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Laws in the UAE Regulating Mergers & Acquisitions

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Looking to grow and expand your business in the UAE through an acquisition or merger? Merger and acquisition (M&A) are a popular method of business expansion used since the beginning of trade and commerce around the world. It is a key strategy in which a company transfers and merges with some other company or purchases a smaller company in order to form one larger entity. Although mergers and acquisitions are primarily utilized by businesses to eliminate competition and boost market share, they also have a considerable impact on the business environments of the nations where these transactions are completed, and the business is functioning. As a result of these factors, the M&A process is complex, and the regulations differ from one nation to the next. Get professional help from an experienced mergers & acquisitions advisory to know more about the M&A laws in the UAE.

A Brief on the Mergers & Acquisitions Advisory & Its Regulations in the UAE

The Merger and Acquisitions across the UAE have transformed it into an enticing business market for domestic organizations seeking business expansion and international organizations seeking foreign investment in the UAE's mainland. The following laws govern Mergers and Acquisitions deals in the UAE as suggested by the best mergers & acquisitions advisory. They are:

  • UAE Labour Law,1980
  • Federal Commercial Companies Law,1984
  • Consumer Protection Law 2006
  • Competition Law of 2012

All About UAE Labour Law & Federal Commercial Companies Law

Acquisition and merger are business transactions where the end stakeholders will be affected by the trade. They include the workers in the acquired or merged entities. The UAE Labour Laws are keen to monitor and control M&A deals without impacting the duties of employees who are influenced by these deals. According to UAE Labour Law, a worker who has completed a year or more of service is obligated to an end-of-service gratuity at the final stage of employment. The gratuity for the end of service can be two times an owner's yearly salary, based on the duration of service. The purchaser should make sure that the buying price includes any such liabilities incurred by the target as of the acquisition date. To know more about UAE labor law, seek guidance from a professional mergers & acquisitions advisory service.

Mergers and Amalgamations are covered in Articles 276 to 280 of the Commercial Company Law as per the Amalgamation. As per the act, a company may be merged with some other company of a similar or different kind. The following methods of Amalgamation shall be used.

  • By merger, the termination of a group of companies and the exchange of their obligations are done to an existing business.
  • By consolidation, the dissipation of a group of companies and the introduction of a new business can transfer all the liabilities of the dissolved businesses.

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The Act also states that the M&A transaction will be considered effective for 3 months after the Register of Commerce receives the notification. The rule has provided creditors a significant stake in the review procedure, and if they document a complaint in less than 3 months, the merger and acquisition process will be suspended when any abuse or violation is found on credible and valid grounds.

Concerning M&A transactions involving publicly traded companies, the act has detailed procedures to follow, which primarily require the approval of the SCA (Securities and Commodities Authority). After approval is given through separate regulations, the public-listed companies that the government wholly owns will begin M&A proceedings.

Another crucial component of the CCL act on acquisitions and mergers is the Foreign Investment Restriction offered in the act's Foreign Investment regulations. The law required that, following an acquisition or merger, 51% of a company's shares be possessed by a UAE individual, with the rest 49% owned by a foreign shareholder. However, the ownership restriction does not apply to FTZs.

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Learn What Mergers & Acquisitions Advisory Has to Say About Consumer Protection & Competition Law

The Consumer Protection Law implementing regulations are more specific about business actions that elevate prices. As per the mergers & acquisitions advisory, the consumer protection law empowers authorities to evaluate whether a business entity's actions have led to an abnormal cost rise. It also forbids the illegal formation of monopolies. Competition law is unquestionably crucial in maintaining a fair market that adheres to the process throughout transactions.

Until the Competition Act was passed, the Federal Commercial Company was the UAE's primary regulator of M&A transactions. With the passage of the Competition Law, people shifted their focus to market behaviour, specifically the misuse of a dominant position, regulation of agreements and merger control.

The important provisions in the act that affects M&A transactions is the Mandatory Merger Control Filing Requirement. It specifies filing as well as the suspension of transactions with pending clearance. UAE merger control analysis must now be considered when planning domestic or international mergers. As per the act, applications for mergers and exemption approvals must be submitted to the UAE's competition department.

The Department will review the application in order to issue a recommendation to the Minister of Economy of the UAE. The Minister will either reject or approve the application. Regarding timeliness, the Minister should issue a decision within ninety days of informing the parties concerned of the application's receipt, though this time frame may be prolonged by forty five days.

Also Read : What Is A Joint Venture & Who Really Benefits from It?

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Acquisitions and mergers have unquestionably become the corporate world's buzzword as a tool for global business consolidation and expansion. The potential for business expansion, simultaneous margin expansion, and skyrocketing shareholder value has enticed corporate entities worldwide to engage in M&A activity. The statutory mechanism governing acquisitions and mergers varies by country, depending on the company's existing legislative policies. Given the enormous potential impact of Mergers and Acquisitions on the business contexts of countries worldwide, they have been governed and executed under these countries' regulatory and statutory supervision.

Looking at the relevant statutory mechanisms governing Merger and Acquisition transactions in the UAE, it is possible to conclude that, despite a blatant surge in business consolidation practices in the form of Acquisitions and Mergers around the world, the presence of strong regulatory mechanisms such as the Competition Act in the United Arab Emirates has significantly secured the business operations from all sorts of anti-competitive corporate practices. Instead, they have helped shape the UAE's environment into a more competitive and stimulating market controlled by economic stability doctrines. Contact Fortius Consulting Services, one of the best business consulting services, if you want to learn in detail about acquisitions and mergers in the UAE.

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