Buying a company in the UAE

1.Before you commit

Buying an established business can provide access to customers, staff and existing contracts. Its value, however, depends on what you acquire, the obligations already attached to the business and the approvals needed to complete the purchase. These points should be established before paying a deposit. This guide focuses on private companies, particularly limited liability companies. Free-zone, licensing and regulated-sector requirements may differ.

2.Define what you are buying

A share purchase and an asset purchase have different consequences. In a share purchase, the company generally continues as the same legal entity. Its existing debts and obligations do not disappear when its owners change. That does not make the buyer personally liable without limit for every company debt, but those obligations can reduce the investment’s value.

An asset purchase should identify the equipment, stock, trade name and contracts included. The operating licence, premises lease and customer contracts do not necessarily transfer with the assets. Nor should an asset purchase be assumed to exclude every potential liability.

3.Look beyond the trade licence

Check the registration documents, constitutional documents and amendments, ownership records and the seller’s signing authority. Identify pledges, transfer restrictions, other partners’ rights and required approvals before fixing the completion date. For a limited liability company subject to federal company law, a stake transfer requires formal documentation and registration with the competent authority. A private agreement alone does not replace those steps.

Combine legal due diligence with financial and tax review. Bank debt, guarantees, employee entitlements, taxes, litigation, material contracts and related-party transactions may affect the price or purchase conditions. Obtain a written disclosure of obligations and reconcile it against supporting records.

4.Turn findings into contractual protection

A discovered problem should influence the deal, rather than simply appear in a report. Consider debt settlement, a price adjustment, retention of part of the purchase price or a specific seller indemnity. Define payment-release conditions, liability limits and periods, disclosed exceptions and the process for making a claim. Consider whether the seller will have sufficient assets or security to meet an obligation after completion.

Where business continuity depends on a bank, landlord, key customer or regulator, make any necessary consent a condition of completion. Assess whether competition approval is required for the particular transaction.

5.Prepare the completion documents

• Registration and ownership documents, signing authority and transfer restrictions.
• Financial statements, debts, guarantees and a schedule of disputes.
• Material contracts and necessary ownership-change or transfer consents.
• The purchase agreement, payment schedule and documented handover of records and access.

6.Hypothetical example

A buyer values a services company largely on revenue from one major customer. That customer’s contract allows termination following a change of control. The expected revenue may therefore be at risk. Reviewing the clause and obtaining any necessary consent before completion could change both the purchase decision and the price.

7.Your next step

Review the transaction structure and refund conditions before paying a non-refundable deposit. Dr. Bahrami’s office can be contacted for legal advice on the proposed purchase and supporting documents.