An M&A transaction in the UAE requires submitting a corresponding request to the relevant ministry. This applies to transactions that:
- lead to acquiring (directly or indirectly; wholly or partially) stakes, assets, or liabilities of other entities;
- create or strengthen a dominant position;
- are capable of affecting the level of competition in a particular market.
Concluding an M&A deal in the UAE capable of restricting competition is prohibited. Those looking to initiate an M&A process in the UAE should keep in mind market share thresholds, namely:
- prohibition of restrictive agreements & abuse of a dominant position;
- merger control rules;
- criteria for identifying SMS enterprises.
Conducting an M&A transaction in the UAE requires compliance with a market share threshold (forty percent of the total number of transactions). Please note that some companies are exempted from this requirement. They include:
- entities/businesses owned or controlled by the federal government or governments of emirates;
- companies rendering financial services in the UAE, telecommunication companies, pharmaceutical companies, oil & gas companies, postal services providers, electricity & water providers, waste disposal companies, shipping companies & railway operators;
- registration of an SME in the UAE (applies to entities operating in trade, industry & services industries).
Criteria for being considered an SME include:
- having two hundred or fewer employees;
- having an annual income of no more than fifty four million dollars.
For industrial sectors these criteria are two hundred fifty & sixty eight million dollars respectively.
Obtaining a banking license in the UAE & acquiring a stake exceeding five percent by banks requires getting approval from the Central Bank.
In cases of "economic concentration", special permission may be required . "Economic concentration" refers to the full or partial transfer of shares of an Arab company which results in the establishment of direct or indirect control over it.
An organization seeking tax exemption must provide copies of its founding documents & financial statements (for the last two fiscal years). In addition, it must provide reasons for requesting an exemption. All documents must be translated into Arabic. Additional documents & information may be requested during the review of an application.
The UAE's regulatory regime doesn’t set any specific deadlines or FDI transactions in the UAE. Approval from the Ministry is normally received within three months (it can be four months if additional information is required). If no decision is made by the specified deadline, a transaction is considered approved.
Violations & Penalties
Initiating an M&A transaction in the UAE requires obtaining a permit. Penalties for non-compliance include:
- fines for concluding restrictive agreements or abuse of dominant market position (in excess of one hundred thousand dollars);
- fines for failure to notify a transaction (from two to five p[ercent of the violatorr's annual income).
Offenders may be ordered to cease their operations for three to six months.
Conducting an FDI transaction in the UAE requires no formal authorization. However, it’s common practice to obtain informal pre-approval for any transaction requiring government approval. Filing a formal application is normally preceded by informal consultations with authorities regarding an upcoming transaction. During the consultations, foreign investors are informally notified of specific aspects of the deal, potential issues connected to national security or any other issues that may lead to non-approval of the deal.
Looking to invest in a business in the UAE? Need advice on the regulation of investment activities in the UAE? Why not contact IQ Decision UK?