In shocking news, this month Bahrain introduced common law for limited liability partnerships without having to create a free zone.
All the legal protection without artificial costs. What a concept.

Meanwhile, there are some decisions being made in listed companies – firms in which the public are investors – that do not seem to be in line with the best standards of corporate governance.

I will cover three – Shuaa, Arabtec and Drake & Scull – and then discuss what this means to our economy.

For Shuaa, the corporate governance journey started with the announcement last month that it was acquiring two companies from a major shareholder. This created a possible conflict of interest and as a listed company regulated by the Central Bank of the UAE and the SCA, the market regulator, you would expect that as part of the announcement a plan to mitigate any possible conflict of interest would be released so that small shareholders can decide if it is fair. The chief executive of the seller is the chairman of the buyer, Shuaa. Will he and other board members appointed by the major shareholder, Abu Dhabi Financial Group, recuse themselves from voting? How will the deals be priced? Who decided that this was a good deal for Shuaa?

Shuaa’s journey continues with the announcement last month that it was in discussions to merge with GFH. On February 20, Shuaa announced the addition of the chief executive of GFH to the board. On March 15, Shuaa announced the immediate resignation of a long-standing board member. The GFH talks were announced on March 16. Most curious of all is that GFH’s declared 2016 profit of US$233 million includes income from litigation, ie, a one-time payoff, of $464m. This means that GFH had a loss of about $231m from normal operations. All of this really needs explanation to shareholders. Why have there been and continue to be acquisitions of companies related to board members? Why did a long-serving board member resign the day before talks with GFH were announced? Why is Shuaa interested in a company that lost $231m from ordinary operations? Good corporate governance requires that transparency be provided by answering these questions.

Arabtec is easier. According to a recent article, the company was owed Dh1.19 billion from shareholders as of the end of last September. Why is it raising Dh1.5bn in new capital if there is a shareholder that owes it Dh1.19bn? Here is the best bit – Arabtec wrote down Dh1.18bn from related parties at the end of the year. When you have huge amounts owed by a shareholder and you write-down almost the same amount to related parties, you need to give out more information so that other shareholders can make decisions. Why would Aabar underwrite Dh1.5bn without this information? Arabtec keeps talking about a turnaround strategy. It needs to be talking about a corporate governance strategy. The SCA needs to talk to Aabar about disclosure. The Abu Dhabi Accountability Authority (Adaa) needs to explain the meaning of the word “accountability” to Aabar.

Finally, late last month it was reported that Drake & Scull’s auditor, PwC, issued a “going concern warning” after the contractor reported a loss of Dh732m and had breached bank covenants. A going concern warning means that without a ­major injection of capital the company will go bankrupt. Luckily for Drake & Scull, Tabarak Investment announced that it will inject about Dh500m. Tabarak’s site, tabarak.ae, shows not a single direct investment. The site does not show any ability to lead a turnaround. The site shows very little. Perhaps it is the wrong site and there is more than one Tabarak Investment. It would not be the strangest thing that is happening.

What does all this mean? It does not have to mean any­thing illegal or unethical is happening. But the recurring theme of a lack of transparency is worrying. In all three instances there are major negative financial issues involved, yet the transparency does not seem to be enough to cast light on the situation. If we want foreign investment, we must meet global transparency levels. Actually, we need transparency for local investment as well.

This article was originally published in The National.