The Legal Framework for Mergers and Acquisitions in the United Arab Emirates

The United Arab Emirates (UAE) has firmly established itself as a pivotal hub for Mergers and Acquisitions (M&A) within the Middle East and North Africa (MENA) region. This robust growth trajectory persists despite global economic fluctuations, driven by a confluence of substantial capital market reforms, strategic policy shifts, and proactive initiatives aimed at attracting foreign investment.

The consistent increase in M&A activity underscores the UAE’s distinctive and resilient position in the global deal-making landscape. Navigating this dynamic environment, however, necessitates a profound understanding of the intricate legal and regulatory frameworks that govern these transactions. Adherence to these evolving legal provisions is not merely a formality; it is paramount for successful deal execution, effective risk mitigation, and fostering long-term business growth.

Foundational Legal Frameworks for M&A

The legal landscape governing M&A in the UAE is anchored by several foundational federal laws, alongside specific regulations within its free zones.

Federal Decree-Law No. 32 of 2021 on Commercial Companies

The Federal Decree-Law No. 32 of 2021 on Commercial Companies (CCL), which came into effect on January 1, 2022, serves as the primary legislation governing the formation, management, and dissolution of commercial companies in the UAE mainland. Key provisions include the ability for companies to operate with a single shareholder and the elimination of restrictions on foreign ownership in various sectors, thereby enhancing flexibility and attractiveness for investors. The Commercial Companies Law also introduced new corporate vehicles, such as Special Purpose Acquisition Vehicles (SPACs) and Special Purpose Vehicles (SPVs). While the Law provides provisions for statutory mergers, such as amalgamation (two companies merging into a new entity) and absorption (one company merging into another existing entity), these methods are less commonly utilized for private M&A due to their inherent complexity and a relative lack of legal precedent.

Nonetheless, the comprehensive regulations on company formation, shares, ownership rights, and corporate restructuring form the bedrock for all M&A activities in the UAE mainland. The introduction of the Commercial Companies Law, with its provisions for single shareholders and relaxed foreign ownership restrictions, represents a deliberate and significant legislative effort to modernize the corporate environment. This directly supports and facilitates M&A activity by simplifying corporate structures and making the UAE a more appealing destination for foreign investors.

Federal Law No. 5 of 1985 (Civil Transactions Law)

Federal Law No. 5 of 1985, commonly known as the Civil Transactions Law, provides a comprehensive framework for civil transactions across the UAE. This foundational law is crucial for ensuring legal certainty and protecting rights and obligations in civil matters, including those underlying M&A agreements. It meticulously defines what constitutes a valid contract, emphasizing key elements such as mutual consent, a lawful purpose, and a specified cause. The law underscores the importance of good faith and equality in contractual agreements, ensuring that all parties enter into agreements voluntarily and without coercion. Furthermore, it includes provisions related to ‘force majeure’, offering relief from contractual obligations in unforeseen circumstances beyond a party’s control. This robust framework for contractual obligations plays an indispensable role in the stability and growth of the UAE’s economy.

Competition Law and Merger Control

The UAE has undertaken significant reforms to its competition law framework, culminating in Federal Decree-Law No. 36 of 2023 Regulating Competition (“New Competition Law”). Key implementing provisions, detailed in Cabinet Ministerial Decree No. 3 of 2025, became effective on March 31, 2025. These reforms introduce a mandatory, suspensory, and pre-closing merger control regime, marking a substantial shift from previous regulations. Under this new regime, any transaction constituting an “Economic Concentration” must be notified to the UAE Ministry of Economy (MoE) if certain thresholds are met.

This evolution demonstrates the UAE’s dual objective: remaining highly attractive for investment while simultaneously establishing robust mechanisms to ensure fair competition and prevent market monopolization. This aligns the UAE’s practices more closely with international competition law standards. For dealmakers, this increased scrutiny necessitates incorporating antitrust risk assessments much earlier in the transaction process. The stringent timelines and potential for automatic rejection also mean that careful planning and specialized legal counsel are critical to navigate these complexities, particularly for foreign-to-foreign transactions that may have a nexus to the UAE market.

Sector-Specific Regulatory Approvals

Beyond the general commercial and competition laws, M&A transactions in specific sectors in the UAE are subject to additional regulatory oversight and approval requirements.

Central Bank of the UAE (CBUAE)

The Central Bank of the UAE (CBUAE) plays a critical role in regulating M&A activities involving banks and other financial institutions operating in the UAE. Its “Major Acquisitions Regulation” mandates prior written approval from the CBUAE for any bank seeking to acquire another institution or transfer liabilities.

Securities and Commodities Authority (SCA)

The Securities and Commodities Authority (SCA) oversees M&A involving public companies and various financial services firms dealing in securities, commodities, and markets. The SCA has detailed guidelines and requirements for public company takeovers and acquisitions, including mandatory takeover rules that apply to acquisitions exceeding threshold of a listed entity. The specific approval or notification requirements vary depending on the type of financial services firm involved. The SCA also emphasizes robust internal control over financial reporting (ICFR) and risk management, promoting transparency and accountability in financial markets.

Insurance Authority

For the insurance sector, the Insurance Authority requires notification for changes in control concerning UAE branches of non-UAE insurers. It is advisable to verify specific requirements in such cases.

Free Zones: DIFC and ADGM

The UAE hosts several free zones, with the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) standing out as premier financial free zones. These jurisdictions operate under their own distinct and robust legal and regulatory frameworks, which are largely based on common law principles, often drawing from English law. This provides a familiar and secure platform for international businesses, making them particularly attractive for complex financial transactions. The DIFC boasts a comprehensive legal database, including its own Companies Law (DIFC Law No. 5 of 2018) and other specialized legislation governing contracts, data protection, and financial services. Similarly, the ADGM operates under a comprehensive set of regulations, including Commercial, Financial Services, and Courts Regulations and Rules.

The distinct legal and regulatory environments of DIFC and ADGM, characterized by their common law foundations and independent regulators, offer a familiar and robust platform for international businesses. This makes them preferred jurisdictions for complex financial transactions and M&A involving global entities, providing a level of legal certainty and regulatory sophistication that resonates with international investors.

Key Aspects Of M&A Transactions

Successful M&A transactions in the UAE involve navigating various structural, due diligence, contractual, and regulatory considerations.

Common Deal Structures

In the UAE, M&A transactions are typically structured as either a share purchase or an asset purchase.11 Share purchases are generally more common, especially for private companies. While statutory mergers (amalgamation or absorption) are provided for under the UAE Commercial Companies Law, they are less frequently used for private M&A due to their complexity and limited legal precedent, though they are increasingly seen in restructuring contexts.

Due Diligence

Due diligence is an indispensable cornerstone of any M&A transaction, serving as a critical compass for both buyers and sellers. It involves a meticulous and systematic investigation to verify information, identify potential risks, uncover hidden liabilities, and assess opportunities, thereby enabling informed decision-making and accurate valuation. The scope of due diligence typically encompasses:

• Corporate: Review of constitutional documents, filings, licenses, and registers.
• Financial: Examination of financial statements, performance, valuation, security over the target entity, and indebtedness.
• Legal: Critical review of legal structure, corporate governance, material contracts, compliance with labor laws, and identification of litigation risks.
• Operational: Evaluation of supply chain, internal controls, IT systems, and customer relationships to identify inefficiencies and synergies.
• Commercial: Analysis of key customer and supplier contracts, particularly agency or distributor arrangements, and change of control provisions.
• Intellectual Property (IP): Comprehensive analysis of registered and unregistered IP and ownership status, including dependency on third-party licenses and IP provisions in employment contracts.
• Employment: Assessment of contractual arrangements with employees and contractors, compliance with statutory rights, and identification of potential loopholes.
• Property: Scrutiny of properties leased or owned by the target entity, including lease expiration dates and terms.
• Regulatory: Examination of regulatory requirements, licenses, and consents, with recommendations for necessary updates.

Key Transaction Documents And Contractual Considerations

A well-structured Sale and Purchase Agreement (SPA) is central to successful M&A transactions, providing operational and legal clarity. It identifies parties, defines the purchase price and payment terms, sets out closing conditions, and includes termination provisions.

The SPA clarifies which assets and liabilities are part of the sale and distributes risk between buyer and seller through representations and warranties, thereby mitigating post-transaction disputes. It also typically includes provisions governing the post-acquisition relationship, such as transitional support. While an SPA can be drafted in any language, English is most common, and for onshore LLCs, a separate short-form Arabic share transfer agreement, attested by a sworn translator, is required for title transfer.

Other contractual considerations include:

• Confidentiality: The UAE generally does not imply confidentiality obligations into contracts, making formal confidentiality agreements crucial. The UAE Penal Code also outlines criminal offenses for breaches of confidentiality.
• Liquidated Damages: While permissible, UAE courts retain the power to vary liquidated damages clauses to reflect the actual loss incurred, overriding pre-agreed amounts.
• Exclusivity Arrangements: The formalities for binding exclusivity agreements are generally similar to those for any other contract.
• Heads of Agreement: For these preliminary documents to be binding, they must clearly state such intent and define essential terms with sufficient certainty.
• Dispute Resolution: Including an arbitration clause is often advisable to specify a familiar jurisdiction for dispute resolution.

Tax Implications

The introduction of a federal corporate tax in June 2023 has significantly impacted M&A transactions, as tax implications are now a crucial factor in acquisition planning. Specialist tax advice has become a necessary component for M&A deals in the UAE. The UAE imposes no withholding tax on dividends, interest, or royalties, which supports cashflow efficiency for cross-border groups.

Employee Transfer

A key consideration in M&A, particularly in asset sales, is the transfer of employees. Under UAE law, employees are not automatically transferred. Instead, they must be formally terminated by the transferor and subsequently re-hired by the transferee. This process accrues end-of-service benefits upon termination, requiring agreement with employees regarding the transfer of these benefits. In share sales, employment generally continues with the target company, but it is crucial to review visa statuses and employment terms for compliance and potential changes.

Ultimate Beneficial Ownership (UBO) and KYC Requirements

The identification of the Ultimate Beneficial Owner (UBO) has gained significant relevance in M&A transactions. UAE regulations define a UBO as an individual who directly or indirectly owns or controls 25% or more of a company’s shares/voting rights or has the right to appoint/dismiss the majority of its directors. UBOs must be disclosed to the authorities upon incorporation or changes in shareholding. Regulatory authorities have also placed considerable emphasis on enforcing mandatory Know-Your-Customer (KYC) requirements.

Key Regulatory Bodies in UAE M&A

Some of the key governmental and regulatory bodies in the UAE include:

• Ministry of Economy (MoE)
• Central Bank of the UAE (CBUAE)
• Securities and Commodities Authority (SCA)
• Dubai International Financial Centre (DIFC) Authority / Dubai Financial Services Authority (DFSA)
• Abu Dhabi Global Market (ADGM) / Financial Services Regulatory Authority (FSRA)
• Department of Economic Development (DED) (Emirate-level)

Conclusion

The UAE’s M&A landscape is characterized by dynamic growth, strategic intent, and an increasingly sophisticated legal and regulatory environment. The nation’s resilience in deal-making, even amidst global economic headwinds, is a testament to its proactive government policies, substantial capital market reforms, and the strategic deployment of sovereign wealth funds aimed at economic diversification. This concerted effort is reshaping the UAE economy, driving investments into high-growth sectors such as technology, AI, and green energy, while simultaneously fostering deeper regional and global integration. The modernization of foundational corporate laws has enhanced flexibility and attractiveness for investors by simplifying ownership structures. Concurrently, the recent reforms in competition law, introducing a new turnover-based merger control threshold, signal a maturing regulatory approach that balances investment attraction with the imperative of ensuring fair competition. This evolution brings the UAE’s regulatory practices closer to international standards, albeit introducing new complexities and necessitating earlier and more thorough antitrust assessments for dealmakers. For entities contemplating M&A in the UAE, success will hinge on thorough due diligence, early engagement with specialized legal and regulatory counsel, and a comprehensive understanding of this rapidly evolving and multifaceted legal landscape.