UAE Law and Practice Contributed by: Ahmed Ibrahim, Malack El Masry and Maryam Quadri, IN’P IBRAHIM .N. PARTNERS
It has become customary for the seller to organise a virtual data room (VDR) onto which documentation of a legal and financial nature is uploaded. The use of VDRs makes the process much more efficient, par - ticularly if the VDR service provider is a sophisticated one. Generally, sellers are also more open to adopting a full-disclosure approach after having the comfort of executing non-disclosure agreements with potential buyers. However, it is not very common to produce vendor due diligence reports except in large-scale deals, owing to the cost involved. Very little information on private companies incorpo - rated in the UAE is publicly available. In particular, a private company’s articles of association and licences do not form part of any publicly available record in the UAE (only certain information is sometimes avail - able). Conducting effective due diligence on the target is, therefore, not possible without the co-operation of the target and its management and shareholders. It is possible to carry out a limited search for a com - pany online and in person at the local chamber of commerce in Dubai and Abu Dhabi. Practices differ between emirates, but a business report providing a brief company profile will generally be available. In addition to reviewing information provided by the seller, legal review will involve conducting appropriate searches and investigations at public registries and authorities; however, this requires the co-operation of the seller and target company. As with private M&A transactions, in public M&A transactions there will be a due diligence survey. However, the due diligence will usually be limited to publicly available information and information that is not share-price sensitive, to ensure that the relevant market is not affected. 5.4 Standstills or Exclusivity Terms of business and memoranda of understanding are usually executed before starting work on any M&A transaction. These generally include exclusivity and confidentiality provisions and other non-binding com - mercial terms. In some transactions, these documents
are sometimes also binding in relation to provisions such as price, subject to completion of due diligence. In addition to confidentiality and exclusivity terms, it has become more common for shareholders in private transactions to negotiate drag-along and tag-along mechanisms. Following recent amendments to the Commercial Companies Law, these rights can now be reflected in the articles of association of mainland companies, enhancing enforceability and aligning UAE practice with international M&A standards. 5.5 Definitive Agreements For a public tender offer, terms and conditions are usually documented in an “offer document” issued to the shareholders of the target, which will provide infor - mation to the shareholders regarding the proposed offer. In addition to the offer document, a shareholder circular setting out the terms and conditions of the offer, details of the proposed consideration and other related matters will be circulated to the shareholders of the target, based on the recommendation by the board of directors to the shareholders to accept the offer and vote in favour of the relevant resolutions at the general meeting, along with the recommendations of the consultants involved in the offer. The sharehold - ers may then pass the requisite resolutions in relation to the offer at the general assembly. The following documents are commonly executed at the signing of a private company share purchase: • a long-form share purchase agreement (SPA) or merger contract/shareholders’ circular, as the case may be; • a disclosure letter (making disclosures against the seller’s warranties in the SPA); • board resolutions of the buyer and the seller approving the transaction; • powers of attorney authorising the signatories; and • a shareholders’ agreement (where there will be more than one shareholder following closing). The following are commonly executed at the closing of a private company share purchase:
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