Answer ... (a) Commercial/corporate
There is no elaborate public register in the United Arab Emirates, comparable to common law jurisdictions such as that maintained by the Companies House in the United Kingdom. Official public information can be obtained on onshore companies via the National Economic Register, which provides information on an entity’s registered address, registered business activities and licence validity.
Public information about free zone companies (other than those in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM)) is limited. The DIFC and ADGM, being common law jurisdictions, have a public register with information on, among other things, a company’s registered address, share capital, shareholders, directors, share capital and data protection officer.
There is no statutory stamp duty on contracts and electronically signed documents are legally enforceable before the courts.
(b) Financial
Information about charges on assets is not publicly available and buyers generally rely on auditors’ reports and the seller’s representations in connection with the indebtedness levels of the target. That said, the target can obtain a credit report from the Al Etihad Credit Bureau (AECB) to provide to the buyer. The AECB is a government organisation that collects credit and financial data from banks and other financial institutions and provides credit reports to companies in the United Arab Emirates. The AECB report includes the company’s address, ownership details, credit facilities and track record for payments over the past two years.
Additionally, a credit report can be obtained from the Dubai Chamber of Commerce, which provides such reports to third parties (without knowledge of the target). This report includes credit ratings and recommended credit limits, in addition to the company’s business, economic and financial information, such as details of its shareholders, directors, auditors, bankers, payment history, purchasing terms and significant customers.
(c) Litigation
There is no publicly accessible database for litigation. Accordingly, a buyer will rely on the seller’s representations and information furnished by the seller. If the buyer wishes to carry out formal litigation checks, it will need a power of attorney from the target or the seller.
(d) Tax
Currently, only value added tax is applicable in the United Arab Emirates; therefore, due diligence is limited to checking whether the target has valid registrations and has completed statutory filings.
(e) Employment
In the United Arab Emirates, most companies have over 90% expatriate employees demography. Due diligence will thus involve ascertaining whether:
- employees are validly employed; and
- the target has complied with all its statutory obligations.
In addition, there is no mandatory pension scheme for employees – employees are entitled to end-of-service gratuity payable upon termination. A target should ideally have some funds reserved under its books of accounts for this contingent liability. Finally, there are no trade unions in the United Arab Emirates.
(f) Intellectual property and IT
IP due diligence will generally include checking IP registrations and a basic search of registered trademarks may be carried out online. A key consideration in this domain is the prohibitively high cost of IP registration in the United Arab Emirates. Smaller to medium-sized companies and start-ups refrain from such registration due to potential increases in their early operational costs.
(g) Data protection
The United Arab Emirates recently issued Federal Decree-Law 45/2021 on the Protection of Data, which aligns data protection laws in the country with global best practices. Legal due diligence entails ensuring that targets have taken steps to comply with the requirements under this law.
The ADGM and DIFC also have data protection regimes which require the submission of appropriate notifications to the relevant commissioner of data protection about the nature of the processing of personal data.
(h) Cybersecurity
The United Arab Emirates recently enacted Federal Decree-Law 34/2021 on Combating Rumours and Cybercrimes. At the due diligence level, this will require a review of the cybersecurity policy to ensure compliance with the new law.
(i) Real estate
In the United Arab Emirates, the land register is not publicly accessible and can only be inspected by:
- interested parties;
- judicial authorities;
- experts appointed by judicial officers; and
- other competent authorities.
However, title ownership or validity of a lease can be checked online based on title or lease registration certificates provided by the target.