What Should Be Included in a Merger or Share Purchase Agreement for a UAE Company?

What Should Be Included in a Share Purchase Agreement for a UAE Company?

A share purchase agreement UAE is a legally binding contract that outlines the terms and conditions under which shares of a company are bought or sold. In the context of mergers and acquisitions within the UAE, an Share Purchase Agreement plays a critical role in formalizing the transaction between a buyer and a seller, defining the scope of the deal, and ensuring legal compliance with local commercial laws and free zone regulations. It essentially serves as the roadmap for transferring ownership while safeguarding the interests of both parties.

 

Key clauses in a UAE Share Purchase Agreement typically cover areas such as purchase price and payment terms, representations and warranties, indemnities, and conditions precedent. These elements protect buyers from undisclosed liabilities and ensure sellers meet specific obligations before the deal closes. The agreement may also detail regulatory approvals required from authorities like the UAE Ministry of Economy, the Securities and Commodities Authority, or sector-specific regulators, depending on the nature of the business.

 

Finally, the Share Purchase Agreement sets out post-completion obligations such as non-compete clauses, employee retention, and transitional services that help ensure a smooth integration after the acquisition. For buyers seeking to acquire a UAE company, having a well-drafted share purchase agreement UAE is essential—not only to clarify rights and responsibilities but also to mitigate risks that may arise after the transaction. Crafting a comprehensive Share Purchase Agreement is a strategic step in sealing a secure and successful merger or acquisition.

 

Understanding the Role of Share Purchase Agreements in the UAE

In the dynamic landscape of corporate acquisition UAE, a Share Purchase Agreement (SPA) is more than a transaction tool—it's the foundation for legal clarity and commercial security. Whether dealing with a share transfer UAE for a mainland or free zone entity, the SPA outlines the terms, conditions, and contingencies that govern the sale of shares. It plays a central role in merger documentation UAE, ensuring both parties are aligned on rights, obligations, liabilities, and post-completion duties.

 

SPAs are especially vital in the UAE’s complex corporate ecosystem, where business laws vary between mainland jurisdictions and free zones like DIFC or ADGM. A carefully drafted SPA not only facilitates a smooth ownership transition but also safeguards against unforeseen liabilities and future disputes.

 

Key Considerations for SPAs in UAE Company Acquisitions:

• Importance Across Jurisdictions:

  • In mainland acquisitions, SPAs must comply with Federal Decree‑Law No. 32 of 2021 (Commercial Companies Law), which also reflects reforms allowing up to 100% foreign ownership in most sectors.

    • In free zones such as DIFC and ADGM, English common law principles may apply, and contractual protections tend to be more elaborate.

• Regulatory Oversight:

  • Ministry of Economy: Oversees foreign investment approvals and commercial registration changes in mainland deals.

    • DFSA (Dubai Financial Services Authority): Governs SPAs within the DIFC jurisdiction, ensuring compliance with financial and corporate rules.

    • ADGM (Abu Dhabi Global Market): Requires adherence to its own set of regulations, which mirror international standards.

• Applicability to Stake Sales:

  • SPAs are legally binding in both majority stake purchases (which usually include full operational control) and minority stake acquisitions, where investor rights, dividend entitlements, and board representation must be clearly specified.

 

Key Clauses Every UAE Share Purchase Agreement Should Include

In the framework of share sale clauses UAE, a Share Purchase Agreement (SPA) serves as a critical legal instrument that governs the transfer of ownership in both mainland and free zone companies. The SPA mandatory terms ensure that rights and obligations of both the seller and buyer are clearly defined, mitigating risks and streamlining deal execution. These clauses are indispensable in managing expectations, safeguarding interests, and complying with UAE’s regulatory standards.

 

Below are the essential clauses found in a robust UAE SPA:

 

Purchase Price and Payment Terms

• Valuation Mechanism: Price may be based on EBITDA multiples, book value, or an agreed formula.

• Payment Methods: Typically via bank transfer, escrow arrangements, or deferred payment schedules.

• Adjustments: Includes working capital adjustments, earn-outs, or closing account reconciliations.

 

Warranties and Representations

• Corporate Standing: Seller affirms company is duly incorporated and operationally compliant.

• Legal & Tax Compliance: Seller confirms no undisclosed liabilities or ongoing legal disputes.

• Ownership of Assets: Assets and IP owned or properly licensed without encumbrances.

 

Indemnities

• Breach of Warranties: Seller compensates buyer for any inaccuracy in representations.

• Unforeseen Liabilities: Covers tax liabilities, litigation, or regulatory penalties post-sale.

• Limitations: Time limits and caps may apply to indemnification claims.

 

Conditions Precedent

• Regulatory Approvals: Approval from UAE’s Ministry of Economy, DFSA (for DIFC), or ADGM.

• Third-Party Consents: Includes shareholder approval, lender consent, or key client agreement.

• Due Diligence: Completion of financial, legal, and operational audits.

 

Restrictive Covenants

• Non-Compete: Seller prohibited from starting or joining competing businesses for a defined period.

• Non-Solicitation: Seller must not recruit employees or solicit clients from the target business.

• Confidentiality: Obligation to maintain secrecy on sensitive deal details post-completion.

 

Completion and Post-Completion Obligations

• Share Transfer: Execution of share certificates, update of shareholder register, notarization if required.

• Board Resolutions: Appointment/removal of directors, change in bank mandates.

• Post-Closing Deliverables: Handover of corporate documents, employee notifications, VAT updates.

 

Dispute Resolution Mechanism

• Applicable Law: UAE Civil Code for mainland entities; DIFC Law or ADGM regulations for free zones.

• Jurisdiction: May specify DIFC Courts, ADGM Courts, or international arbitration (e.g., ICC, DIAC).

• Forum Selection Clause: Clearly states dispute forum and language for arbitration.

 

 Differences Between a Merger Agreement and a Share Purchase Agreement in the UAE

In the UAE’s dynamic business landscape, companies often pursue growth and restructuring through mergers or acquisitions. While both strategies aim to consolidate resources and expand market presence, the legal instruments used—namely, Merger Agreements and Share Purchase Agreements (SPAs)—differ significantly in structure, regulatory treatment, and implications. Understanding these differences is crucial for businesses navigating company merger documentation and compliance under UAE law.

 

The UAE’s Federal Law No. 32 of 2021 on Commercial Companies provides the legal framework for mergers, while SPAs are governed by broader corporate and contractual principles. Below is a detailed comparison of the two approaches, focusing on ownership vs liability transfer, regulatory requirements, and tax and licensing implications.

 

Side-by-Side Comparison Table

Aspect	Merger Agreement	Share Purchase Agreement (SPA)
Transfer of Ownership vs Liabilities	The entire business—including assets and liabilities—is consolidated into a new or surviving entity. Ownership and liabilities are transferred collectively.	Only shares are transferred. Ownership changes, but liabilities remain with the company unless specifically negotiated.
Regulatory Requirements (Federal Law No. 32 of 2021)	Requires approval from the Ministry of Economy and compliance with merger procedures under Articles 280–284. Includes public announcement, bank guarantees, and issuance of new registration certificates.	Governed by corporate law and contractual terms. No merger-specific approval required, but share transfer must be registered with relevant authorities (e.g., DED or free zone authority).
Tax Implications	May qualify as a Transfer of a Going Concern (TOGC), exempt from VAT if conditions are met. Corporate tax may apply depending on structure and valuation.	Sale of shares may be exempt from corporate tax if sold at book value. Capital gains may be taxed if shares are sold above book value.
Licensing Implications	Requires reissuance or amendment of trade licenses. New entity may need to apply for fresh licenses depending on activity and jurisdiction.	Existing licenses remain valid. Buyer assumes control of licensed entity without needing new approvals unless activity changes.
Due Diligence Focus	Comprehensive review of both companies’ assets, liabilities, contracts, and operations. Integration planning is critical.	Focused on target company’s financials, legal standing, and shareholder agreements. Less operational integration required.
Legal Complexity	High—requires coordination between multiple stakeholders, legal advisors, and regulators.	Moderate—primarily contractual, with fewer regulatory hurdles.

 

Whether opting for a merger or an acquisition, UAE businesses must weigh the structural depth of a merger against the transactional simplicity of a share purchase. The choice depends on strategic goals, risk appetite, and regulatory readiness. 

 

Regulatory Approvals and Compliance in UAE M&A Deals

In the UAE, mergers and acquisitions (M&A) are subject to a multi-layered regulatory framework that varies depending on the business activity, legal structure, and jurisdiction of the entities involved. Securing the right approvals is essential to ensure legal validity, operational continuity, and compliance with federal and sector-specific laws. Below is a breakdown of the key authorities that typically need to approve or be notified of M&A transactions.

 

Key Regulatory Authorities

• Ministry of Economy (MoE)

  • Oversees merger control under the UAE Competition Law (Federal Decree‑Law No. 36 of 2023) and related Cabinet Decision No. 3 of 2025, which sets the turnover and market share thresholds for notification.

    • Reviews transactions that meet thresholds for economic concentration (e.g., AED 300 million turnover or 40% market share)

    • Requires pre-approval for qualifying deals and enforces a 90-day notification period

• DIFC Registrar of Companies

  • Governs M&A transactions involving entities registered in the Dubai International Financial Centre (DIFC)

    • Ensures compliance with DIFC Companies Law No. 5 of 2018

    • Approves share transfers, mergers, and changes in ownership within the DIFC jurisdiction

• ADGM Registration Authority

  • Regulates M&A activity for entities incorporated in Abu Dhabi Global Market (ADGM)

    • Handles incorporation, licensing, and structural changes

  • Requires documentation such as business plans, shareholder resolutions, and lease agreements for approval

• Free Zone Authorities

  • Each free zone (e.g., JAFZA, DMCC, DAFZA) has its own regulatory body

    • Approval is required for share transfers, license amendments, and ownership changes

    • Additional consents may be needed for regulated activities (e.g., healthcare, education)

• Sector Regulators

  • Central Bank of the UAE: Must approve M&A involving banks, exchange houses, and financial institutions

    • Insurance Authority (now part of CBUAE): Reviews deals involving insurance companies and brokers

    • Securities and Commodities Authority (SCA): Oversees M&A of publicly listed entities and enforces disclosure rules

    • Other regulators may include: 

      • Telecommunications and Digital Government Regulatory Authority (TDRA)

        • Dubai Health Authority (DHA)

        • Department of Education and Knowledge (ADEK)

Risks of Omitting Key Clauses in a Share Purchase Agreement (SPA) in the UAE

In the UAE’s fast-paced corporate environment, Share Purchase Agreements (SPAs) are critical instruments that govern the transfer of ownership in private companies. Yet, when SPAs are drafted hastily or without legal precision, they can become breeding grounds for SPA disputes in the UAE, exposing buyers and sellers to significant shareholder liability. Omitting key clauses—especially those related to liabilities, warranties, and intellectual property—can lead to costly litigation and reputational damage.

 

Below are the major risks associated with incomplete or poorly drafted SPAs, illustrated through hypothetical scenarios that mirror real-world challenges in UAE transactions.

 

1. Incomplete Liability Transfers

Risk: Buyers may unknowingly inherit liabilities that were not disclosed or properly transferred.

 

Scenario: A UAE-based logistics firm acquires 100% shares of a warehousing company. The SPA fails to include a clause transferring environmental liabilities. Months later, the buyer receives a government notice regarding hazardous waste violations committed before the acquisition. Without a clear indemnity clause, the buyer is forced to pay fines and remediation costs.

 

Impact:

• Unexpected financial exposure

• Regulatory penalties

• Difficulty in seeking recourse from the seller

 

2. Post-Completion Litigation

Risk: Disputes may arise after the deal closes due to vague or missing clauses on warranties, representations, or dispute resolution.

 

Scenario: A tech startup in Dubai sells its shares to a foreign investor. The SPA lacks a robust dispute resolution clause. Six months post-completion, the buyer discovers inflated revenue figures and sues for misrepresentation. With no arbitration clause, the case proceeds to civil court, dragging on for over a year and costing both parties substantial legal fees.

 

Impact:

• Lengthy litigation

• Damage to business relationships

• Loss of investor confidence

 

3. Hidden Debts and IP Disputes

Risk: Undisclosed liabilities or unclear ownership of intellectual property can trigger legal battles and financial losses.

 

Scenario 1: A buyer acquires a media company in Abu Dhabi. The SPA does not include a clause requiring disclosure of outstanding debts. After the acquisition, creditors file claims for unpaid vendor invoices totaling AED 1.2 million.

 

Scenario 2: A fintech firm purchases a startup whose core software was developed by a freelancer. The SPA omits IP assignment clauses. The freelancer later claims ownership of the code and threatens legal action unless compensated.

 

Impact:

• Exposure to third-party claims

• Loss of control over critical assets

• Reputational harm and operational disruption

 

In the UAE, where shareholder liability is generally limited under Federal Law No. 32 of 2021, poorly drafted SPAs can pierce that protection. Whether you're a buyer, seller, or advisor, ensuring that your SPA includes clear clauses on liabilities, warranties, IP rights, and dispute resolution is not just best practice—it’s essential risk management.

When to Hire a UAE Corporate Lawyer for SPA Drafting and Review

In the UAE’s thriving business ecosystem, Share Purchase Agreements (SPAs) are more than just paperwork—they’re the backbone of ownership transfers in mergers and acquisitions. Whether you're a startup founder selling equity or a multinational acquiring a strategic asset, the stakes are high. That’s why engaging a corporate lawyer in Dubai or a seasoned M&A legal advisor in the UAE isn’t just smart—it’s essential.

 

SPAs must be tailored to the jurisdiction, business activity, and regulatory environment. A misstep in drafting or reviewing can lead to disputes, financial exposure, or regulatory penalties. Below are key scenarios where professional legal review is not optional—it’s critical.

When Legal Expertise Is Non-Negotiable

• High-Value Transactions

  • For deals exceeding AED 10 million or involving significant equity stakes, legal review ensures: 

    • Proper valuation mechanisms

      • Ironclad indemnity and warranty clauses

        • Tax-efficient structuring under UAE Corporate Tax Law

         

• Government Contracts or Real Estate Transfers

  • These deals often trigger complex compliance requirements: 

    • Real estate SPAs must comply with emirate-specific property laws and registration protocols

      • Government-linked contracts may require notarization, Ministry of Economy filings, or sector-specific approvals

• Cross-Border Acquisitions

  • International deals introduce jurisdictional and regulatory challenges: 

    • Dual legal systems (civil law onshore vs. common law in DIFC/ADGM) require tailored clauses

      • Foreign ownership rules, tax treaties, and competition law thresholds must be navigated

 

Why a Corporate Lawyer Makes the Difference

• Drafts enforceable contracts aligned with UAE law

• Identifies hidden liabilities and compliance gaps

• Coordinates with regulators (e.g., Ministry of Economy, SCA, free zone authorities)

• Advises on dispute resolution mechanisms (arbitration vs. litigation)

FAQ

1. What is the difference between an asset purchase and a share purchase agreement in the UAE? 

An asset purchase transfers selected assets and liabilities, while a share purchase transfers ownership of the entire company—including all assets, liabilities, and obligations.

 

2. Can an SPA in the UAE include a non-compete clause for the seller? 

Yes, SPAs in the UAE can include non-compete clauses, provided they are reasonable in scope, duration, and geography to protect the buyer’s legitimate interests.

 

3. Is it mandatory to notarize a share purchase agreement in the UAE? 

Yes, for mainland companies, SPAs must be notarized to be legally enforceable. Arabic is standard, but Abu Dhabi now permits English notarization and Dubai allows e-notarization, reducing the need for translation.

 

4. What approvals are typically required before completing a share sale in the UAE?

Approvals may be required from the Department of Economic Development (DED), free zone authorities, sector regulators (e.g., Central Bank, SCA), and existing shareholders depending on the company type and jurisdiction.

 

5. What happens if a seller breaches warranties after the share transfer? 

The buyer may claim damages through litigation or arbitration, depending on the SPA’s dispute resolution clause. UAE courts assess damages case-by-case.

 

6. How is purchase price adjustment usually handled in UAE M&A deals? 

Purchase price adjustments are common and typically based on working capital or net debt at closing. Locked box and completion accounts are standard mechanisms.

 

7. Are foreign buyers allowed to acquire shares in UAE onshore companies? 

Yes, since legal reforms in 2020, foreign investors can own up to 100% of onshore companies in most sectors, subject to activity-specific restrictions.

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