Mergers and acquisitions in UAE (M&A) are essential for businesses seeking to expand, restructure, or enhance their competitive edge. However, the legal environment for M&A in the UAE has recently undergone significant changes.
Understanding these regulatory updates is critical for businesses to ensure compliance and streamline acquisition.
This article provides an overview of M&A regulations and processes in the UAE as of 2024, followed by a summary of our firm’s specialized services for M&A transactions.
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Table of Contents
Overview of Mergers and Acquisitions in UAE
In 2024, the UAE’s M&A landscape is shaped by several critical laws and regulations:
- Federal Decree-Law No. 36 of 2023 on the Regulation of Competition: This law has brought crucial changes to the M&A regulatory framework, including revised notification thresholds and enhanced penalties for non-compliance. These changes aim to maintain a fair competitive market in the UAE and deter monopolistic practices.
- Federal Law No. 2 of 2015 on Commercial Companies: This foundational law lays out the guidelines for corporate mergers and acquisitions, covering shareholder rights, requirements for board and shareholder approvals, and necessary regulatory consents. Compliance with this law is essential for any M&A transaction within the UAE.
- Sector-Specific Regulations: Certain sectors in the UAE, such as banking, telecommunications, and energy, have additional regulatory requirements governed by their respective regulatory bodies. Businesses in these sectors must adhere to these industry-specific rules, which may impact the M&A process.
Revised Notification Thresholds
The Federal Decree-Law No. 36 of 2023 mandates specific thresholds for notifying the authorities about M&A transactions. The notification thresholds include:
- Turnover Threshold: Transactions must be reported if the combined annual turnover of the merging entities meets or exceeds a specified amount, which is expected to be outlined in forthcoming Implementing Regulations. This threshold ensures that only transactions with significant market impact are scrutinized.
- Market Share Threshold: A merger or acquisition requires notification if the combined market share of the involved parties in the relevant market surpasses a percentage set by the authority. The purpose is to prevent the formation of monopolies or entities with an excessive market influence.
These thresholds are intended to identify M&A transactions that could hinder UAE competition. The UAE Council of Ministers anticipates releasing exact values for these thresholds soon.
Enhanced Penalties for Non-Compliance
Failing to meet notification requirements or disregarding the revised thresholds can lead to severe penalties:
- Financial Penalties: Non-compliance may result in fines ranging from 2% to 10% of the annual revenue from the relevant product or service within the UAE in the preceding fiscal year.
- Fixed Fines: In cases where revenue data is unavailable, the fines can range between AED 500,000 and AED 5,000,000 (USD 136,000 to USD 1.36 million).
These new financial penalties highlight the importance of adhering to M&A reporting requirements and conducting transactions transparently. Businesses engaged in mergers and acquisitions in UAE must carefully consider these regulations to avoid financial and legal setbacks.
Key Stages of the M&A Process
The M&A process in the UAE typically involves the following key steps:
- Due Diligence: A comprehensive review of the target company’s financial, operational, and legal standing to identify potential risks or liabilities.
- Negotiation and Structuring: Structuring the transaction, including the pricing, payment methods, and other terms, to align with both parties’ goals.
- Regulatory Approvals: Securing approvals from relevant authorities, depending on the sector and scope of the transaction.
- Completion and Integration: Finalizing the transaction and initiating the integration process, which can involve aligning business practices, corporate cultures, and operational systems.
Businesses operating in UAE-free zones, such as the Dubai International Financial Centre (DIFC), must also be aware of specific regulations applicable within those zones.
Each free zone in the UAE has unique legal and regulatory frameworks that can impact M&A processes.
Learn more about Company Merger Process in UAE Legal steps.
Legal Services Related to M&A in the UAE
Our law firm in UAE specializes in providing tailored legal services for businesses involved in M&A transactions in the UAE.
We offer comprehensive support across every stage of the M&A process, ensuring compliance and safeguarding our clients’ interests.
Our M&A-Related Legal Services:
- Due Diligence: We conduct a thorough investigation of the target company, including financial, legal, operational, and reputational aspects, to uncover any potential risks. This process is critical for informed decision-making in M&A.
- Transaction Structuring and Negotiation: Our team advises on structuring transactions in ways that align with client objectives while meeting UAE regulatory requirements. We handle negotiations to secure favorable terms for our clients and protect their interests throughout the deal.
- Regulatory Compliance: We ensure that all necessary notifications and approvals are filed accurately and on time. Our team liaises with UAE regulatory authorities to streamline the approval process and mitigate potential delays.
- Contract Drafting and Review: Our experienced lawyers draft and review contracts to ensure they address all legal aspects of the transaction and comply with UAE laws. This includes purchase agreements, shareholder agreements, and other vital documents for mergers and acquisitions in UAE.
- Post-Merger Integration Support: Our firm guides the post-merger integration process, assisting with aligning operational procedures, corporate cultures, and technology systems. This support is essential to achieving a seamless and effective integration.
Our team remains updated on the latest legal developments and regulatory requirements, allowing us to offer reliable and informed counsel throughout the M&A process.
By partnering with us, clients gain access to a wealth of experience and specialized knowledge for navigating the UAE’s evolving M&A landscape.
Mergers and Acquisitions FAQs in UAE
Conclusion.
The M&A landscape in the UAE is complex, with evolving regulations that impact every stage of the transaction process. In 2024, revised notification thresholds and increased penalties underscore the importance of compliance and due diligence.
Our law firm is dedicated to helping clients navigate these changes and achieve successful outcomes in their M&A endeavors.
Whether through regulatory compliance, transaction structuring, or integration support, our team provides the expertise needed to conduct smooth and compliant transactions.
Contact our law firm in UAE for expert help. Click the Whatsapp icon below.
A law graduate and legal writer focusing on UAE law, he became known for his ability to clarify complex legal concepts through his writings. His work simplifies the intricacies of the legal landscape in the Emirates, helping both locals and expatriates navigate their legal concerns.