applicable in the State.

3.Refrain from presenting the financing request simultaneously on more than one platform and from collecting any funds related to the financing request presented on the platform by any external means.

4.The total financing applications for the applicant and its affiliated entities – parent company, subsidiary, sister company, or associated companies – shall not exceed AED 15 million throughout the company’s duration. The Authority may adjust the specified amount in this provision according to the requirements of the public interest.

5.Pay the fees due to the operator.

6.Implement the purpose of the financing request by initiating the establishment of a company or increasing the capital of an existing company in accordance with the provisions of the Commercial Companies Law within 5 working days from the expiration date of the offering period, whether the required amount has been collected or satisfied with the amount collected, or by closing the offering immediately upon reaching the maximum required financing.

Article (8) Operator, investor, and financing applicant rights

1.The operator shall be entitled to charge fees from the financing applicant to enable it from offering any of its applications at the platform according to the agreement concluded between them.

2.The financing applicant shall be entitled to re-offer the financing application at the platform, be satisfied with what was collected, or cancel the financing application in the following cases:

A-If the investor retracts his investment decision.

B-If the investor did not pay the financing value after the end of the granted time limit.

C-The expiry of the offering period without covering the required amount. 3.The investor shall be entitled to retreat his investment decision and recover the financing amount that he deposited in the following cases:

A-At any time during the offering period.

B-Within a period not to exceed five (5) working days from the date of collecting the requested financing amount.

C-Expiry of the offering period without covering the minimum required amount. [4] D-Within a period not to exceed five (5) working days from date of the operator disclosure of the financing applicant decision and being satisfied with the collected amount.

E-Within a period not to exceed five (5) working days from date of extending the proposed offering period. In this case, the investor shall be entitled to the fees he paid.

F-Any other cases determined by the Authority.

Article (9) Control and inspection 1.The Authority shall take all the required procedures to supervise, control, and inspect according to the regulations and the resolutions issued thereby in this regard.

2.The Authority shall set the required controls, restrictions, procedures to apply this resolution to evade any legal, technical, or operational risks. 3.The Authority shall be competent to receive the complaints related to the operator activity according to the controls and resolutions issued by the Authority in this regard. The Authority shall have the right to investigate in any violation found through the inspection or included in the complaints received by the Authority.

Article (10) Sanctions 1.In case of violating the provisions of this resolution, regulations, resolutions, controls, or circulars issued according to it, the Authority shall be entitled to impose any of the following sanctions:

A-Give a warning to the violator.

B-Impose a financial fine on the violator not less than (AED 100,000) one hundred thousand dirhams and not more than (AED 1,000,000) one million dirhams, and a fine that is equivalent to the violator achieved profit or avoided loss.

C-Suspend the operator from practicing the activity, cancel the license of the operator or impose sanctions on its employees according the Section one from the rulebook of the financial activities issued by the Authority.

2.The Authority shall be entitled to cancel the financing operations that violate the laws, resolutions, or circulars issued in this regard, and issue an order with reinstatement without prejudice to the good faith third party.

Article (11) Executive resolutions The Authority shall issue the resolutions, circulars, forms required to execute the provisions of this resolution.

Article (12) Publication and enforcement of resolution This resolution shall be published in the official gazette and shall be put into force after (60) days from that date of its publication.

Sheikh Mohammed bin Rashid Al Maktoum Prime Minister

___________________ Issued by us:

On: 10/ Ramadan/1443 AH Corresponding to: 11/ April/2022 AD The decision was published in the Official Gazette on 15 April 2022

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• [1] - Clause (5) of article (3) has been canceled according to Council of Ministers Resolution No. (139) of 2023 issued on 2023/12/29 and enforce on 16/01/2024

• [2] - Article (6) has been amended according to Council of Ministers Resolution No. (139) of 2023 issued on 2023/12/29 and enforce on 16/01/2024

• [3] - Article (7) has been amended according to Council of Ministers Resolution No. (139) of 2023 issued on 2023/12/29 and enforce on 16/01/2024

• [4] - Clause (3/C) of article (8) has been amended according to Council of Ministers Resolution No. (139) of 2023 issued on 2023/12/29 and enforce on 16/01/2024