UAE Law and Practice Contributed by: Ahmed Ibrahim, Malack El Masry and Maryam Quadri, IN’P IBRAHIM .N. PARTNERS
5. Negotiation Phase 5.1 Requirement to Disclose a Deal
resolution approving the transaction in question oth - erwise it is considered rejected. 4.3 Hurdles to Stakebuilding A publicly listed company cannot make any changes to the mandatory reporting thresholds set out under applicable laws and regulations. Any changes to the articles of incorporation will not be accepted by the notary and if the notary accepts them for any reason, they will be deemed void and the applicable law will take precedence. 4.4 Dealings in Derivatives Dealings in derivatives are expressly set out under CMA regulation number 22/RM of 2018 regulating derivative contracts. Therefore, in principle, deriva - tives are allowed and recognised in the UAE. 4.5 Filing/Reporting Obligations If derivatives are regulated, they are listed and traded on the relevant financial market where disclosure and other requisites of such markets would apply. 4.6 Transparency When it comes to private M&A transactions, there are no requirements in relation to transparency; however, shareholders must be treated equally, and statutory pre-emption rights apply in the event of any transfer of shares. The rules applicable to any share transfer are expressly set out under the CCL and any acquirer must obtain an explicit or implicit waiver from exist - ing shareholders. Additionally, procedural approvals and beneficial ownership filings may be required in the case of a change in 25% or more of the ultimate beneficial ownership. In relation to public M&A, there are strict disclosure requirements depending on the level of ownership. Such disclosure can be a pre/ post-notification to the authorities and the market. The company may request a stay on the requirement to notify the Market until the transaction is binding. The authorities are entitled to grant or reject such stay at their discretion. However, the authorities generally do grant stays and extend the duration of a stay depend - ing on the stage of each transaction.
For private M&A transactions, there is no obligation to disclose a deal. However, where there is a potential merger or acquisition taking place, the publicly listed companies and acquirer involved will usually apply for consent to stay the obligation to disclose in rela - tion to such negotiations until such time as a binding contract is signed. Such application must be made by the publicly listed companies involved in the merger, or the publicly listed company and the acquirer in the case of an acquisition. A request for a stay will usually include a list of names that are prohibited from trading certain shares (the “Insiders’ List”). This will usually include the board of directors, management, advisers, relatives and con - nected persons of the relevant companies (and acquir - er). The Insiders’ List will be prohibited from trading in shares of the publicly listed company in question and any parent, subsidiary, sister or affiliate company for certain periods (known as “black-out” periods). 5.2 Market Practice on Timing Market practice on the timing of disclosure cannot dif - fer from legal requirements which are mandatory, and any deviation can expose the relevant party to penal - ties, etc. The UAE regulator is very active in imposing penalties and suspending trading if disclosure require - ments are not constantly and consistently followed. This does not, of course, apply to private companies. 5.3 Scope of Due Diligence In an attempt to reduce costs, more red-flag due dili - gence is being carried out, as opposed to narrative and comprehensive reports being issued for such purpose. Specific consideration is given to matters such as: • foreign ownership restrictions; • real estate ownership restrictions and hidden costs; • change-of-control provisions in material agree - ments; and • employee gratuities and pension schemes.
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