Laws governing mergers and acquisitions in UAE

 

“Mergers generate substantial synergies”- Roger Altman. 

A merger happens when two companies get together to form a new company, and acquisition happens when acquiring company takes over the majority stake in the acquired company & continues with its prior existence.

Mergers and acquisitions can help you realize economies of scale, reduce the cost of production, increase market share, reduce competition, multiply financial resources, access new markets, and ensure sustainability. UAE laws have provisions regarding the procedure of merger and acquisition which our top lawyers in Dubai suggest keeping in mind. The laws are as follows:

1.     For public joint stock companies: 

Regulatory Framework: Decision of the Chairman of the Securities and Commodities Authority (SCA) Board of Directors No. 18/R.M of 2017 and 

Rules for technical requirements: Decision No. 62/R.T of 2017.

For initial approval, the board of directors of the merging companies must issue a resolution. The initial approval has to be taken from the Department of Economic Development, the Central Bank, the Insurance Authority, and licensing bodies.

A ‘merge contract’ shall be drafted, and it should include MOA, name & address of the chairman & members of the new company, consideration (and date) paid to partners and shareholders for transferring their respective shares, and formation of the ‘merger committee’ for completion of the whole merging process.

2.     For other companies: The Commercial Companies Law No. 32 of 2021; Article 285-293

The merger must be in accordance with the provisions of this decree-law, subject to the applicable rules of the Central Bank. The merger contract has to be issued by the general assembly of the ‘seeking company’, and all the merging companies also have to draft a merger contract for giving effect to the amendment of the Memorandum of association of the company. According to article 286, the merger contract should contain:

1. The Memorandum of Association and Statute of the merging Company or the new Company after the merger;
2. The name & address of each Board Member or the proposed manager of the merging Company or the new Company.
3. The method of conversion of the shares or interests of the merged companies into shares or interests of the merging Company or the new Company.

In case the merger has been objected to by shareholders having at least 20% of company capital, the merger contract must contain the rights of those persons to file an appeal within 30 days of approval of the contract. As mentioned under Article 291, the merger shall remain stayed unless the objection is waived or the Court rejects the objection by passing a final judgment, or the Company pays the debt if urgent or provides certain sufficient securities in case of deferred payment.

Conclusion

Mergers and acquisitions involve many technical steps and contractual drafting. BSB Legal Consultants has a separate enthusiastic team of experienced lawyers providing legal services for mergers and acquisitions. Our skilled corporate lawyers will assist in the drafting of an effective merger contract and perform due diligence.

For more information contact info@bsb.legal or call at +971 508014003, we are happy to help!