UAE Law and Practice Contributed by: Ahmed Ibrahim, Malack El Masry and Maryam Quadri, IN’P IBRAHIM .N. PARTNERS
sition and squeeze-out of minority shareholders) and a board resolution. On the other hand, there have also been some signifi - cant legal developments as the UAE has introduced a federal corporate tax, which came into effect in the UAE in June 2023. The implementation of corporate tax is likely to have a significant impact on potential transactions, as tax implications would now have to be factored in during an acquisition. Economic sub - stance regulations, which came into effect in 2020 and have hefty penalties for non-compliance, are also intrinsically linked with the taxability of a UAE entity and will also have to be taken into consideration. Agency laws in the UAE have also recently been over - hauled, which may have an impact on entities propos - ing to undertake commercial agency activities. Under the new law, international companies are now permit - ted to act as an agent, subject to obtaining the neces - sary permissions from the competent authorities and complying with certain conditions, including not hav - ing a registered agency for their products or services in the UAE. Permission for international companies to undertake agency activities is a noteworthy change, in particular since, historically, only UAE nationals could act as an agent (subject to certain specified exemp - tions). 3.2 Significant Changes to Takeover Law The takeover rules have always been part of the CCL; however, in 2020 and 2021, the concept of “squeeze” was given legislative standing. In practice, there have been a number of mandatory tender offers in the UAE, while only two squeeze-out transactions were carried out successfully by two real estate listed pub - lic joint stock companies. It is expected that these precedents, together with the explicit reference in the CCL, will see the market implementing more of these takeover/squeeze-out mechanisms. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies We have seen bidders build up stakes in the target prior to launching an offer; however, this is not neces - sarily very common and is not necessarily a prereq -
uisite to launching a mandatory tender offer, which is triggered at 30%. Although recent developments in the market have seen an increase in takeovers, which may encourage this type of practice, to date there are no principal stake-building strategies per se. 4.2 Material Shareholding Disclosure Threshold In private M&A transactions there are no material disclosure thresholds or filing obligations, only pro - cedural approvals and beneficial ownership filings in the case of a change in 25% or more of the ultimate beneficial ownership. However, for publicly listed companies, strict disclosures and filings are required, as set out below. Any transaction that creates an “economic concentra - tion” must be notified to the UAE Ministry of Econo - my and obtain clearance before being implemented. Under the Decree, a transaction will be regarded as an economic concentration capable of affecting com - petition in the relevant market if either of the following conditions is met: • if the total annual sales value of the relevant parties in the relevant market in the country (ie, the UAE) during the last fiscal year exceeds AED300,000,000; or • if the total share of the relevant parties exceeds 40% of the total transactions in the relevant market in the country during the last fiscal year. Where one of these thresholds is met, the parties involved must make an application for approval at least 90 days prior to completing the relevant trans - action. The CRC then has 90 days (extendable by a further 45 days) to review the transaction and issue a resolution approving the transaction in question oth - erwise it is considered rejected. Mergers CMA Owing to the disclosure obligations on publicly listed companies, the CMA will be aware of potential trans - actions (whether a stay has been requested or not). However, a formal application to the CMA will be required that includes:
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