United Arab Emirates
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.
United Arab Emirates
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.
United Arab Emirates
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.
United Arab Emirates
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.
United Arab Emirates
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.