Private Mergers & Acquisitions in the United Arab Emirates

1. Deal structure

1.1 How are private M&A transactions typically structured in your jurisdiction?

Answer ... Share sales are widely accepted as the most prevalent structure for private M&A transactions in the United Arab Emirates. Such transactions are usually structured as a sale of shares for cash consideration paid on completion. These can entail:

• the purchase of the entire issued share capital of an entity; or
• the purchase of a certain percentage of shares.

However, we see an increasing number of deals being structured with an element of deferred consideration, particularly in venture capital and early-stage deals. Although less common in the United Arab Emirates, there has also been a notable rise in the number of asset acquisitions as a means of enabling a purchaser to select key assets only.

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

Answer ... Share sale: The primary advantage of a share sale is that it typically results in minimal disruption to the target’s business, with only the ownership of the shares being transferred to the buyer. Business contracts typically remain in place with the target, unless an agreement contains a change of control provision that is triggered by the share sale.

The primary disadvantage is the risk to the buyer of assuming all liabilities of the target (unless otherwise carved out in the relevant transaction documentation). While the purpose of the due diligence exercise aims to minimise this risk, there is a lack of public information in the United Arab Emirates, which can sometimes impact the scope of the due diligence exercise. The buyer, therefore, is often heavily reliant on the warranties provided by the seller.

Asset sale: An asset sale is undertaken when:

• a seller seeks to dispose of a specific division from its wider business; or
• a buyer does not wish to assume certain liabilities of the target.

The primary advantage of this approach is that the buyer can choose specific assets and liabilities to acquire. The primary disadvantage is typically the requirement to enter into tripartite agreements to transfer assets as these do not automatically transfer by operation of the company. Further regulatory or licensing approvals may also be required if the assets transferred operate within a regulated sector.

1.3 What factors commonly influence the choice of transaction structure?

Answer ... The primary factor taken into consideration is whether the buyer wishes:

• to assume all assets and liabilities of the target (unless otherwise carved out in the transaction documentation); or
• to ‘cherry-pick’ certain assets.

A buyer may also seek to consolidate a target’s business with its own entity, in which case a statutory merger may be a more appropriate structure.

1.4 What specific considerations should be borne in mind where the sale is structured as an auction process?

Answer ... Auction sales are generally considered in large-scale transactions such as government projects or in the private equity space, where the process of selling a target is heavily controlled by the seller.

The primary considerations differ for buyers and sellers, as follows.

Considerations for buyers: An auction sale is typically a more structured process and includes a fixed timetable for the due diligence exercise and bidding process. A buyer should consider whether:

• it is prepared to have limited control over the transaction process; and
• it can commit to expending a significant amount of time and resources to prepare the bid documents, carry out due diligence and review transaction documents, with no guarantee that it will be selected as the preferred bidder.

In addition, in an auction process there is often a limited amount of information that is made available to potential buyers during a bidding process. While in many other jurisdictions this can be mitigated to a certain degree due to the availability of and access to publicly available information (eg, a target’s constitutional documents and court filings), public access to similar information is very limited in the United Arab Emirates.

Considerations for sellers: Assuming a competitive scenario, the primary consideration for the seller is whether it wishes to exert greater control over the transaction process. In some instances, a seller may have complete control over the project documentation, thereby allowing it to incorporate more seller-friendly terms. The seller may also consider whether it wishes to have access to many potential buyers in the event that the preferred buyer does not proceed with the transaction.

2. Initial steps

2.1 What agreements are typically entered into during the initial preparatory stage of a private M&A transaction?

Answer ... During the initial preparatory stage of a private M&A transaction, parties will typically sign several agreements, including:

• a non-disclosure agreement (NDA); and
• a preliminary agreement (eg, heads of terms, memorandum of understanding, exclusivity agreement, letter of intent).

An NDA is signed between the parties to oblige buyers to:

• maintain the confidentiality of sensitive business information; and
• prevent the disclosure of any information that has been shared.

Notably, however, the enforceability of NDAs in the United Arab Emirates can be challenging due to the difficulties of obtaining injunctive relief or specific performance in the local UAE courts.

A preliminary agreement is another important document for the parties during the preparatory stage. It will generally state the key commercial terms of the transaction. A preliminary agreement can be binding or non-binding, depending on the preference of the parties involved. It is more common in the United Arab Emirates for a preliminary agreement to be non-binding. However, non-binding agreements can still contain legally binding terms, particularly around confidentiality and exclusivity. The parties should also bear in mind that there can be enforcement limitations in the United Arab Emirates when trying to enforce the binding terms of a preliminary agreement governed under the laws of the United Arab Emirates. The UAE courts do not award specific performance or injunctive relief. The only form of remedy for repudiatory breach awarded by the UAE courts is an award of damages. Therefore, it is recommended that preliminary agreements be subject to the laws of the Dubai International Financial Centre or the Abu Dhabi Global Market (which are common law jurisdictions) where such equitable relief may be available.

2.2 Which advisers and stakeholders are typically involved in the initial preparatory stage of a private M&A transaction?

Answer ... The parties that are involved in M&A deals in the United Arab Emirates are generally the same parties that would be involved in deals conducted in other jurisdictions. Primarily, parties will need to consult financial advisers and engage a law firm prior to entering into any agreements with the counterparty.

The parties’ legal counsel will represent their respective interests in the transaction and will draft and negotiate key acquisition documents. The legal team acting on behalf of the buyer will also conduct legal due diligence, which can be extensive depending on the nature of the transaction.

Likewise, both the buyer and seller will have financial advisers who provide recommendations in relation to the transaction’s commercial terms, such as the target’s valuation and price. The seller’s financial adviser may assist in sourcing potential bidders and will coordinate the auction process in a competitive scenario.

As tax laws continue to develop in the United Arab Emirates and become more of a consideration, parties are now increasingly seeking tax advice.

2.3 Can the seller pay adviser costs or is this limited by rules against financial assistance or similar?

Answer ... Limitations are applicable only to public companies. Parties to private M&A transactions in the United Arab Emirates typically agree to each cover their own costs and there are no limitations in place in this regard.

3. Due diligence

3.1 What due diligence is typically conducted in private M&A transactions in your jurisdiction and how is it typically conducted?

Answer ... As in other jurisdictions, the buyer will want to conduct legal and financial due diligence on the target. Depending on the nature and industry of the target’s business, the buyer may wish to carry out additional and more specific due diligence exercises.

In relation to legal due diligence, a comprehensive due diligence exercise will include reviews of the following areas:

• corporate structure and licensing;
• accounts;
• financial arrangements;
• key contracts;
• intellectual property and information technology;
• employment;
• real estate and assets;
• regulatory and permits;
• environment;
• compliance;
• insurance;
• litigation and disputes, and
• tax.

It has become customary for the seller to organise a virtual data room (VDR) into which legal and financial documentation is uploaded. The use of VDRs makes the process much more efficient, particularly if the VDR service provider is a sophisticated one.

3.2 What key concerns and considerations should participants in private M&A transactions bear in mind in relation to due diligence?

Answer ... Legal due diligence exercises can be expensive and time-consuming for large and/or complex transactions. Buyers should:

• carefully consider which areas of the business they wish to investigate;
• ensure that they allocate enough time and budget to make the process effective; and
• consider their risk appetite and their familiarity with the region and the relevant industry, as these factors may impact the scope of the due diligence investigation that is required.

If the buyer is cost conscious and/or has experience operating in the region, it could opt to conduct a red-flag-only exercise. To reduce costs, a red-flag due diligence exercise is becoming more common. Specific consideration is given to matters such as:

• foreign ownership restrictions and verification of ownership of the target;
• real estate ownership restrictions and hidden costs;
• change of control, limitation of liability, indemnification and termination provisions in material agreements;
• employee gratuities and pension schemes (and whether these need to be reflected in the purchase price as a possible liability); and
• regulatory issues such as economic substance regulations and ultimate beneficial ownership declarations.

3.3 What kind of scope in relation to environmental, social and governance matters is typical in private M&A transactions?

Answer ... In relation to environmental matters, Federal Law 24/1999 (as amended) on the Protection and Development of the Environment (‘Environmental Law’) is the primary legislation that governs environmental protection in the United Arab Emirates.

Under the Environmental Law, the party that caused environmental damage is generally liable for the clean-up of any contaminated land. However, buyers should be aware that the potential for successor liability exists due to the difficulty in obtaining environmental records in the United Arab Emirates. Consequently, a buyer may unknowingly inherit liability for environmental harm not caused by them. This may be avoided by seeking to exclude real estate assets from the transaction.

Due to this risk, whenever real estate assets are involved, it is best practice for buyers to conduct their own environmental due diligence in addition to seeking appropriate warranties, indemnities and potentially insurance cover to further mitigate this risk.

However, governance matters have become more relevant, even prior to the recent environmental, social and governance movement. Investors and buyers in the United Arab Emirates continue to take an interest in the decision-making structures of targets. This is particularly true in relation to many mid-market deals, where a significant portion of the due diligence exercise can be spent reviewing the internal governance practices of the target business, as these can be unique to the jurisdiction.

4. Corporate and regulatory approvals

4.1 What kinds of corporate and regulatory approvals must be obtained for a private M&A transaction in your jurisdiction?

Answer ... Shareholder and corporate approval: Pursuant to the terms of UAE Federal Decree Law 32/2021 (‘Commercial Companies Law’), shareholders of a limited liability company (which is the most common corporate form onshore in the United Arab Emirates) benefit from statutory pre-emption rights on a transfer of shares. These rights cannot be waived, unless otherwise agreed by all shareholders at the time of transfer.

The approval of the shareholders of a limited liability company and/or the board of directors of both the buyer and the seller is usually required in both share and asset sales. Individuals executing the local transfer documentation on behalf of a corporate party, if not already authorised to do so by that party’s constitutional documents, must be appointed pursuant to a notarised power of attorney. If executed outside of the United Arab Emirates, such power of attorney must also be attested and legalised by:

• a notary in the country of issue;
• the Ministry of Foreign Affairs;
• the UAE embassy in the country of issue; and
• the UAE Ministry of Foreign Affairs.

Regulatory approval: The applicable corporate or regulatory approvals required will depend on whether an entity is incorporated onshore or in a free zone.

In the case of free zones, a transfer of shares typically requires pre-approval from the relevant free zone authority. Free zones in the United Arab Emirates are typically industry specific. For instance, in transactions involving the sale of a company regulated by the Dubai Health Authority (DHA) in the United Arab Emirates, DHA approval will typically be required.

With reference to most mainland and free zone companies, a share transfer is not completed until the company’s updated commercial licence has been issued by the relevant licensing authority.

4.2 Do any foreign ownership restrictions apply in your jurisdiction?

Answer ... Pursuant to amendments to the Commercial Companies Law in 2021, and provided that an entity is not undertaking activities falling within the scope of the list of activities with a strategic impact (maintained by the UAE Cabinet), there are no longer foreign ownership restrictions in the United Arab Emirates. Activities falling within the scope of the strategic impact list include:

• security and defence activities;
• activities that are military in nature;
• banking;
• exchange companies;
• financing companies;
• insurance activities;
• currency printing;
• telecommunications;
• Hajj and Umrah services;
• holy Quran memorisation centres; and
• services associated with fisheries.

Where 100% foreign ownership is not available to a buyer due to an activity being restricted, a buyer will need to:

• negotiate to retain a relationship with the existing UAE partner; or
• consider undertaking a joint venture with a local partner of its choosing.

4.3 What other key concerns and considerations should participants in private M&A transactions bear in mind in relation to consents and approvals?

Answer ... The transfer of shares in an onshore limited liability company must be notarised. Consequently, the agreement for the sale and purchase of shares must be in writing and in Arabic. In practice, a short-form agreement is prepared for the purposes of the notary together with a longer-form sale and purchase agreement which is not notarised. To ensure that there are no undue delays, it is important to consider whether any powers of attorney are required and ensure that these are in place in advance of the signing. Powers of attorney executed outside of the United Arab Emirates must be further notarised and attested in line with the process set out in question 4.1.

5. Transaction documents

5.1 What documents are typically prepared for a private M&A transaction and who generally drafts them?

Answer ... The primary legal documents for a private M&A share sale will include:

• the sale and purchase agreement (SPA), which is typically drafted by the buyer (but can be drafted by either party in a bilateral transaction and most likely the seller in an auction process);
• a disclosure letter prepared by the seller’s legal team; and
• a share transfer document and an amendment to the target’s memorandum of association, typically prepared by the buyer’s legal representatives.

Each party will also provide and prepare its own corporate approvals such as board or shareholders’ resolutions and powers of attorney, if required.

In an asset sale, separate agreements are likely to be needed for the transfer of specific assets, such as:

• novations of customer and supplier contracts;
• real estate transfers; and
• new employment contracts.

Other supplementary documentation which may be required includes:

• shareholder agreements;
• transitional services agreements; and/or
• service agreements for key employees in the target.

Shareholder agreements are generally prepared by the party that will own a majority stake in the target. Transitional services and service agreements are typically prepared by the buyer’s legal team.

5.2 What key matters are covered in these documents?

Answer ... For share sales, there are various substantive matters that the acquisition agreements will cover.

The SPA will include the terms of the sale and purchase of the shares – for example:

• the particulars of the company;
• the current and new shareholders; and
• the number of shares being purchased.

The SPA will also address the following key matters:

• consideration for the shares being purchased, as well as any adjustments to the consideration (if applicable);
• applicable conditions to the transaction;
• warranties and indemnities that relate to matters such as:
  • corporate information and licences;
  • intellectual property;
  • material contracts;
  • financial accounts;
  • general compliance matters; and
  • tax registration and liabilities;
• pre-completion undertakings;
• provisions relating to confidentiality and restrictive covenants; and
• the governing law and jurisdiction agreed by the parties and dispute resolution measures.

The disclosure letter will also cover key matters by providing additional information to the buyer concerning the target and is used to provide any information not otherwise disclosed to the buyer during the due diligence investigation. If the buyer proceeds with the transaction, the seller will generally be shielded from breach of warranty claims for the disclosed matters.

Many of the key provisions above are also applicable to an asset sale, with the exception of the sale and purchase provisions. Instead, these will:

• be replaced with details concerning the assets and liabilities being purchased and a related apportionment of the purchase price; and
• carve out certain assets or liabilities, if needed.

Additional provisions may be required to outline the mechanisms for transferring title to the buyer.

Additionally, due to the introduction of value-added tax laws in the United Arab Emirates and the recent introduction of corporate income tax, parties are advised to include provisions relating to tax treatment on both share and asset sales.

5.3 On what basis is it decided which law will govern the relevant transaction documents?

Answer ... Parties to private M&A share sale transactions in the United Arab Emirates generally have freedom of contract and may choose foreign law to govern the acquisition agreement. Where parties do not choose UAE law as the governing law, they tend to choose English law or, increasingly, the laws of the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM) (which are based on English law).

An exception to this is when a mainland limited liability company wishes to effect a transfer of its shares. In these cases, a separate short-form share transfer document will be required. This document must:

• state that the share transfer is subject to UAE law; and
• be translated into Arabic prior to it being signed before a UAE notary public.

Further, the memorandum of association of a mainland limited liability company must be in Arabic and signed before a notary public, which will be governed by UAE law. While shareholders in a private M&A deal involving a mainland limited liability company may wish for the transaction documents to be governed by the laws of the DIFC or ADGM, the constitutional documents must be governed by UAE law. The parties can choose, however, to resolve any disputes through arbitration or before the DIFC or ADGM courts.

6. Representations and warranties

6.1 What representations and warranties are typically included in the transaction documents and what do they typically cover?

Answer ... The scope of representations and warranties is usually subject to negotiation between the parties to a transaction and is typically more limited for asset sales. Sellers will generally resist the inclusion of representations, particularly if the acquisition agreement is governed by English law, so typically only warranties will be included. In the context of a share sale, these will likely relate to the following:

• the seller’s title to the shares or assets and capacity to enter into the relevant transaction documents;
• corporate information and licences;
• accounts and finances;
• assets;
• debts and guarantees;
• insurance;
• material contracts;
• compliance with law, including international sanctions and anti-money laundering;
• litigation;
• insolvency;
• intellectual property and information technology;
• employees;
• data protection;
• anti-bribery and corruption;
• real estate;
• regulatory and permits;
• tax; and
• environmental matters.

6.2 What are the typical circumstances in which the buyer may seek a specific indemnity in the transaction documentation?

Answer ... Indemnities are commonly used in transaction documents to address specific identified areas of risk which are of particular concern to the buyer. The matters (if any) which are the subject of an indemnity in a transaction will be a matter of negotiation between the parties. Circumstances which are often subject to indemnities include:

• unresolved or anticipated litigation;
• missing documents of titles, such as share certificates; and
• environmental liabilities – for example:
  • where there is a specific known environmental problem and the buyer considers that environmental warranties will not provide it with sufficient protection; or
  • where the buyer knows very little about the target due to limited due diligence.

6.3 What remedies are available in case of breach and what is the statutory timeframe for bringing a claim? How do these timeframes differ from the market standard position in your jurisdiction?

Answer ... Breach of warranty: If one party commits a breach of warranty, the other party will have a contractual claim for damages to cover the loss it suffers resulting from the breach (if any). For claims that are brought before the UAE courts, contractual damages are calculated on a case-by-case basis and the courts can exercise wide discretion. The courts will typically investigate the foreseeability of the damages at the time the parties entered into the contract. The claimant has the potential to recover:

• actual loss;
• loss of profits;
• moral damages; and
• loss of opportunity.

Time limits: Claims must be brought within five years of the date of the breach (Article 92 of Federal Law 50/2022 (‘Commercial Code’)). For agreements governed by English law, the limitation period is:

• six years for simple contracts; and
• twelve years where the agreement is executed as a deed.

The parties may agree between themselves on a shorter limitation period for bringing claims. For a sale and purchase of shares or assets, time limits on warranty claims are typically between 12 and 36 months.

6.4 What limitations to liability under the transaction documents (including for representations, warranties and specific indemnities) typically apply?

Answer ... Limitations on warranties typically include:

• matters fairly disclosed in the disclosure letter;
• a de minimis – the specified minimum amount below which no individual claim for breach of warranty can be made;
• a basket, whereby a claim or claims must reach an agreed value before a buyer can make a claim against the seller;
• a cap on overall liability;
• the time limits within which any claims must be brought; and
• the buyer’s knowledge, which includes matters already known to the buyer.

Disclosure is a common way in which a seller may seek to limit its liability to a buyer by qualifying the warranties given. While the standard of disclosure is subject to negotiation between the parties, a commonly agreed standard refers to matters fairly disclosed in the disclosure letter with sufficient detail so that the buyer can properly assess the matter being disclosed and its impact on the business. Matters thus disclosed cannot subsequently be claimed as a breach of warranty.

6.5 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

Answer ... Warranty and indemnity (W&I) insurance has not generally been used in the United Arab Emirates. There is a growing tendency for it to be considered for larger M&A transactions in the United Arab Emirates. However, the procurement of W&I insurance remains relatively low in comparison with other jurisdictions, particularly those with large numbers of private equity firms operating in the market. We anticipate an increase in the procurement of W&I insurance for future M&A transactions in the coming years, particularly in light of the recent introduction of Federal Decree Law 47/2022 (‘Corporate Tax Law’). We anticipate that the Corporate Tax Law will lead to an increased appetite for W&I insurance, given that most warranty, covenant and indemnity breaches for tax claims made by buyers relate to the non-disclosure of tax liabilities which are not notified or discovered by a buyer in an M&A transaction.

6.6 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

Answer ... The buyer typically requests the seller’s recent financial statements as evidence of its creditworthiness and liquidity throughout the due diligence review. If this information is in doubt, the buyer may consider retaining a part of the purchase price until completion or paying it into escrow. If the payment or any portion of the consideration is deferred, another option is to insert provisions in the transaction documents which permit the buyer to offset any claims against the deferred payments.

6.7 Do sellers in your jurisdiction often include restrictive covenants in the transaction documents? What timeframes are generally thought to be enforceable?

Answer ... Buyers often request the inclusion of restrictive covenants in the transaction documents. The usual enforceable timeframes range between three and six months, with a defined geographical scope limited to the United Arab Emirates. However, in practice, restrictive covenants are generally difficult to enforce in the United Arab Emirates and the courts will investigate whether there are actual damages, as well as the extent of damages suffered, arising from a breach of any restrictive covenants.

Further, the UAE courts may only award remedies in the form of damages and are unlikely to award remedies in the form of injunctive relief or specific performance. Therefore, a buyer should carefully consider the choice of governing law and jurisdiction underpinning the transaction documents. For instance, both the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) are largely based on English common law and therefore allow a party to seek injunctive relief on the basis of a potential breach of any restrictive covenants. DIFC and ADGM court judgments are enforceable throughout the United Arab Emirates.

6.8 Where there is a gap between signing and closing, is it common to include conditions to closing, such as no material adverse change (MAC) and bring-down of warranties? 

Answer ... Yes, MAC clauses are commonly used as a mechanism for a buyer to be able to exit a transaction between signing and completion. However, the terms of these provisions are very much dependent on the bargaining power of the respective parties. It is in the interests of the buyer to make these as wide as possible to provide it with an exit strategy in the event of a significant shift in government policy or practice that impacts the target. Sellers, on the other hand, typically seek to limit the scope of – if not completely exclude – MAC clauses to ensure that the transaction completes successfully.

In instances where there is a delay between signing and closing, it is common for the buyer to require a suite of interim covenants from the seller that it will:

• operate the target in the ordinary course and consistent with past practice; or
• otherwise undertake certain actions only with the consent of the buyer.

6.9 What other conditions precedent are typically included in the transaction documents?

Answer ... In the context of a sale and purchase agreement, conditions precedent typically include, but are not limited to, requirements to obtain:

• pre-approval from the Department of Economic Development in the relevant emirate, which tends to be sought in the interim stage between signing and completion;
• depending on the nature of the target’s business, approval from other relevant UAE authorities (please see question 4.1 in this regard); an
• banking and other third-party consents in connection with:
  • existing financing or guarantees;
  • certain material contracts; or
  • issues related to a pre-sale reorganisation.

7. Financing

7.1 What types of consideration are typically offered in private M&A transactions in your jurisdiction?

Answer ... Cash is the main form of consideration in a share sale. Other forms of consideration may include shares issued by the buyer in favour of the seller.

7.2 What are the key differences and potential advantages and disadvantages of the various types of consideration?

Answer ... Of the available consideration options, a cash payment on completion is the most straightforward to document and the most appealing to sellers. This payment can be executed in a variety of ways, such as:

• a lump-sum payment on completion;
• payment in instalments post-completion; and
• payment with parts of the consideration deferred or retained for payment at a later date.

If the buyer is satisfying all or part of the transaction consideration through the allotment of shares to the seller, it is important to check that:

• the buyer’s articles of association do not include contractual pre-emption rights; or
• if such rights are included, these can be waived.

Shareholders can agree such restrictions between themselves in the company’s articles, memorandum of association or shareholders’ agreement. If pre-emption rights apply, it will be necessary to obtain shareholder consent to allot the consideration shares to the seller without observing the applicable pre-emption procedure.

Shareholders of free zone or offshore entities do not always have the benefit of statutory pre-emption rights on a transfer of shares. However, UAE mainland limited liability companies automatically enjoy statutory rights of pre-emption and these rights cannot be waived without the agreement of all shareholders.

A further issue with share allotments is that the transfer of shares typically requires pre-approval from the relevant mainland or free zone authority, which can occasionally delay the transfer process. Likewise, certain business activities require special government approvals for allotments, such as companies operating in the healthcare sector.

In onshore transactions, the share transfer is not completed until an updated licence has been issued by the relevant licensing authority, resulting in an extended ‘completion’ period (and often leading to disagreement between the parties over when payment should take place). In free zones, the transfer is generally simpler and completion can usually take place simultaneously with the execution of the transaction documentation, as the transfer of title takes place once the register of members of the target is updated; registration of the transfer with the relevant free zone authorities is a post-completion formality.

7.3 What factors commonly influence the choice of consideration?

Answer ... Sellers favour cash payment at completion, as this ensures that value is realised. It is also straightforward to document in the acquisition agreement, as the consideration clause can often be confined to setting out:

• the agreed price;
• the buyer’s obligation to pay the price in full at completion;
• how the completion payment must be paid (eg, by electronic transfer to a specified bank account or delivery of a banker’s draft); and
• if there are several sellers, how the consideration will be apportioned between them.

While cash consideration tends to be the most prevalent in practice, a buyer may be unable or unwilling to structure the price in this way for various legal or commercial reasons. For example, the buyer may be unable to raise the requisite finance to pay the price entirely in cash. As a result, the buyer may propose satisfying all or part of the price through non-cash consideration.

Additionally, a buyer may want to offer shares to incentivise owner-managers who will remain with the target after the acquisition has taken place. As shareholders in the buyer, the owner-managers will be motivated to improve the performance and value of the buyer and target, which in turn will increase the value of their consideration shares.

If part of the consideration is paid in a form other than cash, the buyer may consider other mechanisms which are available to secure the seller’s obligations. For example, it is possible to take security over the shares in a company in the United Arab Emirates by way of a pledge of shares which can be documented in a pledge agreement, signed by both parties. The process for taking security over shares will differ depending on the emirate or free zone in which the target is incorporated, so care should be taken to ensure that the proper process is complied with.

7.4 How is the price mechanism typically agreed between the seller and the buyer? Is a locked-box structure or completion accounts structure more common?

Answer ... There is no pricing practice that is customary and the structure of the transaction often depends on the nature of the business and how revenue is realised. Locked-box acquisitions are very common, particularly where a private equity player is selling or buying.

Equally, price adjustment mechanisms based on completion accounts are also very common, particularly where a business is subject to substantial fluctuations in revenues.

7.5 Is the price typically paid in full on closing or are deferred payment arrangements common?

Answer ... Whether a buyer pays the purchase price in full on closing will depend on:

• the respective negotiating power of the parties;
• market conditions; and
• the specific factors of the transaction.

Various deferred payment options, including earnout structures, are possible in the United Arab Emirates and have become more common. An earnout is used where a seller remains with the target to manage the business post-completion. These mechanisms provide for payment of part of the purchase price to be deferred and payable by reference to the future performance of the target, with the aim of incentivising the seller to be aligned in growing the business. While earnouts do have the potential for an increase in consideration paid, sellers should be particularly mindful of earnout structures, as the buyer will have control over the company, its finances and accounting when the earnout element is to be calculated.

Escrow arrangements may also be used when there are price adjustments/deferred consideration elements to the transaction. For smaller-value transactions, escrow arrangements were less frequently used in the past, due to:

• the lack of escrow agents in the United Arab Emirates; and
• the comparatively high costs of engaging international escrow agents.

However, due to the gap between the share transfer documents being signed and the share transfer taking effect, escrow arrangements in the United Arab Emirates are becoming more routine.

7.6 Where a deferred payment/earn-out payment is used, what typical protections are sought by sellers (eg, post-completion veto rights)?

Answer ... Ultimately, the negotiating strength of the buyer or the seller will also impact the seller’s ability to request deferred payment protection. However, under the Civil Transactions Law, there is a general duty to act in good faith. The term ‘good faith’ is typically given a broad interpretation by the UAE courts. Therefore, the parties must execute the agreement, including any obligations under an earnout clause, as initially agreed.

Moreover, supplementary seller protection mechanisms can be built into the earnout arrangements in the sale and purchase agreement. For example, restrictive covenants may be imposed on the buyer regarding the conduct of business of the target during the earnout period. The scope of these restrictive covenants will be subject to commercial negotiations between the parties.

7.7 Do any rules on financial assistance apply in your jurisdiction, and what are their implications for private M&A transactions?

Answer ... The Commercial Companies Law prohibits public and private joint stock companies or their subsidiaries from providing financial assistance to any individual or company to purchase shares (including bonds or sukuk) in the company. Financial assistance includes:

• gifts;
• loans;
• donations;
• assets of the company;
• securities; and
• guarantees.

This prohibition does not apply to limited liability companies.

7.8 What other key concerns and considerations should participants in private M&A transactions bear in mind from a financing perspective?

Answer ... Deal financing processes for conventional deals in the United Arab Emirates generally follow established practice in other jurisdictions. However, there are some UAE-specific issues that should be borne in mind, particularly around the security package where the processes for creating and registering share pledges and other collateral can be unique to the jurisdiction.

8. Deal process

8.1 How does the deal process typically unfold? What are the key milestones?

Answer ... Once a target has been identified, the buyer will engage legal, financial and other advisers. For the seller, this phase of the process may be substantially more involved as it begins to prepare for the transaction. Like the buyer, the seller will also engage legal and other advisers.

After a non-disclosure agreement has been signed, the parties will convene to discuss further key transaction terms.

If the parties are sufficiently interested in pursuing a transaction, they will usually prepare and negotiate a preliminary agreement (see question 2.1). In most cases, it is customary for the buyer’s legal team to prepare the first draft.

After the execution of a preliminary agreement, the buyer and its advisers will conduct due diligence on the target or assets. Information identified during the due diligence process may impact the structure of the transaction and the terms of the purchase agreement, which are often negotiated while due diligence is being conducted.

This phase of the transaction process ends when:

• due diligence has been completed; and
• the acquisition agreement and any other ancillary transaction documents (including the disclosure letter) have been fully drafted and negotiated.

The duration of this phase will depend on:

• the complexity of the deal;
• the scope of due diligence;
• the responsiveness of the parties; and
• the contentiousness of the negotiations.

Lastly, signature pages are executed by the parties and circulated among the deal participants (usually by email) by the lawyers, unless the transaction is structured as a split exchange and completion, which allows the parties a limited period of time after exchange to procure the satisfaction of any relevant conditions prior to completion taking place. At closing, the buyer will:

• pay any cash consideration to the seller (and, if applicable, deposit funds into escrow); and/or
• issue shares constituting part of the consideration.

Title to the company or assets then belongs to the buyer.

8.2 What documents are typically signed on closing? How does this typically take place?

Answer ... A share sale requires the execution of a sale and purchase agreement, as well as other ancillary transactional documents. Signature pages are usually exchanged electronically.

On closing of a share sale of a mainland limited liability company, the share transfer agreement and the limited liability company’s amended memorandum of association (MOA) must be signed before a UAE notary. This generally requires the parties or their authorised representatives to be present in person, although virtual notarisation is sometimes possible.

With an asset sale, the same transactional documents are executed; and as there is no change in control or ownership of the company, the only requirement is execution of a short-form agreement before a UAE notary public or relevant free zone authority. However, if the parties are transferring a specific asset that requires a certain type of registration, the authorities will require the attendance of the authorised signatories in person or their authorised representatives.

Closing typically takes place when:

• an amended and restated MOA is signed; and
• the licence of the target is updated by the registrar of companies to reflect the buyer’s acquisition.

8.3 In case of a share deal, what is the process for transferring title to shares to the buyer?

Answer ... For mainland limited liability companies, share transfer agreements and amendments to the company’s MOA must be in Arabic and signed before a UAE notary public (see question 8.2).

If the buyer is a foreign entity, the relevant authority will typically require:

• notarised and legalised copies of the buyer’s constitutional documents; and
• a notarised and legalised power of attorney authorising representatives of each of the buyer and seller to sign on their behalf.

Free zones will typically also require that resolutions of the shareholders and transfer application forms be submitted to the relevant authority. The relevant authorities will then issue an updated commercial licence to confirm the registration of the new owners. Free zone authorities may also issue a new share certificate. Generally, the transfer of title to the shares is not perfected until the company’s updated commercial licence/register of shareholders naming the new owners has been issued.

Furthermore, the United Arab Emirates now requires companies to disclose their immediate shareholders and their ultimate beneficial owners (pursuant to UAE Ministry of Economy Cabinet Resolution 58/2020). Consequently, in a share sale the Department of Economic Development in the relevant emirate (or relevant free zone authority) will require the target to update its register of ultimate beneficial ownership. This must be done within 15 days of completion. The authorities may require this to be done when the required share transfer documents are submitted for final approval and the target’s updated commercial licence is issued.

8.4 Post-closing, can the seller and/or its advisers be held liable for misleading statements, misrepresentation, omissions or similar?

Answer ... A seller can be held liable for pre-contractual misrepresentation or misleading statements. Under Article 185 of the United Arab Emirates Civil Code, ‘misrepresentation’ is “when one of two contracting parties deceives the other by means of trickery or word or deed which leads the other to consent to what he would not otherwise have consented to”. Misrepresentation, therefore, does not include statements made innocently or negligently; it requires a deliberate act, including deliberate silence or omission, and the burden of proof can be quite high.

Article 185 of the Civil Code applies only between the parties to a contract. The parties to an agreement can exclude any liabilities, except those resulting from fraud, gross negligence and wilful misconduct, and therefore should include an entire agreement clause which is carefully considered. The primary purpose of an entire agreement clause is to confine the terms of the arrangement to those written into the contract itself, which includes avoiding claims relating to statements and representations made prior to the date of the contract.

8.5 What are the typical post-closing steps that need to be taken into consideration?

Answer ... There are several post-completion steps that parties will need to undertake. There will generally be a change of company officers and the MOA may also need to be updated (to the extent that this is not done at closing). Additionally, new powers of attorney and bank mandates may need to be issued and registered, which can usually take place only post-completion once the new company licence has been obtained.

9. Competition

9.1 What competition rules apply to private M&A transactions in your jurisdiction?

Answer ... UAE Federal Law 4/2012 on the Regulation of Competition (‘Competition Law’) applies to economic activities both within and outside the United Arab Emirates that affect competition in the United Arab Emirates. The Competition Law is supplemented by the Council of Ministers Resolution 37/2014 and Cabinet Resolutions 13/2016 and 22/2016 (‘Implementing Regulations’).

A merger clearance request is triggered in cases where there is an economic concentration, unless exemptions apply pursuant to the Competition Law and as set out further below. The term ‘economic concentration’ is defined as:

any act resulting in a total or partial transfer (merger or acquisition) of a property, usufruct rights, rights, stocks, shares or obligations from an establishment to another, empowering the establishment or a group of establishments to directly or indirectly control another establishment or another group of establishments.

Under Cabinet Resolution 13/2016, the prior approval of the Ministry of Economy (Department of Competition) is required for activities that will result in:

• an enterprise attaining a dominant market position (40% or more); or
• an economic concentration (irrespective of whether the parties to the economic concentration have a formal presence in the United Arab Emirates).

This means that, to the extent that the proposed M&A transaction will have an effect on competition in the United Arab Emirates, it is irrelevant whether the parties actually have a presence in the United Arab Emirates. The dominant market position threshold of 40% or more is determined irrespective of whether the parties to an economic concentration together or separately meet the threshold, as long as together (ie, following the conclusion of the M&A transaction) they have a market share of at least 40% in the relevant market.

Competition laws do not apply to UAE federal or local government entities in various sectors (to qualify under this exemption, the relevant business must be at least 50% owned by the federal or local government entity).

Consequently, the parties to a transaction should consider whether a competition or merger clearance is required to be made with the Department of Competition and apply for approvals at least 30 days prior to the transaction closing pursuant to the Competition Law. Cabinet Resolution 22/2016 requires the relevant parties to file such notification at least 30 days prior to the conclusion of the draft agreement for the transaction. Therefore, there is some uncertainty as to the correct time for the filing of a merger clearance application; so if the transaction falls within the requirements of the Competition Law, the conservative approach would be to seek approval prior to closing.

9.2 What key concerns and considerations should participants in private M&A transactions bear in mind from a competition perspective?

Answer ... The first consideration pertaining to competition is to gauge an understanding of what constitutes the relevant ‘market’. This task has its challenges and will require substantial discussions with counterparties to the M&A transaction to define and understand the parameters of the scope of the market in question. The UAE competition legislation does not define or verify the parameters as to what constitutes the relevant market. However, the principles of EU competition law can provide some helpful guidance as to what constitutes the ‘market’ (noting that EU competition law and principles are not applicable in the United Arab Emirates).

Other considerations include the following:

• The merger clearance application form that must be submitted to the Department of Competition within the United Arab Emirates Ministry of Finance is in Arabic. This may present challenges regarding the discussion of aspects of the form with an English-speaking party. It may be the case that an English translation is required to finalise the content of the form, with an Arabic draft of the form then subsequently submitted to the Department of Competition.
• All documents required to be submitted to the Department of Competition must be either in Arabic or supported by a certified Arabic translation.
• Documents disclosed to the Department of Competition marked as confidential will be kept as such pursuant to the Competition Law. Nonetheless, the Department of Competition requires the parties filing for merger clearance to submit non-confidential summaries of the confidential documents or information pertaining to the M&A transaction.

10. Employment

10.1 What employee consultation rules apply to private M&A transactions in your jurisdiction?

Answer ... There is no obligation under UAE law:

• to inform or consult with employees or their representatives; or
• to obtain employee consent to a share sale or an asset sale.

However, employment contracts should be double checked for any relevant restrictions.

10.2 What transfer rules apply to private M&A transactions in your jurisdiction?

Answer ... Employees do not automatically transfer to a buyer in an asset sale in the United Arab Emirates. If a buyer wishes to take on the seller’s employees, the seller must first terminate their employment and cancel their UAE visas, if the seller is their visa sponsor. The buyer must then re-employ the employees and sponsor their visas.

Depending on the terms agreed between the buyer and seller, it may be necessary for the seller to terminate an employee’s contract by:

• providing the required notice or payment in lieu of notice; and
• settling statutory and contractual dues, including end of service gratuity.

The buyer can then rehire either on substantially the same terms or on new terms of employment.

Alternatively, a buyer can agree to assume all liabilities of the employees to ensure continuity of service. In this case, the accrued entitlements transfer with the employees and become the responsibility of the buyer under the Labour Law (Federal Law 33/2021, as amended). However, in practice, the sale price may be readjusted to account for the employees’ accrued entitlements.

If an employee does not wish to be employed by the buyer, his or her employment can be terminated, subject to the employment contract and statutory requirements. In this case, liability for the employment termination typically remains with the seller.

In relation to share sales, the employee’s contract remains in place and unchanged, unless the parties agree otherwise. Likewise, if the employer wishes to terminate the employment contract, the employer must:

• follow the normal procedure;
• serve the contractual notice period; and
• pay contractual and statutory entitlements.

10.3 What other protections do employees enjoy in the case of a private M&A transaction in your jurisdiction?

Answer ... The statutory concept of redundancy does not exist under UAE law. Any termination of employment contracts during their contractual term can be treated as arbitrary dismissal, unless it:

• relates to poor performance or conduct; or
• is made on one of the specific grounds of gross misconduct.

Thus, employees may be able to claim compensation for arbitrary dismissal in addition to their other contractual and statutory entitlements. However, redundancy has been recognised by the UAE courts as a lawful reason for termination if the employer can show documentary evidence that employee dismissals were required in order to prevent the business from being forced to close.

An employee’s entitlements may include, subject to the terms of his or her contract, payments:

• in lieu of notice (if notice is not being served/worked by the employee);
• of accrued salary up to the termination date;
• of allowances, including education, transport and housing; and
• for accrued and untaken annual leave.

10.4 What is the impact of a private M&A transaction on any pension scheme of the seller?

Answer ... Generally, it is not common for employees to participate in employers’ private pension schemes. However, the Labour Law provides for an end of service gratuity payment for expatriate employees, meaning those who are non-Gulf Cooperation Council nationals. This does not apply to employees working in the Dubai International Financial Centre (DIFC) (although the DIFC has its own DIFC Employee Workplace Savings Plan, which is an end of service benefit plan into a funded and professionally managed defined contribution plan). This payment is calculated based on an employee’s:

• length of service; and
• basic salary at the date of termination.

If an employee has at least one year of continuous service with the employer at the point of termination, he or she could be entitled to an end of service gratuity payment upon termination of the employment.

10.5 What considerations should be made to ensure there are no concerns over the potential misclassification of employee status for any employee, worker, director, contractor or consultant of the target?

Answer ... This is likely to be most relevant in the case of a merger. Parties should review the HR structures of both entities to ensure that the potential for any confusion concerning employee misclassification is addressed far in advance of the transaction closing.

10.6 What other key concerns and considerations should participants in private M&A transactions bear in mind from an employment perspective?

Answer ... If the transaction involves employees who participate in a private pension scheme (eg, those employed by companies operating in the DIFC or by companies that offer a private pension scheme on a voluntary basis), the employees will have the benefit of a private pension scheme with the selling company. However, the buyer may or may not offer this benefit to the employees as part of their new employment contract unless it is required to offer such benefit (as is applicable to DIFC registered entities). Likewise, an employee’s end of service gratuity entitlement will be payable to the employee upon termination of his or her employment by the seller, prior to being rehired by the buyer. However, in practice, the parties often negotiate to ensure continuity of service for the employees, including a ‘rollover’ of their end of service gratuity entitlements.

11. Data protection

11.1 What key data protection rules apply to private M&A transactions in your jurisdiction?

Answer ... Federal Law 45/2021 regarding the Protection of Personal Data (‘Data Protection Law’), which came into force on 2 January 2022, provides greater clarity on what is permissible in terms of the collection, processing, review and transfer of personal data onshore in the United Arab Emirates. Likewise, offshore, the Dubai International Financial Centre (DIFC) and the AGDM have amended their data protection laws to bring them into line with the EU General Data Protection Regulation. In terms of corporate application, both onshore and offshore regulation require that entities collect data only for a clear and specific purpose. Businesses must have security measures in place to safely store any collected data and must delete data that is no longer required. The federal law also includes:

• comprehensive requirements for controllers and processors;
• breach notification requirements;
• obligations around the appointment of data protection officers;
• data protection impact assessment requirements; and
• requirements for privacy notices.

Consequently, the due diligence phase of a transaction should include scrutiny of the target business’s data practices.

11.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from a data protection perspective?

Answer ... The Data Protection Law covers the processing of personal data belonging to UAE data subjects, regardless of where the data controller or data processor is established. Participants should thus:

• consider the provisions of this law that are triggered if a UAE-based entity transfers data abroad – for example, to the buyer; and
• take the need to transfer data into consideration when drafting the transactional documents.

12. Environment

12.1 Who bears liability for the clean-up of contaminated sites? How is liability apportioned as between the buyer and the seller in case of private M&A transactions?

Answer ... As discussed in question 3.3, the Environmental Law is the primary legislation on environmental protection in the United Arab Emirates. It sets out provisions on liability for environmental damage. Each emirate and some free zones have their own environmental rules and regulations.

Liability for costs of treatment or removal of environmental damage lies with any person that intentionally or negligently causes damage to the environment as a result of violating provisions under the law (Article 71 of the Environmental Law). The party that caused the damage is generally liable for the clean-up of contaminated land.

However, this does not necessarily absolve a buyer of potential liability, as a buyer can inherit liability even though violations may have preceded a purchase.

The Environmental Law sets out various penalties for violations, including:

• fines of between AED 1,000 and AED 10 million; and
• imprisonment.

12.2 What other key concerns and considerations should participants in private M&A transactions bear in mind from an environmental perspective?

Answer ... For asset sales, buyers can protect themselves against inheriting environmental liability by specifically excluding real estate from the acquisition.

For share sales, it may be more difficult for a buyer to avoid inheriting environmental liability, unless:

• it is specifically carved out before completion; or
• protection from environmental liability (eg, an indemnity) is given to the buyer by the seller (please see question 6.2).

In all cases where buyers acquire real estate, they should seek appropriate warranties and indemnities against environmental liability. This gives the buyer possible recourse against the seller if such warranties are untrue. A buyer may also consider insurance to mitigate potential exposure to environmental liability.

Buyers should also carry out due diligence on any land before the acquisition so that they can seek to address any environmental liability. However, carrying out environmental due diligence in the United Arab Emirates is not straightforward and information regarding previous regulatory violations on a particular site is often limited.

13. Tax

13.1 What taxes are payable on private M&A transactions in your jurisdiction? Do any exemptions apply?

Answer ... Transfer tax is not generally payable on transfers of shares in mainland or free zone entities (asset sales are typically taxed, as noted below). The following charges, however, may apply:

• Corporate income tax: A new federal corporate income tax regime came into effect on 1 June 2023. Please see question 13.4 for further information on the potential implications of this for future acquisitions.
• Value-added tax (VAT): VAT is not applicable to share sales. However, related or associated fees and charges (eg, legal and tax advisory fees) may incur VAT at the standard rate of 5%. If the share transfer is VAT exempt, VAT on such costs may not be recoverable by the parties to the transaction.

A sale or transfer of a real estate interest can result in a charge for VAT. For instance, an asset sale of a commercial property is subject to VAT at the standard rate of 5%.

Additionally, depending on the asset and authority involved, other fees may apply, such as:

• notarial fees;
• administration fees; and
• real estate transfer fees.

13.2 What other strategies are available to participants in a private M&A transaction to minimise their tax exposure?

Answer ... There are various strategies for participants in an M&A transaction to deploy to minimise their tax exposure. Therefore, we would recommend that tax advice always be sought.

13.3 Is tax consolidation of corporate groups permitted in your jurisdiction? Can group companies transfer losses between each other for tax purposes?

Answer ... The Ministry of Finance in the United Arab Emirates has published a public consultation document (PCD) on corporate tax in connection with the Corporate Tax Law. The PCD provides the general framework for the corporate tax regime. The PCD indicates that the tax consolidation of a wholly owned group of companies is possible in the United Arab Emirates, provided that the parent company:

• holds at least 95% of the share capital, voting rights, entitlements to profits and net assets;
• has the same financial year as the tax group subsidiary; and
• prepares the financial statements using the same accounting standards as the tax group subsidiary.

For the purposes of offsetting tax losses and profits within the tax group, pre-grouping tax losses of any joining member will be the carried forward losses of the tax group. There are also specific rules with regard to the joining, leaving and discontinuation of a tax group, among other things. We recommend that specialist tax advice be sought in this regard.

13.4 What other key concerns and considerations should participants in private M&A transactions bear in mind from a tax perspective?

Answer ... Pursuant to the Corporate Tax Law, the standard rate of corporate income tax is 9%. There is:

• potentially a higher rate for large multinationals with global revenues of more than AED 3.15 billion, although it is unclear at this point whether there will be a set minimum tax rate for such companies, and whether such rate will be mandatory or optional; and
• a 0% rate for taxable income up to AED 375,000.

The introduction of corporate income tax in the United Arab Emirates is likely to lead to greater transaction due diligence to ensure that there is a complete understanding of the tax liabilities being acquired.

As there are key concerns and considerations that participants in private M&A transactions should bear in mind, we would advise that participants always seek tax advice.

14. Trends and predictions

14.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

Answer ... Compared with US and European markets, where there are substantial economic headwinds (eg, inflation, high interest rates and recession concerns), the UAE market has been spared to some degree. The United Arab Emirates remained the country in the Middle East and North Africa (MENA) with the highest volume of M&A activity in the first quarter of 2023, registering 42 deals worth $2 billion, according to the EY MENA M&A Insights Report.

Due to high oil prices, the United Arab Emirates – and the Gulf Cooperation Council (GCC) region generally – have money to spend at a time when other market players are taking a more conservative stance. Moreover, the region is home to some of the world’s largest and deepest-pocketed sovereign wealth funds. M&A activity involving private equity or sovereign wealth funds represented, respectively, 32% and 68% of the United Arab Emirates’ total deal volume and value in the first quarter of 2023. This ability to fund the local M&A market, as well as the European and US markets, gives the United Arab Emirates and the GCC a substantial and competitive edge.

14.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Answer ... The United Arab Emirates has been taking a proactive approach and has been making progress transforming from an oil-based economy to a knowledge-based, technology-focused one. It is also becoming an increasingly compelling market for regional and global dealmakers. Sector-wise, the technology industry reported the highest number of deals in Q1 2023 (19 in total) worth $461 million in disclosed value. This reflects the strong focus on technology and digital infrastructure across the UAE M&A landscape in all sectors. As the population of the United Arab Emirates grows, there has also been increased focus on consumer industries and consumer markets generally. Opportunities both in the M&A market and more broadly should be created by:

• the United Nations Climate Change Conference taking place in December 2023; and
• a larger focus on digital markets and a greener economy.

15. Tips and traps

15.1 What are your top tips for the smooth closing of private M&A transactions and what potential sticking points would you highlight?

Answer ... A well-negotiated term sheet at the outset can help ensure the smooth closing of a transaction. Similarly, documents setting out completion logistics can be very useful. Conditions precedent checklists and closing checklists with a clear delineation of stakeholder responsibilities and the status of each action item can help to avoid unnecessary delays.

The United Arab Emirates is not a signatory to the Hague Convention, so all foreign documents submitted to government authorities must be notarised and attested by the UAE embassy and Ministry of Foreign Affairs in the country of issue and the Ministry of Foreign Affairs in the United Arab Emirates. Identifying these documents and beginning this process far in advance of closing similarly helps to avoid delays to the transaction timeline. If the parties will need to sign before a notary, it is often useful to:

• do a ‘dry run’; and
• determine the appointed signatories well ahead of signing.

The licensing and regulatory landscape of the United Arab Emirates entails dealing with different authorities, including:

• the relevant free zone authority for offshore entities; and
• the relevant Department of Economic Development (DED) and notary for onshore entities.

However, it is possible for a company to have additional regulators. These additional regulators are generally relevant in connection with certain types of activities listed on an entity’s licence, such as advertising. In this situation, the parties will need:

• approval from the relevant free zone authority or DED and notary; and
• approval from the relevant additional authority.

The parties will be unable to update the business’s licence until the additional authority has given its approval. As a substantial portion of the purchase price is often conditional on the licence being updated, it is advisable to thoroughly check which authorities will need to be involved far in advance of closing.

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This article was orignally published by Mondaq. To read the full report, please click here.