Despite economic challenges, the UAE has continued to demonstrate notable growth in the M&A space. Its effective and agile recovery from the disruption caused by the COVID-19 pandemic has reassured both regional and international investors that the UAE remains a stable environment for their capital, largely insulated from significant global shocks. Indeed, the past year has seen a resurgence in deal-making activity, including consolidation among established market participants across various sectors, alongside a large number of public listings. 

Merger Control

On 20 January 2025, the Cabinet issued Ministerial Decree No 3 of 2025 (the Decree), which sets out the criteria for what constitutes an economic concentration requiring prior approval from the Ministry of Economy. The Decree was published in the Official Gazette on 30 January 2025 and came into force 60 days later, on 31 March 2025. Further information can be found in 2.4 Antitrust Regulations.

Changing Geopolitical Situation

The abrupt change in the geopolitical situation in early 2022 has led to a surprising shift towards the east. This change continues to impact the transactional space in the UAE. More and more global market players are looking at the UAE as a place to base their new headquarters and head offices. Fuelled by this shift, dynamic deals are taking place in many sectors in the UAE, including cross-border transactions, with many deals finding support through investment by the government. Sectors such as green energy, real estate and power in particular, have seen an increase in investment. 

New Tax and Regulations

The UAE introduced a federal corporate tax, which came into effect in June 2023. The implementation of corporate tax has shown a significant impact on potential transactions, as tax implications are being factored in during an acquisition. Economic substance regulations, which came into effect in 2020 and for which there are hefty penalties for non-compliance, are also intrinsically linked with the taxability of a UAE entity and also have to be taken into consideration. This has also left a mark on transaction documents, where tax indemnities are now becoming market standard. That said, given the introduction of federal corporate tax, the Ministry of Finance recently issued Cabinet Decision 98 of 2024 pursuant to which economic substance requirements will not be applicable for the financial year started on or after 1 January 2023 but remains applicable for the financial years 1 January 2019 to 31 December 2022. Further, if penalties have been applied by the competent authorities for financial periods falling after 31 December 2022, these will be annulled and any amounts collected returned to the relevant entity. Accordingly, given the rapidly evolving nature of the tax environment in the UAE, specialist tax advice is now a necessary component for M&A transactions.

Identification of UBO

Another important aspect which became extremely relevant for M&A transactions is the identification of the ultimate beneficial owner (UBO). Under UAE regulations, the UBO is an individual who owns or controls, whether directly or indirectly, 25% or more of the shares/voting rights of a company or has the right to appoint or dismiss the majority of its directors. UBOs have to be disclosed to the authorities at the time of incorporation or change in shareholding or similar structuring actions. It is therefore imperative that transactions are structured in a way that permits the identification of the UBOs of the companies involved. Of course, if a publicly listed company is involved, the rules may differ.

KYC Requirements

Regulatory authorities have also placed considerable emphasis on the enforcement of mandatory know-your-customer (KYC) requirements. This commitment to transparency has resulted in the UAE’s removal from the Financial Action Task Force (FATF) grey list. The UAE’s removal from the FATF grey list further emphasises its commitment to robust KYC practices and overall financial transparency to further enhance the UAE’s reputation as a secure and transparent financial hub.

Many industries have shown good progress this year such as investments in green energy in part due to the push from government authorities to focus on green energy solutions. The UAE is also placing particular strategic focus on artificial intelligence, which is projected to contribute nearly 14% to the region’s GDP by 2030.

Additionally, the real estate sector has also witnessed a significant upswing due to the constant demand for real estate assets, whether for purchase or lease, due to the constantly increasing number of expats in the UAE.

Acquiring a Private Company

The most common way to acquire a private company is through a share purchase. Asset purchases exist in the UAE but are less common, owing to a lack of legal precedent and formality. The UAE has introduced a federal corporate tax, which came into effect in June 2023. The implementation of this corporate tax has had a significant impact on potential transactions, as tax implications are now being factored in during an acquisition. 

Furthermore, the practicality of moving assets is more complicated in the UAE owing mainly to the requirement of tripartite agreements to transfer assets (they do not automatically transfer by operation of the business of the company). A private company can also be acquired through a statutory merger, which allows the transfer of assets by operation of law. This was previously not common practice owing to the lack of precedents and the long procedural requirements in relation to creditor objections. However, this is no longer the case, and mergers have started to become more popular because of the rising demand to consolidate entities working in the same sector. 

The merger of companies is clearly envisaged under the applicable law and there have been more mergers in the past few years than previously. However, these mergers have been of private and public joint stock companies, rather than limited liability companies. 

In addition, the UAE Commercial Companies Law (Federal Law No 32 of 2021) or CCL, which came into force on 2 January 2022, introduces key changes that contemplate two new corporate vehicles, a special-purpose acquisition vehicle (SPAC) and a special-purpose vehicle (SPV). It is anticipated that SPACs will increasingly be used as vehicles to acquire or merge with another company. The CCL also recognises the concept of an SPV, which is defined as a company established for the purpose of separating the obligations and assets associated with a specific financing operation from the obligations and assets of its parent entity. An SPV can offer a strategic structuring proposition for receiving and issuing equity investments. 

There is more regulatory control of public mergers and acquisitions, as explained below.

Public Mergers

Two companies that are merging will be required to get the appropriate board approval and call a general assembly to approve the merger. This will involve formal valuations of both companies. The relevant regulatory approvals will also be required. For public companies, these are acquired from industry-specific regulators, the Securities and Commodities Authority (SCA) and the Department of Economic Development (DED), usually by completing applications and submitting documentation. 

An application will need to be submitted to the SCA, and a merger certificate obtained from the SCA approving the merger, before said merger can be completed. The SCA has 20 business days from the date of complete submission to issue a decision approving or denying the application. Practically, initial approval will be sought from the SCA, the DED and the relevant industry-specific regulator to ensure that they approve the merger in principle, before a formal and final application is made. 

The DED will also need to give final approval and implement the merger, including the de-registration of the merging entity. There will also likely be industry-specific requirements that will need to be complied with before completion can occur. 

Shareholders holding not less than 20% of the capital of the companies seeking to merge will have the right to oppose the merger and challenge the merger before the court within 30 days of the date of approval of the merger by the general assembly. 

A notice confirming the intention to merge within ten business days from the date of approval of the merger by the general assembly will be sent in writing to all creditors and published in two daily newspapers (one in Arabic). Creditors and other concerned parties will then have a 30-day period to object to the merger. 

Public Acquisitions

Generally, the tender offer period is likely to be around two to four months. The timing of the tender offer period is explained in further detail below.

An acquirer will need to obtain consent to the proposed offer from all concerned bodies such as the competent local authority and any relevant sector-specific licensing bodies. An acquirer must inform the target company of its planned MTO and file an application to the SCA to make an offer (within 21 days of delivering the intent of acquisition to the target company). The SCA may extend this time period based on a request from the acquirer. If the acquirer fails to make the offer within this period or announces that it is backing down off the offer, the acquirer shall be prohibited from making any offer to the target company within the six months following such period. It shall also be prohibited during the said period from making any buying transactions which would apply the provisions of the mandatory offer.

The SCA will then approve or reject the application within seven days from receipt of the application filing.

If the offer application is rejected by the SCA, the acquirer may appeal the rejection within 14 days of notification of the rejection.

If the offer application is approved by the SCA, the target’s board must deliver the draft offer and draft offer document, its recommendation for the offer, and its consultants recommendation of the offer to the target’s shareholders within 14 days of receiving approval of the offer from SCA. There is very limited guidance on the specifics of what must accompany the recommendation and ultimately it will be up to the target’s board to be comfortable that it has a reasonable basis for the recommendation (ie, through an independent valuation that supports the offered pricing).

Any consultants that participated in the preparation of the acquirer’s offer document should verify the data contained within it. 

The acquirer must also notify the market of the SCA approval of the offer, the draft offer and the draft offer document. If the acquirer does not publish a press release to this effect, then the target company must do so.

Offer acceptances must be submitted by the 28th day from the day following the offer’s receipt by the target (“first closing date”), unless the acceptance date is extended (such extended deadline being the “second closing date”).

The offer is valid until the 60th day from the day after it is received by the target (however, the SCA may extend the offer validity period).

Payment must be settled no later than three days from the date that all conditions, requirements, and approvals related to the offer are met.

There are a few main regulatory bodies to consider for the UAE mainland (not covering the many free zones that form part of the UAE): 

• the Department of Economic Development (DED) in each of the emirates, for all types of companies; 
• the Ministry of Economy for private joint-stock companies; 
• the Securities and Commodities Authority (SCA) for listed joint-stock companies;
• the relevant stock exchange market (in this case, the Abu Dhabi Securities Exchange or Dubai Financial Market – the “Market”) for any listed joint stock companies; 
• the Competition Regulation Committee (CRC) of the UAE Ministry of Economy; 
• UAE Central Bank (CB) for banks and licensed financial companies; and 
• the notary public for all types of companies, as notarisation is required for the completion of most M&A transactions. 

The vast majority of onshore companies – that is, companies registered in the UAE outside the free zones – are regulated by the CCL, which came into force on 2 January 2022. Part 7 of the CCL sets out the rules for the transformation and merger and acquisition of companies. Yet some onshore companies, such as companies wholly owned by UAE federal or local governments, follow regulations that may differ from the CCL. 

In addition to the CCL, private joint stock companies (PrJSCs) are also regulated by additional ministerial decrees, namely Decree No 137 of 2024 (as amended). The decree has specific provisions that govern the acquisition of shares in PrJSCs. 

Companies registered in a free zone are not necessarily governed by the CCL. Where corporate regulations have been issued for a free zone, the CCL applies only where a matter is not covered in the free zone corporate regulations. Certain free zone authorities (ie, those of the Dubai International Financial Centre and the Abu Dhabi Global Market) have been provided with comprehensive regulatory powers with an explicit exemption from the CCL. 

Other free zone authorities have less legislative authority; however, while the scope may vary, corporate regulations exist for all free zones. Aside from corporate legislation, in the CCL, the Civil Code and the Commercial Code, sector-specific rules may also impact M&A activity in certain industries.

The amendments to the CCL now permit 100% foreign ownership of certain onshore companies. 

The change follows the publication of amendments to the CCL on 30 September 2020, which generally removed the requirement for a UAE national to own at least 51% of the shares in the capital of a UAE company. The amendments also removed the requirement for branches of foreign companies in the UAE to appoint a UAE national agent, for most activities. 

Subject to certain other approvals, the CCL also grants discretion to the relevant DED in each emirate to permit 100% foreign ownership in other types of activities. Applications of this nature are considered on a case-by-case basis. 

Wholly foreign-owned companies will not be subject to higher fees or have greater guarantee or share capital requirements than would be the case for a UAE-owned or part-owned company. 

However, in practice, some emirates have not fully implemented this change. Government and sector-specific authorities in some emirates are still in the process of either implementing this change or issuing regulations to make this change effective. This sometimes creates practical difficulties in implementing a transaction with 100% foreign ownership, despite this being statutorily permissible. 

These changes to foreign ownership rules are applicable equally to both new and existing companies.

The Federal Decree-Law No 36 of 2023 on the Regulation of Competition (the New Law) is the current primary antitrust regulation applying to business combinations in the UAE. The New Law was issued on 29 December 2023, replacing Federal Decree-Law No 4 of 2012 (the Old Law). The New Law provides a comprehensive and robust legal framework aimed at fostering fair competition, preventing monopolistic practices, and protecting consumer welfare.

To date, the New Law’s executive regulations have not been issued and accordingly the Cabinet Resolution No 37 of 2014 on the Executive Regulations of the Old Law still applies, to the extent the provisions do not contradict the New Law.

On 20 January 2025, the Cabinet issued Ministerial Decree No 3 of 2025 (the Decree), which sets out the criteria for what constitutes an economic concentration requiring prior approval from the Ministry of Economy. The decree was published in the Official Gazette on 30 January 2025 and came into effect 60 days later, on 31 March 2025.

Under the Decree, a transaction will be regarded as an economic concentration capable of affecting competition in the relevant market if either of the following conditions is met:

• if the total annual sales value of the relevant parties in the relevant market in the country (ie, the UAE) during the last fiscal year exceeds AED300,000,000; or
• if the total share of the relevant parties exceeds 40% of the total transactions in the relevant market in the country during the last fiscal year.

Where one of these thresholds is met, the parties involved must make an application for approval at least 90 days prior to completing the relevant transaction. The CRC then has 90 days (extendable by a further 45 days) to review the transaction and issue a resolution approving the transaction in question otherwise it is considered rejected.

Generally, the laws and regulations governing labour fall under Federal Labour Law No 33 of 2021 (the “New Labour Law”), which repeals Federal Labour Law No 8 of 1980. The executive regulations of the New Law were issued pursuant to Cabinet Resolution No 1 of 2022 and came into effect on 2 February 2022. The key points of the New Labour Law are outlined below.

Employment Dispute Statutory Limitations

Pursuant to Federal Decree-Law No 9 of 2024 amending provisions of the New Labour Law, the statutory limitation to claim a labour dispute has been extended from one year from entitlement of right to two years from the expiry/termination of the employment relationship.

Working Models

The New Labour Law has introduced several flexible working models, amounting to six types of working models, as follows:

• full-time: working for one employer daily for full working hours throughout the working week;
• part-time: working for one or more employers for a defined number of hours or specific business days;
• temporary: work that is required for a specific duration or is task-based, concluding upon the completion of the designated task;
• flexible: working hours or days may vary depending on the workload, as well as the employer’s economic and operational needs, in alignment with established business practices;
• remote: full-time or part-time work that is conducted partially or entirely remotely, outside of the employer’s premises; communication is facilitated through electronic channels rather than physical presence; and
• shared: work and responsibilities are shared among multiple employees, with wages distributed based on the proportion of work performed by each employee, as determined by business needs.

Limitation on Fixed Term Employment Contracts

Previously, the New Labour Law stipulated that the maximum duration of a limited-term contract was three years. However, this restriction has since been removed, and the law no longer prescribes any statutory maximum or minimum term for such contracts.

Dealing with Unlimited Term Employment Contracts

While the New Labour Law no longer permits unlimited term contracts, employers are faced with existing unlimited term employment relationships. In this regard, the Labour Law provided both the employer and the employee with the right to terminate an existing unlimited-term employment contract for a legitimate reason, subject to the following minimum notice periods:

• less than five years: a minimum notice period of 30 days;
• between five and ten years: a minimum notice period of 60 days; and
• more than ten years: a minimum notice period of 90 days.

Employment matters form a critical component in any corporate acquisition within the UAE.

It is also worth noting that only within the context of a share transaction or a merger would employees automatically transfer by virtue of the transaction. In the case of an asset transfer, employees would technically need to have their contracts terminated and be re-hired by the acquiring entity. Their rights and obligations are in practice regulated by virtue of a contractual arrangement.

There are no specific requirements within the context of an M&A transaction for managers/directors to go through security clearance to be appointed. In some instances there is scrutiny in relation to authorised signatories. However, as a general rule, the authorities can intervene on account of any violation of public policy or any threat to national security.

On 29 December 2023, Federal Decree-Law No 36 of 2023 on the Regulation of Competition came into force, which has significant implications for merger control regulations. While the implementing regulations are yet to be issued, the Cabinet issued, on 20 January 2025, Ministerial Decree No 3 of 2025 clarifying economic concentration and dominant position criteria (see 2.4 Antitrust Regulations).

A Dubai Court of Cassation set a unique precedent regarding the first mandatory tender offer and squeeze-out in relation to one of the leading public joint stock real estate developers in the UAE. As a background, an acquirer who acquires 90% plus 1% or more of the total share capital of a publicly listed company may apply to the SCA for approval to force the remaining minority shareholders to sell or swap their shares to the acquirer within 60 days of the date of the final settlement of the primary offer. The minority shareholders can object and take the matter to court; however, the mandatory acquisition will not be suspended save by court order. 

The articles of association of the publicly listed company must permit the mandatory acquisition for it to be valid. 

In the present case, the real estate publicly listed company had amended its articles through a general assembly resolution to include provisions related to a mandatory offer. While the offeror made its mandatory offer in line with the applicable rules and regulations, a shareholder holding less than 5% of the share capital of the public company objected to the general assembly resolution approving the amendment to the articles. The grounds of the shareholder’s objections included that:

• the resolution failed to comply with applicable procedural requirements (which were in fact applicable to a board resolution);
• the mandatory acquisition value represented an unfair offer to the shareholders; and
• mandatory acquisition was only issued in favour of the majority shareholders.

The court rejected the arguments of the minority shareholder, noting that:

• the minority shareholder did not qualify to challenge the resolution on account of not holding at least 5% of the shareholding;
• any objection to a general assembly resolution has to be carried out in accordance with the prescribed procedural rules, including requesting the authority to stop the execution of the general assembly resolution within three days of the passing of the resolution; and
• whether the procedure for objecting to a board resolution had been followed or not was not relevant in this case since the subject matter was a general assembly resolution.

The Dubai court’s decision is a significant judgment regarding the difference between challenging a shareholder’s resolution (that allows for a mandatory acquisition and squeeze-out of minority shareholders) and a board resolution. 

On the other hand, there have also been some significant legal developments as the UAE has introduced a federal corporate tax, which came into effect in the UAE in June 2023. The implementation of corporate tax is likely to have a significant impact on potential transactions, as tax implications would now have to be factored in during an acquisition. Economic substance regulations, which came into effect in 2020 and have hefty penalties for non-compliance, are also intrinsically linked with the taxability of a UAE entity and will also have to be taken into consideration. 

Agency laws in the UAE have also recently been overhauled, which may have an impact on entities proposing to undertake commercial agency activities. Under the new law, international companies are now permitted to act as an agent, subject to obtaining the necessary permissions from the competent authorities and complying with certain conditions, including not having a registered agency for their products or services in the UAE. Permission for international companies to undertake agency activities is a noteworthy change, in particular since, historically, only UAE nationals could act as an agent (subject to certain specified exemptions).

The takeover rules have always been part of the CCL; however, in 2020 and 2021, the concept of “squeeze” was given legislative standing. In practice, there have been no mandatory tender offers in the UAE, except for very recently, when a few squeeze-out transactions were carried out successfully by two real estate listed public joint stock companies. It is expected that these precedents, together with the explicit reference in the CCL, will see the market implementing more of these takeover/squeeze-out mechanisms.

We have seen bidders build up stakes in the target prior to launching an offer; however, this is not necessarily very common and is not necessarily a prerequisite to launching a mandatory tender offer, which is triggered at 30%. Although recent developments in the market have seen an increase in takeovers, which may encourage this type of practice, to date there are no principal stake-building strategies per se.

In private M&A transactions there are no material disclosure thresholds or filing obligations, only procedural approvals and beneficial ownership filings in the case of a change in 25% or more of the ultimate beneficial ownership. However, for publicly listed companies, strict disclosures and filings are required, as set out below.

Any transaction that creates an “economic concentration” must be notified to the UAE Ministry of Economy and obtain clearance before being implemented. Under the Decree, a transaction will be regarded as an economic concentration capable of affecting competition in the relevant market if either of the following conditions is met:

• if the total annual sales value of the relevant parties in the relevant market in the country (ie, the UAE) during the last fiscal year exceeds AED300,000,000; or
• if the total share of the relevant parties exceeds 40% of the total transactions in the relevant market in the country during the last fiscal year.

Where one of these thresholds is met, the parties involved must make an application for approval at least 90 days prior to completing the relevant transaction. The CRC then has 90 days (extendable by a further 45 days) to review the transaction and issue a resolution approving the transaction in question otherwise it is considered rejected.

Mergers

SCA

Owing to the disclosure obligations on publicly listed companies, the SCA will be aware of potential transactions (whether a stay has been requested or not). However, a formal application to the SCA will be required that includes:

• details of the merger as well as a copy of the merger contract;
• the proposed articles of the merged company;
• financial statements for the two preceding financial years;
• the initial approvals from the DED in the relevant emirate and from any industry-specific regulator;
• an action plan and approach report for the merger;
• the audited financial position of the merging companies (which reflects the financial position no later than three months from the date of submitting the application);
• valuation from the company or their financial advisers;
• the valuation report of the merging companies;
• an auditor’s report;
• the resolutions of the board of directors approving the merger;
• the shareholder circular; and
• special resolutions. 

Industry-specific regulator

Initial approval is often sought from any industry-specific regulators early in the negotiations, to incorporate any comments or requirements that such regulator may have, and so that when applications for final approval are made, the regulator has already agreed to the transaction in principle and provided its feedback. 

DED

As with the industry-specific regulator, initial approval is commonly sought from the DED to approve the transaction in principle. The DED will carry out the implementation of certain parts of the merger, including amending and cancelling the commercial licences of the relevant merging company; amending and updating the memorandum and articles of association; de-registration of the “merging” company; and a capital increase of the “surviving” company.

Market

Where the publicly listed company has been approved a stay, it will only be required to disclose to the Market (as a whole) once the merger contract is signed. 

Acquisitions

Exempt acquisitions

All acquisitions of shares listed on the Market must be carried out on the market trading system through one of the Market’s registered brokers, unless it is an over-the-counter (OTC) acquisition or one of the exempt transactions. Some examples of exempt transactions (as applicable in the relevant Market) are as follows: 

• a transfer of ownership between spouses and relatives to the second degree; 
• a transfer of ownership taking place as a result of inheritance, wills or gifts made to official charitable bodies in the state without consideration; 
• a transfer of ownership taking place pursuant to court orders; 
• a transfer of ownership taking place pursuant to an amicable settlement with a financial institution; 
• a transfer of ownership taking place between persons whose names appear on one single certificate of ownership; 
• transfer of ownership between parent or holding companies and subsidiaries; or
• the sale of securities by public auction.

Acquiring less than 5% of a publicly listed company

In this case, there are no specific notification or disclosure obligations to the SCA, DED or the Market. There are often no share transfer agreements on transactions of this size. Whether acquiring 5% or more of a publicly listed company or 10% or more of a parent, subsidiary, sister or affiliate of a publicly listed company, there are no prior notification or disclosure obligations to the SCA, DED or the Market. However, the acquirer is required to provide an immediate post-notification of the acquisition to the Market. This process is repeated for each additional 1% of shares in such publicly listed company purchased by the acquirer.  Furthermore, the industry-specific regulators may have their own rules and regulations in this regard, for example, where a bank is acquiring 5% or more of shares in a publicly listed company, it will require the prior approval of the CB.

Acquiring 30% or more of a publicly listed company

The SCA

An MTO is triggered where an acquirer acquires, or where an acquisition results in such acquirer holding, 30% plus one share or more of a publicly listed company. The acquirer is obliged to immediately stop increasing its ownership ratio and notify the SCA of its ownership ratio and whether there is any intention to make an MTO; if not, the acquirer’s ownership ratio must be reduced to 30% or less within three months of notification to the SCA.

Industry-specific regulator

It is likely that the approval of any industry-specific regulator will be required prior to obtaining approval from the SCA. For example, an acquirer purchasing shares in a bank will need approval from the CB before it can obtain approval from the SCA. 

The DED

Procedural approvals and beneficial ownership filings may be required with DED in the case of a change in 25% or more of the ultimate beneficial ownership. 

The Market

Where the acquirer has been approved a stay, it will be required to disclose to the Market immediately upon execution of the purchase order. 

OTC acquisitions

Certain transactions can be carried out on an OTC basis, meaning that they are executed outside of the market trading system. 

The Market

The seller and the acquirer will need to submit a formal request to the chair of the Market containing the details of the transaction (including the agreed price) and containing a signed undertaking to the Market. OTC acquisitions must exceed a certain financial threshold. For example, under the Dubai Financial Market, the minimum size of the shares being acquired through a block deal would be at least between AED1 million and AED15 million (depending on the relevant company whose shares the block deal is being carried out on), and the execution of such block deal can be at a price higher or lower than a maximum of either 10% or 25% of the previous close price, depending on the percentage by which the transaction value exceeds the block amount thresholds. 

Mandatory Tender Offer (MTO)

A mandatory tender offer is triggered where an acquirer acquires, or where an acquisition will result in such acquirer holding, 30% plus one share or more of a publicly listed company. The acquirer is obliged to immediately stop increasing its ownership ratio, notify the SCA of its ownership ratio and whether there is any intention to make an MTO; if not, the acquirer’s ownership ratio must be reduced to 30% or less within three months of notification to the SCA. 

Where the acquirer wishes to make an MTO, it will be completed if such offer results in the acquirer holding at least 50% plus one share or more shares in the capital of the publicly listed company. If this threshold is not reached, the offer will be cancelled and the acquirer’s share ratio must be reduced to 30% or less. 

The SCA can make exceptions to this rule, including for government-owned companies, distressed companies and securities acquired through inheritance. 

Any transaction that creates an “economic concentration” must be notified to the UAE Ministry of Economy and obtain clearance before being implemented. Under the Decree, a transaction will be regarded as an economic concentration capable of affecting competition in the relevant market if either of the following conditions is met:

• if the total annual sales value of the relevant parties in the relevant market in the country (ie, the UAE) during the last fiscal year exceeds AED300,000,000; or
• if the total share of the relevant parties exceeds 40% of the total transactions in the relevant market in the country during the last fiscal year.

Where one of these thresholds is met, the parties involved must make an application for approval at least 90 days prior to completing the relevant transaction. The CRC then has 90 days (extendable by a further 45 days) to review the transaction and issue a resolution approving the transaction in question otherwise it is considered rejected.

A publicly listed company cannot make any changes to the mandatory reporting thresholds set out under applicable laws and regulations. Any changes to the articles of incorporation will not be accepted by the notary and if the notary accepts them for any reason, they will be deemed void and the applicable law will take precedence.

Dealings in derivatives are expressly set out under SCA regulation number 22/RM of 2018 regulating derivative contracts. Therefore, in principle, derivatives are allowed and recognised in the UAE.

If derivatives are regulated, they are listed and traded on the relevant financial market where disclosure and other requisites of such markets would apply.

When it comes to private M&A transactions, there are no requirements in relation to transparency; however, shareholders must be treated equally, and statutory pre-emption rights apply in the event of any transfer of shares. The rules applicable to any share transfer are expressly set out under the CCL and any acquirer must obtain an explicit or implicit waiver from existing shareholders. Additionally, procedural approvals and beneficial ownership filings may be required in the case of a change in 25% or more of the ultimate beneficial ownership. In relation to public M&A, there are strict disclosure requirements depending on the level of ownership. Such disclosure can be a pre/post-notification to the authorities and the market. The company may request a stay on the requirement to notify the Market until the transaction is binding. The authorities are entitled to grant or reject such stay at their discretion. However, the authorities generally do grant stays and extend the duration of a stay depending on the stage of each transaction.

For private M&A transactions, there is no obligation to disclose a deal. However, where there is a potential merger or acquisition taking place, the publicly listed companies and acquirer involved will usually apply for consent to stay the obligation to disclose in relation to such negotiations until such time as a binding contract is signed. Such application must be made by the publicly listed companies involved in the merger, or the publicly listed company and the acquirer in the case of an acquisition. 

A request for a stay will usually include a list of names that are prohibited from trading certain shares (the “Insiders’ List”). This will usually include the board of directors, management, advisers, relatives and connected persons of the relevant companies (and acquirer). The Insiders’ List will be prohibited from trading in shares of the publicly listed company in question and any parent, subsidiary, sister or affiliate company for certain periods (known as “black-out” periods).

Market practice on the timing of disclosure cannot differ from legal requirements which are mandatory, and any deviation can expose the relevant party to penalties, etc. The UAE regulator is very active in imposing penalties and suspending trading if disclosure requirements are not constantly and consistently followed. This does not, of course, apply to private companies.

In an attempt to reduce costs, more red-flag due diligence is being carried out, as opposed to narrative and comprehensive reports being issued for such purpose. 

Specific consideration is given to matters such as:

• foreign ownership restrictions; 
• real estate ownership restrictions and hidden costs; 
• change-of-control provisions in material agreements; and 
• employee gratuities and pension schemes. 

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

Generally, sellers are also more open to adopting a full-disclosure approach after having the comfort of executing non-disclosure agreements with potential buyers. However, it is not very common to produce vendor due diligence reports except in large-scale deals, owing to the cost involved. 

Very little information on private companies incorporated in the UAE is publicly available. In particular, a private company’s articles of association and licences do not form part of any publicly available record in the UAE (only certain information is sometimes available). Conducting effective due diligence on the target is, therefore, not possible without the co-operation of the target and its management and shareholders. It is possible to carry out a limited search for a company online and in person at the local chamber of commerce in Dubai and Abu Dhabi. Practices differ between emirates, but a business report providing a brief company profile will generally be available. 

In addition to reviewing information provided by the seller, legal review will involve conducting appropriate searches and investigations at public registries and authorities; however, this requires the co-operation of the seller and target company. 

As with private M&A transactions, in public M&A transactions there will be a due diligence survey. However, the due diligence will usually be limited to publicly available information and information that is not share-price sensitive, to ensure that the relevant market is not affected.

Terms of business and memoranda of understanding are usually executed before starting work on any M&A transaction. These generally include exclusivity and confidentiality provisions and other non-binding commercial terms. In some transactions, these documents are sometimes also binding in relation to provisions such as price, subject to completion of due diligence.

For a public tender offer, terms and conditions are usually documented in an “offer document” issued to the shareholders of the target, which will provide information to the shareholders regarding the proposed offer. In addition to the offer document, a shareholder circular setting out the terms and conditions of the offer, details of the proposed consideration and other related matters will be circulated to the shareholders of the target, based on the recommendation by the board of directors to the shareholders to accept the offer and vote in favour of the relevant resolutions at the general meeting, along with the recommendations of the consultants involved in the offer. The shareholders may then pass the requisite resolutions in relation to the offer at the general assembly.

The following documents are commonly executed at the signing of a private company share purchase: 

• a long-form share purchase agreement (SPA) or merger contract/shareholders’ circular, as the case may be; 
• a disclosure letter (making disclosures against the seller’s warranties in the SPA); 
• board resolutions of the buyer and the seller approving the transaction;
• powers of attorney authorising the signatories; and 
• a shareholders’ agreement (where there will be more than one shareholder following closing). 

The following are commonly executed at the closing of a private company share purchase: 

• updated disclosure letter (where it has been agreed that the seller’s warranties will be repeated at closing); 
• any required releases of security over shares in the target; 
• resignation letters from the directors; 
• the documentation required for the appointment of new directors; and 
• a share transfer instrument and amended memorandum or articles of association. 

Where the target company is a limited liability company or a private joint stock company, the implementation of the share transfer will follow the UAE procedural requirements, regardless of the law chosen to govern the deal documentation. 

The SPA will contain provisions that deal with the order of events, including details of how the purchase price will move from buyer to seller, as the share transfer onshore can take up to one week to complete. The negotiating power of the parties will determine how this is done. An escrow agent will often be appointed to hold the purchase price pending the transfer of title to the shares. 

As with private M&A transactions, for a public M&A, there will be the usual suite of documents, including an SPA or merger contract. However, these will usually have limited indemnities, representations and warranties compared with those considered standard in private M&A transactions. Publicly listed companies will also have disclosure requirements for their relevant market, along with general assembly notices and shareholder circulars to approve the transaction. The transaction agreements are usually governed by UAE law, given that publicly listed companies are subject to strict rules and regulations under UAE law. To avoid contradiction and ambiguity in the legal interpretation of the contracts, UAE law is the prudent choice.

The process of acquiring/selling a business is usually mandated by the commercial side of the transaction. Some transactions close in a few months or even less, while others can take up to a year or more to close, depending also on the size of the target.

Private Acquisition

From a procedural perspective, for a private acquisition, closing will require notarisation and regulatory approvals that would generally take no more than a few weeks to one month, depending on the industry. The UAE has been very efficient in moving towards electronic submissions that require some handling at this stage, but which will in the long run make transfers more efficient and less time-consuming.

Public Acquisition

From a public acquisition perspective, closing that does not involve a mandatory tender offer should not take more than a few weeks to one month (taking into consideration negotiations, due diligence and other non-regulatory matters), as with private acquisitions. However, in the case of an MTO process, closing would take no less than three months.

An MTO is triggered where an acquirer acquires, or where an acquisition results in such acquirer holding, 30% plus one share or more of a publicly listed company. The acquirer is obliged to immediately stop increasing its ownership ratio and notify the SCA of its ownership ratio and whether there is any intention to make an MTO; if not, the acquirer’s ownership ratio must be reduced to 30% or less within three months of notification to the SCA.

In the majority of transactions, the consideration is cash, which can be paid in a variety of ways, such as: 

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

Share swaps are also very common in the UAE. No pricing practice is customary, and this mainly depends on the structure of the transaction. There has also been a noticeable increase in the use of the locked-box approach to consideration, particularly where a private equity player is selling or buying. However, there has been an increase in the use of purchase price adjustment mechanisms by buyers and sellers in determining the consideration to be paid. Where the purchase price is subject to adjustment, this is most commonly based on completion accounts (earn-out mechanisms being relatively rare, although they do exist in certain types of management buyouts).

Generally, a takeover offer is subject to the following corporate/regulatory conditions: 

• receipt of all required government, corporate, regulatory and statutory approvals, exemptions and/or waivers in connection with the transaction, including receipt of the final written approval(s) of the SCA in relation to the transaction; 
• provision to the target of all the information required or requested by the SCA in relation to the transaction; 
• dispatch of the offeree circular to the shareholders (and no subsequent revocation of or change to the recommendation by the board of directors to the shareholders to accept the offer and vote in favour of the relevant resolutions at the general meeting); 
• the shareholders’ passing of the requisite resolutions in relation to the offer at the general assembly;
• no material breach of certain undertakings or warranties given by the target having occurred; and 
• no material adverse effect having occurred.

Where the acquirer wishes to make an MTO, it will be completed if such offer results in the acquirer holding at least 50% plus one share or more shares in the capital of the publicly listed company. If this threshold is not reached, the offer is cancelled and the acquirer’s share ratio must be reduced to 30% or less. 

The SCA can make exceptions to this rule, including for government-owned companies, distressed companies and securities acquired through inheritance.

The acquirer’s financial consultant may be required to provide confirmation that the acquirer has the necessary funds to execute the tender offer.

Material adverse change clauses (“MAC clauses”) are often used in M&A transactions to give the acquirer the right to walk away from a deal in the event of a material adverse change occurring between the signing and the closing of the transaction. Acquirers have become more focused on MAC clauses as a result of COVID-19. There has also been a reduction in break-up fees in view of the uncertainty created by COVID-19; however, we are seeing more appetite for such fees recently. In relation to non-solicitation, this of course remains a very important requirement that attempts to provide some certainty to the parties.

In private M&A transactions, shareholders can seek to control the company through the board. However, this becomes a less likely option for public transactions, as board members are appointed by cumulative vote.       

Voting by proxy is standard in the UAE, and is permitted and regulated under applicable laws and regulations.

Minority squeeze-outs are referred to as “mandatory acquisitions” under the SCA M&A Rules, which only apply to joint stock companies that are listed. An acquirer who acquires, or as a result of an acquisition, will hold 90% plus one share or more of the total share capital of a publicly listed company may apply to the SCA for approval to force the remaining minority shareholders to sell or swap their shares to the acquirer within 60 days of the date of the final settlement of the primary offer (the “Offer Period”). The minority shareholders can object and take the matter to court; however, the mandatory acquisition will not be suspended save by court order. If there is no objection or no court order to suspend the mandatory acquisition, it will be completed seven days after the Offer Period.

The articles of association of the publicly listed company must permit the mandatory acquisition for it to be valid. 

Conversely, minority shareholders possess a corresponding right. They can require an acquirer, who holds or following an acquisition will hold the same threshold of 90% plus one share or more of the total share capital of a publicly listed company, to buy them out. Any holders with at least 3% of the total share capital of a publicly listed company may submit an offer to the acquirer to purchase the minority shares. The acquirer must respond within 60 days and can approve or reject the offer. If the offer is rejected or the acquirer does not respond, the minority shareholders can ask the SCA to force the acquirer to make an offer. If the SCA agrees, the acquirer will be required to make an offer within 60 days of being notified of the SCA’s decision.

Irrevocable commitments have occurred in the past; however, clients are not generally advised to enter into such commitments, as they could be viewed as a violation of the law when it comes to public M&A.

When it comes to private M&A transactions, there are no requirements in relation to making any bid public. However, shareholders are treated equally, and statutory pre-emption rights apply in the event of any transfer of shares. 

In relation to public M&As, there are strict disclosure requirements depending on the level of ownership. Such disclosures can be a pre/post-notification to the authorities and the market, otherwise, the company may ask for a stay on the requirement to notify the market until the transaction is binding. The authorities are entitled to grant or reject such stay at their discretion. However, the authorities generally do grant stays and extend the duration of a stay depending on the stage of each transaction.

For private companies, corporate and regulatory approvals are required to issue shares; however, there are no disclosure requirements. For listed companies, any issuance of shares is referred to as a rights issue (unless such issuance is for a strategic investor) and follows a mandatory process that includes approvals and disclosures to the regulator and the market.

Bidders do not need to produce financial statements; however, the target company may be required to do so. Generally, financial statements need to be prepared in accordance with the IFRS.

The only transaction documents that are disclosed in full are the announcement of intention to make an offer, the offer document and shareholder circular, which mainly include all the terms of the relevant transaction. For example, the merger agreement itself is not required to be disclosed, but most of its provisions are already set out in the shareholders’ circular.

The directors’ duties are to act within the company’s best interests, exercising independent judgement to promote the success of the company. In doing so, directors must always avoid conflicts of interest. The duties of the directors in an LLC are owed to the company, the shareholders and any interested third parties. In public joint stock companies, it is the same position; however, the SCA extends the directors’ duties to all stakeholders, including employees, creditors, suppliers, and any other person who has an interest in the public joint stock company.

In public M&A transactions, special and ad hoc committees are often established to address a specific issue. For example, a merger committee is established to oversee the merger process. These committees are not used in practice to resolve any conflict-of-interest issues. Board members that are conflicted must declare such conflict and abstain from voting.

Although there are apparently no precedents, a recommendation of the board is generally required to be made to the shareholder to either recommend the offer or vote against it. If the offer is challenged before the courts, judges and court experts would likely take into consideration the recommendation of the board of directors.

Independent advice is generally provided by appointing counsel to carry out the following: a legal and financial due diligence on the target, an independent valuation issued by an independent valuer (not the auditor of the company) and a fairness opinion to be issued by an appointed financial adviser.

Numerous clients have been assisted in relation to conflict-of-interest issues regarding resolutions passed by the general assembly related to takeovers.

Other than a competing offer, there are no hostile takeovers in the UAE. 

A competing offer can be announced but may not be submitted any later than 53 days after receipt of the primary offer. The competing offer must be on better terms for the shareholders than the primary offer. The offeror must seek approval from the SCA before submitting the competing offer. The SCA may approve the offer where it contains material amendments in favour of the shareholders (including, but not limited to, price) or where the target company has recommended the offer (subject to the directors not being related to such competing offeror).

A dissenting board member has the right to record their objection in the minutes of the board meeting on matters they do not recommend, and such record will clear them of any liability with regard to such decision.

A dissenting board member has the right to record their objection in the minutes of the board meeting on matters they do not recommend, and such record will clear them of any liability with regard to such decision.

See 9.2 Directors’ Use of Defensive Measures. Directors must also abide by their duties to the company, the shareholders, and the stakeholders (wherever applicable).

Directors are entitled to say no and record such action in the minutes; however, they do not have the ability to prevent a transaction from taking place.

In private M&A transactions, litigation is not common; however, it is relatively common when it comes to public M&A transactions.

In a public M&A transaction, litigation is usually brought before the completion of the takeover, squeeze-out or merger.

Transactions should be accompanied by valuations (independent valuer) and the issuance of a fairness opinion by the investment bank advising on the transaction, and the offer should preferably be made at a premium to the valuation in terms of share price in order to avoid liability. Acquirers should not sit on the board of the target; but if they do, they should resign prior to any decisions being taken in relation to the transaction.

Shareholder activism depends on the shareholding structure of the company. If a company is dominated by the ownership of one shareholder holding more than 50%, then shareholder activism will have less weight than it will have in companies where the shareholding is scattered, and where decision-making can be affected by such activism. That said, we have seen in the past minority activist shareholders filing complaints to the market and SCA against proposed M&A transactions if the minority shareholders deem that such transactions are against the business strategic vision or expansion plan of the company and in fact threatened to bring claims.

Activists might encourage companies to enter into M&A transactions if they are at a premium in comparison to the market price.

Activist shareholders in the UAE have previously threatened to bring claims against the directors of a company and/or the acquirer, and some have actually filed claims.