The deal is not done when the SPA is signed. It is done when the licence says so.

Share purchase or asset purchase, and why the licence usually settles it

In most markets the share-or-asset question is answered by tax and liability appetite. In the UAE it is usually answered by permissions.

A share purchase leaves the operating entity intact: trade licence, sector approvals, customer contracts, leases, bank accounts and employee visas all stay where they are, and historic liability comes with them. What changes is ownership — and that change itself frequently requires the licensing authority's approval, and in regulated sectors the regulator's, before it takes effect.

An asset purchase gives a cleaner liability line but only works if the buyer holds, or can obtain, a licence covering the activity. It also means novating every contract, moving every employee onto a fresh visa and labour contract, reassigning leases with landlord consent, recording every intellectual property assignment, and — where real property is involved — transferring title through the land department, with the transfer fee assessed on value belonging in the deal model rather than being discovered after it.

The transfer mechanics differ by regime and are not interchangeable. A mainland LLC interest transfers by notarised amendment to the constitutional documents, in Arabic, followed by an update to the commercial register and the licence. A commercial free-zone company transfers under that zone's own regulations, with the zone authority's approval and its registrar's records; no two zones run identical processes. A DIFC or ADGM company transfers broadly as an English company would, by instrument of transfer and entry in the register of members.

Statutory pre-emption is the trap in the mainland route. Existing shareholders of an LLC have rights of first refusal on a transfer of interests, and a sale negotiated without clearing or waiving them is exposed to challenge by the shareholder left out of the conversation. That waiver belongs in the conditions, not the closing bundle.

Foreign ownership after the 2020 amendments, and what still carries restrictions

The 2020 amendments to the federal companies regime removed the general requirement that a mainland company be majority-owned by UAE nationals, and opened full foreign ownership across most commercial and industrial activities. That was a genuine structural change, and it made a large volume of nominee and side-letter arrangements unnecessary.

It did not make ownership unconditional. Three qualifications matter on a live deal.

Activities of strategic impact. A defined category of activities remains subject to conditions, which may include ownership or board-composition requirements. The category is administered at federal and emirate level, and the licensing authority's current position on the specific activity code on the target's licence is the only answer worth relying on. Not the general rule; the activity code.

Sector regimes with their own rules. Banking, insurance, and certain professional and defence-related activities carry their own ownership, licensing and change-of-control requirements that sit on top of the companies law. So does the commercial agencies regime, which has its own registration and eligibility conditions and has been amended in recent years.

Legacy structures. Many targets still carry nominee arrangements, side letters, undocumented profit-sharing with a local partner, or share pledges granted to secure them. These do not evaporate because the ownership rules changed. They are live contractual positions held by someone who may prefer the status quo, and they surface at exactly the point the buyer needs that person's signature at the notary. Cleaning up a legacy nominee position is a pre-signing workstream with its own negotiation, not a completion mechanic.

The diligence that actually changes the price

Standard diligence checklists imported from London or New York cover the wrong ground here. The items below are the ones that, in our experience, move price or kill deals.

• Licence and activity chain. Does the licence permit what the business actually does, in each emirate where it operates? Businesses drift into adjacent activities without amending the licence. Fines are manageable; an unlicensed revenue stream that the buyer is paying a multiple on is not.
• Registered commercial agency. If the target holds a registered agency or distributorship, that registration carries protections and its own termination and transfer conditions. It may also be the target's principal asset. Whether it survives a change of control, and on what terms the principal can react, needs a direct answer before signing.
• Related-party arrangements. Intra-group leases at non-market rents, management fees to a shareholder entity, personal guarantees given by a departing founder, informal supply terms with a family business. These are usually undocumented, usually price-relevant, and usually disappear at completion, taking their economics with them.
• End-of-service liability. Accrued gratuity under the federal labour framework is generally unfunded and sits on the balance sheet as a provision that is easy to understate. It is a hard number, it is calculable, and it should be a completion-accounts item rather than a warranty.
• Real estate title. Onshore title is what the land department register says it is, not what the sale-and-purchase paperwork says. Verify the register directly, check whether the property sits in an area where the buyer's nationality permits ownership, confirm lease registration, and confirm whether any mortgage or attachment is recorded against the title. Where the target owns real estate, ask the land department whether a share transfer is itself treated as a transfer for fee purposes.
• IP chain of title. Trade marks registered in the target's name, in the correct classes, with assignments from any predecessor recorded — not merely executed. Software and design work produced by contractors or overseas affiliates without a written assignment is a recurring gap in this market.
• Unregistered and unrecorded security. Search the federal movable-assets register and the relevant title registers, but assume the searches will not find everything. Pledges over LLC interests recorded with the licensing authority, guarantees given for affiliate debt, and undertakings given to a landlord or a principal are frequently absent from the data room and need to be asked for by name.
• Tax and substance position. Corporate tax registration, filing history, transfer-pricing documentation on related-party flows, VAT position and grouping, and whether the entity has been meeting economic-substance requirements where its activity engages them.

Two process points. Onshore courts do not run common-law disclosure, so evidence you do not gather before signing is evidence you may never get. And Arabic-language originals govern before an onshore authority — a diligence exercise run entirely off English translations has not seen the documents.

SPA mechanics, and how warranty and indemnity claims actually behave

Sale agreements in this market are usually drafted on familiar international lines, and increasingly on DIFC or ADGM law with arbitration or those courts as the forum. That choice is sound, and it is worth understanding what it does and does not achieve.

Where the SPA is governed by DIFC or ADGM law and disputes go to those courts or to arbitration, the warranty package behaves broadly as a common-law practitioner expects: disclosure operates, caps and baskets operate, and the tribunal will apply the bargain as written. This is the principal reason sophisticated parties choose it even for wholly onshore targets.

Where the SPA is governed by onshore UAE law, several features of the civil-law framework change the calculation. The court retains a discretion to adjust agreed compensation to reflect loss actually suffered, which means a liquidated-damages or pound-for-pound indemnity figure is a starting point for the judge rather than a fixed entitlement. Claimants are expected to prove loss. Contractual notification periods shorter than the statutory limitation position may not be given effect in the way the drafter assumed. And the overarching obligation to perform in good faith gives a judge room to look past the literal allocation of risk.

The practical consequence is that an onshore-law SPA is a poor instrument for recovering money after the fact. Where the target carries a known, quantifiable exposure, the reliable answers are price reduction, escrow or holdback, and a specific pre-completion fix — not a warranty and a hope.

Regardless of governing law, keep the notarised transfer instrument consistent with the SPA. It will be short, it will be in Arabic, it will be the document the licensing authority acts on, and it should say nothing the long-form agreement contradicts.

Warranty and indemnity insurance is available for UAE deals and is placed regularly at mid-market size and above, usually through underwriters writing from London or the region. Three things are worth knowing before it is built into the deal model. Underwriters price off the diligence, so a light-touch exercise produces a policy with holes where the diligence was thin. Known issues are excluded, which means the very exposures UAE diligence tends to surface — an activity outside the licence, an unresolved agency registration, an undocumented related-party arrangement — are usually the ones the policy will not cover. And underwriters are more comfortable with a common-law-governed warranty package than with an onshore-law one, which feeds back into the governing-law decision. W&I solves a clean-exit problem for a seller. It does not substitute for diligence, and it does not cover what you already found.

Conditions, regulatory consents and merger control

The gap between signing and completion is where UAE deals lose their timetable. Three categories of condition drive it.

Licensing authority and free-zone approvals. A change in the ownership of a mainland LLC has to be recorded with the licensing authority, and the authority's requirements — approvals, attested documents, sometimes fresh security clearances for incoming shareholders — set the pace. Free-zone authorities each run their own process. Neither is difficult; both are unforgiving about form.

Sector regulator change-of-control approvals. Financial institutions, insurers, telecommunications operators, healthcare providers, education providers and listed companies each answer to their own regulator, and a change of control in those sectors requires that regulator's prior clearance. These are the long poles. They are also the conditions most often assumed to be administrative and discovered to be substantive.

Merger control. The federal competition regime requires economic concentrations meeting prescribed thresholds to be notified to the Ministry of Economy and cleared before closing. Reform of that regime introduced a turnover-based threshold alongside the market-share test, which materially widened the population of notifiable deals, and the analysis is now a live workstream on transactions that would previously have been waved through. Certain sectors supervised by their own regulators sit outside the general regime. The regime applies across the UAE — being a DIFC or ADGM company does not take a transaction outside it.

Foreign signatories and documents. Powers of attorney and corporate authorisations executed abroad require notarisation and the full legalisation chain, followed by legal translation into Arabic in the UAE. Allow real time for this. A completion that slips because a board resolution came back from an embassy three days late is an avoidable and entirely typical failure.

On the day itself, the mechanics are ordinary but the sequencing is not: funds flow through an escrow arrangement, the notarised instrument is executed, and the register and licence are updated. There is a window during which the buyer has paid and the register has not yet caught up. Close it with escrow release conditioned on registration evidence, and with an irrevocable power of attorney from the seller allowing the buyer to complete the filings if the seller becomes unavailable.

Joint ventures, minority protection and deadlock

Most UAE joint ventures are documented twice: a shareholders' agreement negotiated at length in English, and the constitutional documents filed with the licensing authority in Arabic. The authority acts on the second. The parties argue about the first.

That gap is the source of most JV disputes we see. A reserved-matters list, a board-composition arrangement or a transfer restriction that appears only in the shareholders' agreement binds the parties contractually but does not stop a registrar acting on a properly executed filing. Where the constitutional documents can carry the protection, put it there. Where they cannot, build the contractual protection so that it can be enforced quickly — arbitration with a seat and rules the parties can actually use, and interim relief available before an award.

Minority protection in a mainland LLC starts from statutory rights to information and to challenge resolutions, and is built up from there through supermajority thresholds on defined matters, board representation, information undertakings, restrictions on related-party dealings, and anti-dilution mechanics on new issues. In a DIFC or ADGM JV the toolkit is the familiar English one and behaves accordingly.

Deadlock is where imported drafting fails hardest. Russian roulette and Texas shoot-out mechanics assume a transfer can be effected against a defaulting party. In a mainland LLC the transfer needs a notarised instrument and the authority's cooperation, and a shareholder who simply declines to attend the notary can stall the process for as long as it takes to obtain and enforce an order. If you want a self-executing exit mechanism onshore, the answer is an irrevocable power of attorney granted at the outset, held on defined terms, alongside a clean arbitration route. Drafted after the deadlock, it is worthless.

Earn-outs and deferred consideration, and why they are hard here

Earn-outs bridge a valuation gap by transferring the risk of future performance back to the seller. They rely on three things: an objectively determinable formula, reliable post-completion accounting, and a credible remedy if the buyer runs the business in a way that suppresses the number. In the UAE the first is manageable, the second is variable, and the third is weak.

The formula must be genuinely determinable from the agreement, not left to later agreement between the parties. Define the metric, the accounting policies used to produce it, the treatment of intra-group charges and allocations, and the mechanism for resolving a dispute over the calculation — ideally an expert determination with a named appointing body and a binding outcome.

The enforcement problem is evidential. Proving that a buyer diverted revenue to an affiliate, loaded the target with management charges, or delayed recognition into the following period requires access to the buyer's own records. Onshore procedure gives a claimant limited means of compelling that access, and while a good-faith obligation exists in principle, it is difficult to convert into a quantified award without the documents. An arbitral tribunal with document-production powers is a better forum, and choosing it is part of designing the earn-out rather than an afterthought.

Where the seller has no continuing operational role, the realistic alternatives are usually better: a lower headline price, a holdback released against defined milestones, deferred consideration secured by a bank guarantee or escrow, or an equity rollover that aligns the seller with the outcome directly. Where the seller does remain in management, tie protective operating covenants to the earn-out period and make them specific — no reorganisation of the earn-out business, no reallocation of customers, no change to the accounting policies used in the formula.

Post-completion: licence transfer and the first ninety days

Completion changes the register. It does not change the operating reality, and the work that follows is more than administrative housekeeping — a missed step here can suspend the business.

The sequence typically covers: amendment of the trade licence and commercial register entries; a new or updated immigration establishment card and labour establishment file, without which the target cannot process visas; bank mandate and signatory changes, which are slower than every deal timetable assumes and which can freeze payments; corporate tax and VAT registration and grouping consequences of the new ownership; re-recording of registered intellectual property in the correct name; land department and lease registration updates where property transferred; and re-registration or renegotiation of any commercial agency.

Two dates govern the plan. The trade licence renewal date is a hard deadline with penalties and, ultimately, suspension attached — completing shortly before a renewal window compresses everything. And any sector licence with its own renewal or reporting cycle needs to be met by an entity whose governance has just changed.

Where the target sat inside a seller group, add the transitional layer: shared IT systems, group insurance, group treasury, seconded personnel, shared premises. These are usually documented, if at all, in a transitional services agreement drafted in the final week. Draft it earlier, price it, and set a firm end date — transitional arrangements that drift become permanent dependencies on a party with no remaining interest in the business.

Where UAE M&A goes wrong

The failure modes repeat, and almost all of them are cheap to prevent at structuring stage and expensive to fix afterwards.

• Structure chosen before permissions are mapped. An asset purchase agreed on liability grounds, then discovered to require a licence the buyer does not hold and cannot obtain in the deal timetable — or a share purchase that inherits a regulatory breach the buyer has now paid for.
• Statutory pre-emption ignored. A mainland transfer negotiated without clearing existing shareholders' rights of first refusal, leaving a shareholder with a live challenge and a strong negotiating position after signing.
• The notarised instrument treated as a formality. Short-form Arabic transfer documents drafted by someone who has not read the SPA, and which say something different from it. The authority acts on the short form.
• Warranties relied on to recover a known exposure. A quantified problem left in the warranty package instead of the price, then pursued in a forum that will require proof of actual loss and may adjust the agreed figure to match it.
• W&I bought to cover what diligence found. Known issues are excluded. A policy taken out to paper over a thin diligence exercise reproduces the gaps in the diligence.
• End-of-service liability left as a warranty. A calculable, unfunded balance-sheet item treated as a risk allocation rather than a completion-accounts adjustment.
• Diligence conducted in English only. Arabic originals govern before onshore authorities and courts, and translation summaries prepared for the data room are not the documents.
• Merger control assessed late or not at all. The turnover-based threshold brought in by reform of the competition regime captures transactions that older practice assumed were outside it, and the regime is suspensory.
• Deadlock mechanics that cannot be executed. Shoot-out clauses copied from an English precedent into a mainland LLC, where a defaulting shareholder can stall the transfer by declining to attend the notary.
• Earn-outs without a document-production forum. A formula that depends on the buyer's records, and a dispute route that cannot compel the buyer to produce them.
• Legacy nominee arrangements discovered at signing. A local partner with an undocumented economic interest and a pledge over the interests, whose signature is now on the critical path.
• Post-completion filings treated as housekeeping. A lapsed establishment card or an unamended licence, and a business that cannot issue visas or renew.

Each of these is a decision taken early that only becomes visible under pressure. That asymmetry is the argument for corporate counsel at term-sheet stage rather than at signing.

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