Kadernani & CompanyBuying an established business in Dubai can offer something a new venture cannot: immediate access to customers, employees, licences, premises, supplier relationships and revenue.
That can make an acquisition considerably faster than building the same operation from the ground up.
It can also mean buying several years of someone else's legal and commercial history.
A profitable business may carry unresolved tax positions, undocumented related-party arrangements, employee liabilities, licence issues, shareholder disputes, customer contracts that terminate on a change of control or financing that becomes repayable when ownership changes.
The real question when buying an existing business in Dubai is therefore not simply:
“Is this a good business?”
It is:
“What exactly am I buying, which liabilities come with it, and what will remain legally and commercially intact after closing?”
For investors, family offices, corporate acquirers and overseas groups entering the UAE, that question should drive the structure, due diligence, purchase agreement and closing process from the beginning.
A successful acquisition is not simply one in which the share transfer is registered.
It is one in which the buyer receives the business it thought it was buying, with the licences, people, contracts, assets and operating capability required to produce the expected value after completion.
Start With the Deal Structure, Not the Price
Most acquisitions begin with valuation.
The seller says the business is worth AED 50 million.
The buyer believes it is worth AED 40 million.
The parties begin negotiating somewhere in between.
The more important legal question comes first:
What is being acquired?
There are two broad possibilities.
The buyer can acquire the shares or ownership interests in the company.
Or it can acquire selected assets and business operations.
The economic result can look similar.
The legal consequences are very different.
The decision should therefore be made before the price and transaction timetable become fixed.
A Share Purchase Buys the Company With Its History
In a share acquisition, the company itself generally continues to exist.
The buyer acquires ownership of that legal entity.
Its contracts remain its contracts.
Its employees remain employed by it.
Its licences remain held by it, subject to any ownership-change approvals.
Its receivables remain its receivables.
Its bank accounts remain its bank accounts.
Its historical tax filings, disputes, warranties given to customers and potential liabilities also remain with it.
That continuity is often one of the strongest reasons to acquire shares.
A buyer may be purchasing a business precisely because it already has:
customer contracts;
regulatory permissions;
experienced staff;
a recognised trading history;
banking relationships;
leases;
supplier arrangements;
and
commercial goodwill.
Recreating those relationships in a new company may take months or may not be possible on equivalent terms.
The trade-off is straightforward.
The buyer receives the legal continuity of the company.
It also receives the company's history.
Due diligence and contractual protection therefore become particularly important.
Historic Liabilities Do Not Disappear When the Shares Change Hands
This point is sometimes misunderstood.
Suppose the target underpaid an employee two years before the acquisition.
Or filed an incorrect VAT return.
Or breached a customer's contract.
Or received a regulatory warning.
The legal entity responsible remains the same entity after the buyer acquires it.
Changing shareholders does not ordinarily erase those obligations.
The buyer may have contractual recourse against the seller under the SPA.
That is different from saying the underlying company liability disappeared.
The acquisition agreement therefore allocates risk between buyer and seller.
It does not rewrite the rights of tax authorities, employees, customers, regulators or other third parties merely because ownership changed.
This is why warranties and indemnities matter.
But it is also why the buyer should understand the company's history before deciding which risks it is prepared to inherit economically.
An Asset Purchase Can Be More Selective
An asset transaction works differently.
Instead of buying the company, the purchaser acquires specified parts of the business.
These might include:
inventory;
equipment;
intellectual property;
customer contracts;
a brand;
receivables;
a business line;
technology;
real property interests;
or
other agreed assets.
The buyer may be able to leave unwanted liabilities behind with the seller.
That can make an asset deal attractive where the existing company contains significant historical risk.
But the separation comes at a price.
Assets and relationships may need to be transferred one by one.
Contracts may require assignment consent.
Employees may need new employment arrangements.
Licences may need to be reissued.
A landlord may need to approve assignment of the lease.
Government permits may be tied to the seller.
Banking relationships may not transfer.
Customer data may need lawful migration.
Intellectual-property registrations may need formal assignment.
An asset deal therefore gives the buyer greater ability to choose what it acquires, but it can require considerably more work to recreate operational continuity.
The Right Structure Depends on What Creates the Business's Value
The buyer should identify what it is really paying for.
If most of the value lies in a regulator-issued licence that cannot easily be transferred, a share acquisition may be the more practical route.
If the value lies principally in equipment, inventory and intellectual property while the company itself has serious historical liabilities, an asset acquisition may be more attractive.
If the customer contracts contain change-of-control clauses, a share acquisition may still require consents.
If the customer contracts prohibit assignment, an asset deal may be difficult.
If the workforce is central to the business, employment transition becomes critical.
If the principal asset is real estate, DLD and property-transfer rules may dominate the transaction.
The legal structure should therefore follow the value drivers.
It should not simply follow the seller's preferred tax or exit structure.
Do Not Assume the Seller's Preferred Structure Is Also Best for the Buyer
Seller and buyer incentives frequently differ.
A seller may prefer a share sale because it allows a clean exit from the company.
It may also produce a more favourable Corporate Tax result where the conditions for Participation Exemption are satisfied.
The buyer may prefer an asset deal because it wants greater control over which liabilities it assumes.
Neither preference is inherently unreasonable.
The structure should be negotiated.
Where the seller insists on a share sale, the buyer may respond with stronger:
warranties;
tax protections;
specific indemnities;
escrow;
retentions;
or
price adjustments.
Where the buyer insists on an asset deal, it should recognise that the seller may require a different price to account for tax, transfer and residual-liability consequences.
Structure and price are connected.
They should be negotiated together.
The Jurisdiction of the Target Matters Immediately
A Dubai business may be:
a mainland LLC;
a free-zone company;
a DIFC entity;
an ADGM entity within a wider UAE group;
or
part of a foreign structure with a UAE branch.
Those entities do not use identical transfer processes.
The competent authority, constitutional documents, regulatory approvals and registration requirements differ.
A broker saying:
“This is a Dubai company and the shares can be transferred quickly”
is not enough.
The buyer should identify the exact legal entity.
That means obtaining the current:
trade licence;
commercial registration;
Memorandum or Articles;
shareholder records;
manager or director information;
and
licensing authority details.
Only then can the transfer mechanics be mapped accurately.
Mainland LLC Share Transfers Have a Statutory Process
A mainland LLC acquisition deserves particular care.
Under the UAE Commercial Companies Law, an ownership interest can be transferred to another partner or to a third party, subject to the company's MOA and the statutory requirements.
The transfer must be made through the required formal instrument and becomes effective against the company and third parties when it is recorded in the commercial register with the competent authority.
This means a signed SPA is not the final legal transfer.
The agreement creates contractual obligations between the buyer and seller.
The corporate transfer must still be implemented.
That distinction should be reflected in the SPA.
Signing and legal completion may be separate events.
Existing LLC Partners Can Have a 30-Day Redemption Right
Where an LLC partner proposes to transfer an interest to someone who is not already a partner, Article 80 of the Commercial Companies Law becomes particularly important.
The selling partner must notify the other partners, through the manager, of the proposed purchaser and the terms of the transaction.
The other partners generally have 30 days from the relevant notification to exercise the statutory redemption right over the interest.
If several partners exercise that right, the interest is allocated according to the applicable statutory mechanism.
Only once that process has been dealt with can the buyer safely assume that the seller is free to transfer the interest to the external purchaser.
This can materially affect transaction timing.
A buyer should therefore identify statutory and contractual pre-emption rights before agreeing an unrealistic closing date.
Contractual Transfer Restrictions Can Add Another Layer
The statutory process is only one part of the transfer analysis.
The MOA, shareholder agreement or investment documents may contain additional restrictions.
These can include:
rights of first refusal;
rights of first offer;
consent requirements;
lock-up periods;
tag-along rights;
drag-along rights;
permitted-transfer provisions;
and
restrictions on transfers to competitors.
The buyer should identify all of them.
A shareholder cannot necessarily deliver clean title merely because its name appears on the commercial licence.
The shares may be legally owned by the seller while still being subject to contractual rights in favour of others.
Those rights should be resolved as conditions to completion.
The 2025 Companies Law Changes Make Share-Class Due Diligence More Important
The UAE corporate framework became more flexible through Federal Decree-Law No. 20 of 2025, which amended the Commercial Companies Law.
Among the important developments is greater flexibility concerning different classes of LLC ownership interests, subject to the applicable regulatory framework.
For an acquirer, that means percentage ownership may no longer tell the complete story.
A buyer acquiring 60% of the target should establish:
which class of interests it is acquiring;
what voting rights attach;
what economic rights attach;
whether another class has preferential distributions;
whether redemption rights exist;
what happens on liquidation;
and
whether any class carries enhanced control rights.
A majority percentage can be much less valuable than it appears if another investor holds unusual constitutional rights.
The cap table should therefore include rights, not merely percentages.
Management Control Should Be Reviewed Separately From Ownership
A buyer can acquire the majority of a company and still fail to obtain practical control on day one.
The existing manager may remain registered.
A former shareholder may retain a broad power of attorney.
Bank accounts may require the former owner's signature.
Government portals may be linked to the seller's mobile number.
The accounting system may be accessible only through credentials controlled by the previous finance team.
Key customer relationships may still be managed personally by the founder.
Ownership and control are connected.
They are not identical.
The buyer should map both.
Powers of Attorney Need Special Attention
A due-diligence review should identify all active powers of attorney issued by the company or its shareholders.
Those instruments may authorise individuals to:
sign contracts;
operate bank accounts;
deal with government authorities;
sell assets;
represent the company in litigation;
or
delegate authority further.
Completion should address which powers remain appropriate.
A buyer should not acquire the company while leaving a former executive with broad authority to dispose of company assets.
Revocation may require formal steps.
Those steps belong on the closing checklist.
Share Pledges and Security Can Prevent a Clean Transfer
The buyer should also establish whether the shares or ownership interests have been pledged.
A lender may have security over the seller's interest.
The company's own assets may be mortgaged or pledged.
Bank facilities may contain restrictions on changes of ownership.
A share acquisition that technically transfers ownership while simultaneously triggering a financing default is not a successful closing.
Security documentation and finance agreements therefore need to be reviewed before completion.
Where lender consent or release is required, it should ordinarily be a condition precedent rather than an informal post-closing promise.
Ultimate Beneficial Ownership Must Be Updated
A share acquisition also changes the company's ownership records.
Under the UAE beneficial-ownership framework, the company must maintain accurate information concerning its partners, shareholders and Real Beneficiaries.
A change of ownership cannot simply be registered without addressing whether the transfer changes the company's ultimate beneficial ownership.
Relevant registers and information generally need to be updated within 15 days of the company becoming aware of the change, in accordance with the applicable framework.
This should be treated as a completion workstream.
The buyer should be ready with:
ownership charts;
passport or corporate information;
control details;
and
supporting documents concerning the new ultimate beneficial owners.
UBO compliance should not be discovered only when the licensing authority refuses to process the transfer.
Regulatory Approval Can Be More Important Than Corporate Approval
Buying a company operating in a regulated sector is not the same as buying an ordinary trading business.
Depending on the activity, a change in ownership or control may require approval from the relevant regulator.
This can arise in sectors such as:
financial services;
insurance;
healthcare;
education;
virtual assets;
transport;
telecommunications;
professional services;
and
strategic-impact activities.
The approval may concern the buyer itself.
The regulator may examine:
ultimate shareholders;
financial resources;
directors;
management;
fitness and propriety;
experience;
or
the source of acquisition funds.
A buyer should not become unconditionally obliged to complete until required regulatory approvals have been identified and, where necessary, obtained.
A Trade Licence Does Not Prove the Business Is Operating Within Its Licence
Licensing diligence should go beyond confirming that a licence exists.
The legal team should compare the activities shown on the licence with the business the company actually conducts.
A target may have expanded organically.
It may now provide services never added formally to its licence.
It may operate from premises not approved for a particular activity.
It may advertise services that require another permit.
It may rely on a professional approval that belongs personally to a founder who will leave after closing.
The buyer should understand whether the business can lawfully continue after the seller leaves.
That is different from simply confirming that it has operated historically.
Regulatory Correspondence Should Be Reviewed
Regulated and semi-regulated businesses may have received:
inspection reports;
warnings;
requests for remediation;
fines;
licence conditions;
or
regulator correspondence.
These documents should form part of due diligence.
A valid licence can coexist with a material unresolved compliance problem.
The buyer should know whether the regulator has already identified weaknesses likely to require expenditure after completion.
The purchase price and warranties should reflect that risk.
Competition Clearance Should Be Screened Early
Larger acquisitions now require careful consideration of the UAE merger-control regime.
Under the current Competition Law framework, an acquisition can require notification if either of two alternative thresholds is met.
The first is where the relevant undertakings' combined annual UAE sales value in the relevant market exceeds AED 300 million during the preceding financial year.
The second is where their combined share exceeds 40% of total transactions in the relevant UAE market during that period.
These are alternative tests.
A transaction does not need to satisfy both.
This should be screened early, particularly where a strategic buyer is acquiring one of its competitors.
The Competition Filing Must Precede Completion
Where notification is required, the transaction cannot simply close first and be explained later.
The Competition Law requires the application to be submitted at least 90 days before completion.
The Ministry's substantive review period is also significant.
The decision period can run for 90 days after receipt of a complete application and may be extended for a further 45 days.
The SPA should therefore contain:
a competition condition precedent;
appropriate cooperation obligations;
a realistic long-stop date;
and
rules governing the business during the review period.
An agreement requiring completion within four weeks makes little sense if mandatory competition clearance makes that legally impossible.
The Purchaser Has the Filing Responsibility in an Acquisition
The 2026 Executive Regulations clarify procedural responsibility.
For an acquisition, the economic-concentration application is submitted by the acquiring undertaking or its properly authorised legal representative.
This should be reflected in transaction planning.
The seller will still need to provide significant information.
But the buyer should take control of the filing strategy, market analysis and timetable.
The parties should also agree how they will address information that either regards as commercially sensitive.
Competition filings may require detailed information concerning market activity, competitors, sales and other transactions.
Confidentiality planning matters, particularly where buyer and target compete before completion.
Do Not Integrate Competitors Before Clearance
Where the purchaser and target are competitors, pre-closing conduct deserves care.
The buyer understandably wants to prepare for day one.
It may request pricing, customer, pipeline and strategy information.
Some information may be necessary for diligence and integration planning.
That does not mean the businesses have already become one company.
Until completion, they remain separate economic actors.
Sensitive information should therefore be managed through appropriate controls where necessary.
The transaction should not become a vehicle for premature coordination.
This is both a competition and transaction-governance issue.
Due Diligence Should Test the Investment Thesis
A legal due-diligence exercise should not simply produce a report containing several hundred pages of summaries.
The purpose is to determine whether the assumptions supporting the buyer's valuation are legally sustainable.
If the investment thesis is:
“We are acquiring a business with long-term government contracts,”
the legal review should focus heavily on those contracts.
If the thesis is:
“We are acquiring a licensed platform that allows immediate market entry,”
the licence and change-of-control analysis becomes central.
If the thesis is:
“We are buying a recurring-revenue technology business,”
customer churn rights, IP ownership, data rights and key staff become critical.
Diligence should follow value.
The legal team should know what would cause the investment committee to reduce the price or walk away.
Corporate Records Should Tell a Coherent Ownership Story
The corporate review should establish the ownership history.
This includes:
incorporation documents;
current MOA or Articles;
share-transfer history;
capital changes;
share classes;
shareholder agreements;
board and shareholder resolutions;
commercial-register extracts;
and
UBO records.
The buyer should reconcile these documents.
If the commercial register identifies one ownership structure while the shareholder agreement assumes another, the discrepancy needs explanation.
If a founder claims beneficial ownership of interests legally held by another person, that requires investigation.
Informal nominee arrangements create particular risk.
A buyer should not become the next participant in an ownership dispute it did not understand.
Family Businesses Can Require Additional Ownership Diligence
Dubai has many successful family-owned businesses.
Their corporate history can be less formal than that of institutional groups.
The founder may have treated several entities as one business.
Family members may consider themselves economically entitled to shares that have never been formally transferred.
Expenses may be shared across companies.
Properties may be personally owned but used by the operating company.
Loans may exist without formal agreements.
These arrangements may have worked because the family trusted one another.
A third-party acquisition changes the context.
The buyer should identify which assets and rights actually belong to the target.
Family expectation is not the same as registered legal ownership.
Financial Due Diligence Should Look Behind EBITDA
Acquisition negotiations often revolve around EBITDA.
Legal diligence should understand what produces it.
A business may report attractive profits because:
related-party rent is below market;
the owner works without market compensation;
management fees are not charged;
customer concentration is unusually high;
maintenance spending has been deferred;
or
certain liabilities remain unrecorded.
Those issues can affect normalized earnings after the acquisition.
The buyer should therefore reconcile financial diligence with legal diligence.
If the target occupies a building owned personally by the seller at below-market rent, the buyer needs to know what rent will apply after closing.
That can affect valuation far more than the wording of an ordinary warranty.
Related-Party Transactions Need to Be Unwound or Formalised
Owner-managed businesses frequently rely on related-party arrangements.
These may include:
loans;
property leases;
management services;
shared employees;
common purchasing;
IP licences;
or
personal guarantees.
The buyer needs to decide which arrangements should survive.
If a business depends on software owned by another company controlled by the seller, the licence needs to remain available after acquisition.
If company cash has historically funded another group entity, that practice should stop or be properly documented.
If the seller has guaranteed the target's bank debt personally, replacement security may be required.
Related-party diligence is therefore not merely about identifying conflicts.
It is about making the target capable of operating independently after completion.
Customer Contracts Should Be Prioritised by Value
Not every contract deserves the same diligence effort.
The buyer should identify which agreements account for most of the revenue or strategic value.
Those contracts should be reviewed for:
term;
termination;
renewal;
pricing;
change of control;
assignment;
exclusivity;
minimum purchase commitments;
service levels;
liability;
and
dispute resolution.
A customer representing 35% of the target's revenue deserves more attention than fifty immaterial supplier agreements.
The buyer should also determine whether customer relationships are contractual or largely personal to the seller.
Revenue that disappears when the founder leaves should not be valued as though it belongs permanently to the company.
Change-of-Control Clauses Can Undermine a Share Deal
A share acquisition does not legally assign the target's contracts because the contracting entity remains the same.
That does not mean third-party consent is irrelevant.
Many contracts contain change-of-control provisions.
These may give the counterparty:
a consent right;
a termination right;
a renegotiation right;
or
another contractual remedy
where the target's ownership changes.
The buyer should identify those provisions before signing.
Key consents should usually become conditions precedent.
The buyer should not pay for a business valued principally around a major distribution agreement only to discover after completion that the supplier can terminate because of the acquisition itself.
Asset Deals Create a Different Contract-Transfer Problem
An asset acquisition presents the opposite issue.
The actual contracting entity changes.
The buyer usually needs to determine whether each material agreement can be assigned, novated or replaced.
Some contracts prohibit assignment.
Others allow it only with consent.
Government contracts may have special transfer rules.
Franchise agreements may require approval of the buyer.
Software licences may not transfer at all.
The asset purchase agreement should therefore include a schedule identifying:
which contracts transfer;
which require consent;
which will be replaced;
and
what happens if a critical consent is not obtained.
The seller should not simply promise to “transfer the business.”
The transfer needs to be legally possible.
Real Estate Can Become a Transaction Within the Transaction
If the target owns real estate, a share purchase leaves title with the same company.
That can preserve continuity, although the buyer should still review title, mortgages, leases, usage and any change-of-control implications.
If the acquisition is structured as an asset deal and the property itself is being transferred, Dubai Land Department procedures and transfer costs may become relevant.
Where premises are leased, the buyer should examine:
lease term;
renewal;
rent review;
permitted use;
assignment;
change of control;
landlord consent;
and
security deposits.
A successful acquisition can still fail operationally if the business loses the premises from which it operates.
Employee Continuity Depends on the Structure
Employment is another area where share and asset deals differ materially.
In a share acquisition, the employer generally remains the same company.
The shareholders change.
The employer does not.
That usually supports continuity of employment, subject to any contractual or regulatory consequences of the ownership change.
In an asset acquisition, the position is different.
The buyer should not assume that employees automatically move to a new legal employer.
Federal Labour Law expressly preserves existing employment contracts where there is a change in the form or legal status of the establishment.
A true business transfer from one employer to another may require separate arrangements concerning termination or transfer, new employment documentation, work permits, visas and recognition of historic entitlements.
Employment planning should therefore begin before closing.
Employee Liabilities Should Be Quantified
The buyer should review:
employment contracts;
salary records;
accrued annual leave;
end-of-service obligations;
bonuses;
commissions;
unpaid expenses;
employee loans;
disciplinary matters;
termination disputes;
and
restrictive covenants.
For a share deal, these liabilities remain within the target.
They therefore affect value.
For an asset deal, the parties should specify which employee obligations remain with the seller and which are assumed by the buyer.
The agreement should not leave this point to payroll teams after completion.
Key Employees Can Be More Valuable Than the Corporate Entity
A business may depend heavily on a founder, technical director or sales executive.
The buyer should identify those individuals during diligence.
Questions include:
Will they remain?
Do they have written contracts?
Are incentives needed?
Do they own any of the IP personally?
Are customer relationships concentrated around them?
Do they have enforceable confidentiality obligations?
A buyer acquiring the company but losing the people responsible for most of its revenue can technically complete the transaction and still lose the investment thesis.
Retention should therefore form part of deal planning.
Restrictive Covenants Need Realistic Drafting
The buyer may also require the seller or key executives not to establish a competing business immediately after completion.
That can be commercially justified where the purchase price includes substantial goodwill.
The restriction should nevertheless be drafted according to the applicable law and the legitimate interest being protected.
The buyer should identify what it actually needs.
That may involve restrictions concerning:
competition;
customer solicitation;
employee solicitation;
confidential information;
or
use of acquired intellectual property.
Overly broad language is not necessarily stronger.
Precision is usually more valuable.
Intellectual Property Should Be Verified, Not Assumed
Technology, trademarks, software and know-how frequently account for a large proportion of business value.
The buyer should determine who actually owns them.
A company may use a trademark registered personally by the founder.
Software may have been created by a contractor without an adequate IP assignment.
A key domain name may be registered through an employee's personal account.
The company may use licensed software that terminates on change of control.
Open-source components may create obligations the buyer has never considered.
IP diligence should therefore include both registered and unregistered rights.
The objective is to establish that the target owns, or has durable rights to use, the assets required to run the business after closing.
Domains, Social Media and Digital Accounts Are Business Assets
Traditional due-diligence checklists sometimes overlook digital control.
For many modern businesses, some of the most valuable assets are:
domain names;
website hosting;
social-media accounts;
Google Business profiles;
app-store accounts;
advertising platforms;
cloud services;
code repositories;
and
customer databases.
The buyer should establish who legally and technically controls those accounts.
A company can own the trademark while its founder personally controls the domain through which all customers reach the business.
That is a day-one risk.
Closing should include transfer of administrator credentials and account ownership where appropriate.
Data Protection Needs to Be Included in M&A Diligence
Businesses increasingly hold large amounts of:
customer data;
employee data;
marketing information;
financial information;
and
sensitive commercial records.
The buyer should identify which data-protection regime applies to the target and whether the company has a lawful basis for collecting, using and transferring that information.
This is particularly important where data moves:
outside the UAE;
between group companies;
through cloud providers;
or
into AI and analytics platforms.
An asset sale can also involve transferring a customer database to a different legal entity.
That should not be treated as though data were ordinary inventory.
The lawful basis and contractual consequences require review.
Cybersecurity Incidents Can Be Hidden Transaction Liabilities
A target may have suffered a breach that management regards as resolved.
The buyer should establish whether:
data was compromised;
customers were notified where required;
regulators were notified;
ransomware payments occurred;
credentials remain vulnerable;
and
cybersecurity remediation was actually completed.
Technology diligence should therefore involve more than confirming that software exists.
For data-dependent businesses, unresolved cyber risk can create significant post-closing cost and liability.
Litigation Diligence Should Include Threatened Claims
A litigation schedule listing filed court cases is only the beginning.
The buyer should ask about:
demand letters;
arbitrations;
employee complaints;
customer claims;
regulatory investigations;
expert proceedings;
dishonoured payment instruments;
and
disputes that management considers commercially manageable.
Some of the largest acquisition liabilities arise from disputes that had not yet reached court at signing.
The seller should therefore disclose both existing proceedings and circumstances reasonably capable of producing material claims.
Corporate Tax Has Changed Acquisition Due Diligence
UAE acquisitions now require detailed Corporate Tax review.
The buyer should establish:
whether the target registered correctly;
whether returns have been filed;
whether tax has been paid;
whether related-party transactions comply with transfer-pricing requirements;
whether interest deductions are supportable;
whether historic restructurings relied on relief;
whether tax losses remain usable;
and
whether any free-zone tax assumptions remain valid.
The fact that the target paid little or no Corporate Tax is not necessarily reassuring.
The relevant question is why.
Free Zone 0% Claims Should Be Tested Carefully
A free-zone company may claim Qualifying Free Zone Person status.
That position should be verified.
The buyer should review:
the target's activities;
counterparties;
Qualifying Income;
mainland operations;
substance;
transfer pricing;
audited financial statements;
and
non-qualifying revenue.
The current free-zone regime is conditional.
If the seller priced the business on the assumption of a continuing 0% Corporate Tax rate, the buyer should establish whether that assumption remains valid after the acquisition.
A change in business model after closing can also change the tax result.
Tax status should therefore be included in integration planning.
Share and Asset Sales Can Have Different Corporate Tax Outcomes
For the seller, a gain on the sale of shares may potentially qualify for the Participation Exemption where the statutory conditions are satisfied.
That exemption is not automatic merely because shares are being sold.
For an asset sale, gains on the disposal of business assets generally form part of taxable income unless another statutory relief applies.
The UAE Corporate Tax framework provides Business Restructuring Relief for qualifying transfers of a business or independent part of a business, but the relief is conditional and can be subject to clawback.
The tax structure should therefore be analysed before the parties fix the commercial structure.
Tax should not become a negotiation conducted after the SPA is already drafted.
VAT Can Also Differ Between an Asset Sale and a Business Transfer
Ordinary asset disposals can constitute taxable supplies for VAT purposes depending on the assets and parties involved.
The VAT framework separately recognises a transfer of a business as a going concern.
Where the statutory conditions are satisfied, the transaction can receive treatment different from an ordinary asset-by-asset sale.
The distinction matters.
Calling an agreement an “asset purchase” does not by itself determine the VAT result.
The legal and commercial substance of what is being transferred needs to be considered.
VAT should therefore be modelled before the parties agree whether the price is inclusive or exclusive of VAT.
Tax Indemnities Should Be Separate From General Warranties
Historic tax exposure deserves dedicated SPA treatment.
A general warranty that the company has “complied with all applicable laws” may not provide adequate protection.
The SPA can contain a detailed tax covenant or indemnity addressing liabilities attributable to periods before completion.
The document should also deal with:
control of tax audits;
access to historical records;
amended returns;
tax refunds;
correspondence with the FTA;
and
settlement of authority enquiries.
The buyer owns the target after completion.
It will therefore need cooperation from the seller if a historical issue emerges.
That obligation should exist in the agreement rather than depend on goodwill years later.
Financial Debt Should Be Verified Directly
Bank debt can materially affect acquisition value.
The buyer should review:
facility agreements;
loan balances;
security;
guarantees;
covenants;
defaults;
and
change-of-control provisions.
A completion statement should distinguish between true operating liabilities and debt-like items.
This can include:
shareholder loans;
overdue tax;
employee accruals;
unpaid dividends;
finance leases;
or
other amounts treated as debt under the agreed price mechanism.
Labels in the balance sheet should not determine the acquisition economics automatically.
The SPA should define them.
The Purchase Price Needs a Mechanism, Not Just a Number
A headline enterprise value does not determine the final amount paid.
The transaction needs to explain how that number converts into equity value.
Two common mechanisms are:
completion accounts;
and
locked-box structures.
Under completion accounts, the purchase price is adjusted after closing based on agreed financial measures such as cash, debt and working capital at the completion date.
Under a locked-box approach, the price is generally fixed by reference to an earlier balance sheet, with protections designed to prevent value leaking to the seller between the locked-box date and completion.
Neither method is inherently better.
The appropriate mechanism depends on the business and the quality of the financial information.
What matters is that the buyer and seller understand exactly how the final consideration will be calculated.
Working Capital Can Become the First Post-Closing Dispute
A business can appear profitable while requiring significant cash immediately after acquisition.
The buyer should therefore understand normal working capital.
Receivables may take 120 days to collect.
Inventory may be obsolete.
Suppliers may have extended unusual credit to the seller.
A buyer should not pay a full valuation and then discover it needs to inject substantial cash simply to keep the same business operating.
Where the SPA includes a working-capital adjustment, the parties should define:
the target level;
accounting policies;
included and excluded items;
and
the dispute mechanism.
A poorly drafted working-capital clause can produce immediate litigation after completion.
Locked-Box Transactions Need Leakage Protection
Where the parties use a locked-box structure, the buyer is economically treated as owning the business from the agreed historical date.
The seller should therefore be restricted from extracting value before completion.
The agreement should define leakage carefully.
Potential leakage can include:
dividends;
shareholder payments;
related-party fees;
repayment of shareholder debt;
bonuses linked to the transaction;
or
other value transfers to the seller group.
Certain payments may be expressly permitted.
Everything else should be recoverable under the agreed contractual mechanism.
Warranties Should Follow the Due-Diligence Findings
The best warranties are transaction-specific.
A generic acquisition precedent may contain hundreds of statements.
That does not make it effective.
If the target is a software company, the warranties should address:
IP ownership;
open-source software;
data protection;
cybersecurity;
key customer agreements;
and
developer rights.
If the target is a healthcare business, regulatory approvals and professional licensing become more important.
If it is a construction company, active projects, bonds, claims, subcontractors and retention exposure deserve attention.
Warranties should follow risk.
They should not be inserted simply because they appeared in the lawyer's last SPA.
Disclosure Is as Important as the Warranty
The seller will normally disclose exceptions to the warranties.
That disclosure process deserves careful management.
A warranty may say:
“There is no material litigation.”
The disclosure letter may identify an existing claim.
Once properly disclosed, the buyer may have limited ability to bring a warranty claim concerning that matter.
The buyer should therefore review disclosures actively.
A data room containing ten thousand documents should not automatically be treated as effective disclosure of every risk hidden somewhere inside it.
The SPA should define the disclosure standard.
Important known issues should be disclosed clearly and specifically.
Knowledge Qualifications Need Precision
Sellers often try to qualify warranties by saying:
“So far as the Seller is aware...”
That immediately raises another question:
Whose awareness?
The founder?
The board?
The CFO?
The HR director?
A properly drafted SPA can identify the relevant individuals and, where appropriate, the level of inquiry they must make.
Otherwise, a seller may argue later that a problem was known by a senior employee but not personally known by the shareholder giving the warranty.
The knowledge definition should reflect who actually runs the business.
Indemnities Are Better Suited to Known Specific Risks
A warranty addresses the accuracy of a statement.
An indemnity can allocate a defined liability more directly.
If diligence identifies:
an unresolved tax audit;
a known employee dispute;
a regulatory investigation;
an IP ownership defect;
or
a specific pending lawsuit,
the buyer may require a dedicated indemnity.
That is more targeted than relying only on a general warranty claim after the loss occurs.
The commercial negotiation should then address:
scope;
duration;
financial cap;
mitigation;
third-party claims;
and
security for payment.
A Strong Indemnity Is Only as Good as the Seller Behind It
Contractual protection has economic value only if the seller can satisfy the claim.
This is especially important where the seller distributes the purchase price immediately after closing or is a special-purpose company.
The buyer may therefore require:
escrow;
a retention;
deferred consideration;
a parent guarantee;
or
another form of security.
The level should reflect the actual risk.
Holding half the purchase price for five years is usually commercially unrealistic.
Holding nothing where a material identified liability exists may be equally unwise.
Risk and security should be matched.
Claim Limits Should Be Negotiated With the Risk Profile in Mind
SPAs commonly include contractual limitations such as:
de minimis thresholds;
baskets;
overall liability caps;
time limits;
and
exclusions for matters disclosed or otherwise recovered.
Fundamental warranties—such as title to the shares and authority to sell—may justify different treatment from ordinary operational warranties.
Tax claims may require another period.
Fraud is usually treated separately.
These provisions determine the practical value of the warranty package.
The buyer should therefore negotiate them as carefully as the warranties themselves.
Earn-Outs Can Bridge a Valuation Gap
Seller and buyer frequently disagree about future performance.
An earn-out can bridge that difference.
The buyer pays part of the consideration initially and additional amounts if the business reaches agreed targets.
The concept is simple.
The drafting is not.
The parties need to define:
the performance metric;
measurement period;
accounting policies;
who controls the business;
what investment the buyer must maintain;
what happens to extraordinary items;
how group costs are allocated;
and
how disputes are resolved.
If the seller remains involved in management, governance arrangements during the earn-out period also need to be clear.
A badly drafted earn-out can turn every ordinary business decision into an argument over whether the buyer is suppressing the seller's future payment.
Revenue Earn-Outs and EBITDA Earn-Outs Create Different Incentives
The metric matters.
A revenue earn-out may encourage growth even where margins deteriorate.
An EBITDA earn-out may encourage cost reduction even where long-term investment suffers.
A customer-retention earn-out focuses on another aspect of value.
The parties should use the metric that best reflects the assumption causing the valuation disagreement.
They should also anticipate manipulation.
If the buyer can divert customers into another group company, the earn-out needs appropriate protection.
If the seller remains in management and can delay expenses artificially, that should also be considered.
Earn-outs work best when neither side can control the metric unilaterally.
Seller Rollover Equity Can Align Interests
Another way to bridge valuation uncertainty is for the seller to retain or reinvest part of its ownership.
That can align incentives where the founder remains essential to future growth.
It also means the relationship does not end at closing.
The parties then need a new shareholder framework addressing:
governance;
minority rights;
future funding;
transfer restrictions;
tag and drag rights;
future exit;
and
employment or management arrangements.
A transaction cannot simultaneously treat the seller as fully exited and as an ongoing co-investor.
The documents should reflect which role applies after closing.
Conditions Precedent Should Protect the Deal's Essentials
Not every unresolved matter should prevent completion.
Some matters should.
A condition precedent is appropriate where failure to satisfy the condition would undermine the acquisition itself.
Examples can include:
regulatory approval;
competition clearance;
lender consent;
key customer consent;
landlord consent;
waiver of pre-emption rights;
release of share pledges;
required corporate approvals;
or
renewal of a critical licence.
The buyer should resist closing while a matter fundamental to value remains unresolved simply because the seller promises to fix it afterward.
After the purchase price has been paid, leverage changes.
Not Everything Needs to Be a Condition Precedent
Too many conditions can also make a deal impossible to close.
The parties should distinguish between:
deal-critical matters;
and
administrative matters capable of safe post-closing completion.
For example, transfer of a minor software account may be suitable for a post-closing undertaking.
Regulatory approval to own the business usually is not.
The test is:
If this remains unresolved after closing, can the buyer still operate the business it agreed to buy?
If the answer is no, it probably belongs before completion.
The Closing Sequence Should Be Written Before the Closing Day
Complex transactions rarely close through one signature.
Completion may involve:
share-transfer instruments;
notarisation;
licensing-authority filings;
amended MOA or Articles;
director or manager changes;
banking documents;
release of security;
regulatory approvals;
payment instructions;
escrow releases;
employee arrangements;
and
delivery of corporate records.
The sequence matters.
Payment should not occur before the buyer receives the agreed protection.
The seller should not transfer ownership without certainty regarding payment.
A closing memorandum should state exactly who does what and in what order.
The time to discover that a bank release requires another document is not while all parties are sitting at the notary or service centre.
Completion Funds Need Independent Verification
High-value business acquisitions are vulnerable to payment fraud.
Closing bank instructions should therefore be verified through trusted channels.
A last-minute email changing the seller's account should never be accepted automatically.
Where several recipients are being paid—seller, lender, escrow agent or others—the payment schedule should identify each beneficiary clearly.
This is not merely an administrative issue.
Once acquisition proceeds are sent to a fraudulent account, even a perfectly drafted SPA may provide limited practical comfort.
Day-One Control Should Be Planned Before Day One
Legal ownership alone does not run the business.
Immediately after completion, the buyer may need control over:
bank accounts;
accounting systems;
government portals;
corporate email;
cloud platforms;
premises;
customer records;
inventory;
HR systems;
domains;
social-media accounts;
trade licences;
and
physical company records.
The day-one plan should identify who receives each item.
For founder-led businesses, this is particularly important because many systems may be tied to the founder personally.
The buyer should not discover after closing that the former owner is still the only person capable of accessing the company's bank or cloud account.
Bank Mandates Should Change Immediately Where Appropriate
The bank should form part of completion planning.
A legal share transfer does not automatically change bank signing authority.
The bank may require:
updated licence documents;
shareholder resolutions;
new signatory forms;
KYC documents;
and
UBO information.
Processing may take time.
The buyer should therefore understand how company funds will be controlled between legal completion and completion of the bank's internal change process.
Temporary authority should be tightly controlled.
Corporate Records Should Be Physically and Digitally Delivered
The buyer should receive the company's legal history.
That can include:
original incorporation documents;
resolutions;
contracts;
employee files;
licences;
tax records;
accounting records;
litigation files;
insurance policies;
property documents;
and
regulatory correspondence.
Digital records should be delivered in usable form rather than remaining indefinitely in the seller's personal cloud storage.
Post-closing disputes become considerably more difficult where the buyer cannot reconstruct events because historic records disappeared with former management.
Insurance Coverage Should Be Reviewed at Change of Control
The target's insurance policies may contain change-of-control provisions or require notification.
Policies might include:
property;
professional indemnity;
cyber;
directors and officers;
product liability;
medical;
or
other operational coverage.
The buyer should establish whether existing coverage continues after closing.
Claims-made policies deserve particular attention because historic conduct can produce claims after the transaction.
The buyer may need run-off coverage or other arrangements for pre-closing periods.
Insurance should therefore be included in transaction planning, not only operational integration.
Post-Closing Integration Can Create New Legal Risk
The buyer's job does not end with registration of the transfer.
Integration changes the target.
Employees may be moved.
Systems may be consolidated.
Customer data may be shared.
Contracts may be renegotiated.
Group policies may be imposed.
Management fees may begin.
Intercompany financing may change.
These steps can create:
employment;
data;
competition;
tax;
transfer-pricing;
and
regulatory implications.
The integration plan should therefore receive legal review where material.
A transaction that was legally sound at completion can create new exposure if integration is implemented carelessly.
UBO and Corporate Registers Should Be Updated Promptly
Post-completion corporate housekeeping is legally important.
The shareholder register and beneficial-ownership records should reflect the new structure.
Under the current UBO framework, changes to relevant information generally need to be reflected within 15 days.
Licensing-authority records should also be updated as required.
The buyer should confirm completion of these filings rather than assume that the service provider or seller handled them.
A clean post-closing file should show that legal ownership, public registration and internal corporate records all match.
The Seller's Transition Role Should Be Documented
In founder-owned businesses, the buyer may need the seller's assistance for several months.
That arrangement should be documented.
The seller may remain as:
employee;
consultant;
director;
advisor;
or
temporary transition manager.
Each role has different consequences.
The agreement should define:
responsibilities;
authority;
compensation;
duration;
confidentiality;
and
termination.
A seller who has transferred the company should not continue exercising undefined authority simply because employees are accustomed to taking instructions from the founder.
Transition should have a beginning and an end.
Customer Communication Needs to Be Managed
The buyer may wish to announce the acquisition immediately.
That can be useful.
It can also concern customers who chose the business because of the seller personally.
A communication plan should therefore explain continuity.
Key customers may benefit from direct contact before or immediately after closing.
Where consent to change of control is required, the communication process must align with the contractual procedure.
The buyer should not announce publicly that it owns the company before the legal conditions to completion have actually been satisfied.
Dispute Planning Belongs in the SPA
Even well-run acquisitions produce disagreements.
Common post-closing disputes include:
working-capital calculations;
earn-out disputes;
warranty claims;
tax indemnities;
undisclosed liabilities;
seller competition;
fraud allegations;
and
whether disclosures were sufficient.
The dispute clause should therefore be designed for the transaction.
The parties should consider:
forum;
governing law;
language;
confidentiality;
interim relief;
cost;
and
where a judgment or award may need to be enforced.
A cross-border buyer should not accept a dispute clause simply because it appears in the seller's first SPA draft.
Enforcement should be considered while both parties remain cooperative.
Expert Determination Can Be Better for Accounting Disputes
Not every disagreement belongs before a court or arbitral tribunal.
Completion accounts and certain earn-out calculations may be better resolved by an independent accountant acting as expert.
The SPA should define:
which matters go to the expert;
how the expert is appointed;
what accounting principles apply;
what materials the expert can consider;
and
whether the determination is final.
The distinction between an accounting disagreement and a legal interpretation dispute should be clear.
A valuer should not be asked to determine a fraud allegation.
Likewise, a tribunal may not be the most efficient forum for a narrow working-capital calculation.
Fraud Should Be Treated Separately From Ordinary Warranty Claims
Most SPAs contain negotiated financial and time limitations on seller liability.
Those protections are designed for ordinary contractual claims.
Deliberate fraud presents a different issue.
The agreement should be drafted consistently with the applicable law and should not create the impression that intentional deception is merely another capped warranty issue.
From the buyer's perspective, evidence of fraud can fundamentally change the claim.
From the seller's perspective, fraud allegations should not be used casually simply to escape negotiated contractual limitations.
The distinction should be preserved.
A Practical Acquisition Review Before Signing
Before acquiring an existing Dubai business, the buyer should be able to answer:
Are we buying shares or assets, and why?
Which legal entity owns the business?
Who legally owns the shares?
What rights attach to those shares?
Are there pledges, pre-emption rights, tag or drag rights?
Does Article 80 or another transfer restriction apply?
Who must approve the transfer?
Is regulatory change-of-control approval required?
Could UAE merger-control notification apply?
Which licences are essential?
Do the licensed activities match actual operations?
Which customer contracts create most of the value?
Do those contracts contain change-of-control or assignment rights?
What property or leases are essential?
Who owns the IP?
Which employees are essential?
What historic employee liabilities exist?
What Corporate Tax and VAT exposure exists?
Is any free-zone 0% position being relied upon?
What debt and security exist?
What litigation or threatened claims exist?
What related-party arrangements must survive or terminate?
What adjustment converts headline valuation into actual purchase price?
What warranties and indemnities address the identified risks?
What security supports those claims?
What approvals and consents must exist before completion?
What controls transfer to the buyer on day one?
And what happens if the business delivered after closing is materially different from the one presented during negotiations?
If those questions have not been answered, agreeing the price does not mean the deal is ready to sign.
The Best Acquisition Process Preserves the Commercial Reason for Buying
Legal due diligence should not make an acquisition unnecessarily slow.
Its purpose is the opposite.
It should identify the issues that could prevent the business from delivering the value the buyer expects.
A buyer does not need perfection.
Every operating business has risks.
The objective is to distinguish:
ordinary business risk;
from
unknown or mispriced legal risk.
A customer contract expiring next year may be a commercial risk the buyer knowingly accepts.
An undisclosed regulatory investigation is different.
Normal employee turnover may be expected.
An unpaid statutory liability affecting the entire workforce is different.
A reasonable level of working capital fluctuation may be accepted.
A seller extracting material cash between pricing and closing is different.
Due diligence allows those distinctions to be made before the buyer loses negotiating leverage.
Buying a Business Is Ultimately a Risk-Allocation Exercise
The purchase price reflects what the buyer believes the future business is worth.
The acquisition documents determine who bears the risk that the assumptions behind that valuation are wrong.
If the business underperforms because the market weakens, that is generally the buyer's commercial risk after closing.
If the business underperforms because the seller concealed the loss of its largest customer before signing, that is a very different issue.
The SPA should draw that boundary as clearly as possible.
That is the purpose of:
warranties;
disclosures;
indemnities;
price adjustments;
escrow;
conditions precedent;
and
post-closing covenants.
They are not technical additions to the commercial deal.
They are the mechanisms through which the commercial deal is actually enforced.
How Kadernani & Company Legal Consultants Can Assist
Kadernani & Company Legal Consultants advises local and international investors, family offices, strategic buyers, founders and corporate groups on acquisitions, disposals and business transfers throughout Dubai and the wider UAE.
For professional advice regarding buying an existing business in Dubai, UAE M&A, share purchases, asset acquisitions, legal due diligence, share-transfer approvals, competition clearance, transaction structuring, SPAs, tax indemnities, earn-outs or post-acquisition disputes, contact Kadernani & Company Legal Consultants to discuss the transaction and investment objective.
Our approach begins by identifying what the buyer actually needs to acquire.
For some businesses, legal continuity is critical and a share acquisition provides the stronger route.
For others, historic liabilities make an asset acquisition more appropriate even though the operational transfer is more complicated.
The structure should therefore be selected around licensing, contracts, employees, assets, tax and regulatory continuity, not simply the form preferred by the seller.
For mainland LLC acquisitions, particular attention should be given to the current Commercial Companies Law, including the formal transfer requirements and the statutory process that can give existing partners a 30-day redemption right where an interest is being transferred to a non-partner.
The MOA, shareholder arrangements, share classes and registered ownership should be reviewed before the buyer assumes that the seller can deliver the proposed equity.
Regulated businesses require a separate change-of-control analysis.
The transaction should identify which regulator or licensing authority must approve the incoming investor and whether ownership, management or fitness-and-propriety conditions apply.
Where competition thresholds may be engaged, the filing analysis should also take place before the parties agree an aggressive closing timetable.
Due diligence should then be organised around the investment thesis.
We focus not only on whether documents exist, but on whether the licences, key contracts, employees, intellectual property, property rights and operating relationships on which the valuation depends will remain available to the buyer after closing.
Tax and transaction structuring should also be coordinated early.
A share sale and asset sale can produce materially different Corporate Tax and VAT consequences.
Historic Corporate Tax positions, free-zone status, transfer pricing, VAT compliance and identified authority risks should be reflected in the diligence findings and SPA protections.
Where known exposure exists, a specific indemnity, retention or escrow may provide stronger protection than a broad general warranty.
The closing process is then mapped so that payment, corporate transfer, regulatory approvals, release of security and operational control occur in the correct sequence.
Post-closing work includes UBO and shareholder-record updates, banking authority, corporate records, employee and customer communications, systems access and implementation of any agreed transition arrangements with the seller.
If a dispute emerges after completion, the first question is usually whether the problem was:
properly disclosed;
covered by a warranty or indemnity;
reflected in the price mechanism;
or
caused by events occurring only after the buyer assumed control.
The transaction documents should make that analysis as clear as possible.
For boards and investment committees, the practical test is straightforward:
before the acquisition becomes unconditional, the buyer should know exactly which legal entity or assets it is acquiring, which liabilities remain inside that structure, which consents are required for continuity, what the final price actually depends on, and what contractual protection exists if the business delivered is not the business that was presented.
Where those answers remain uncertain, a senior-led transaction and due-diligence review before signing is usually far less expensive than discovering the issue after the purchase price has been paid.