UAE Law and Practice Contributed by: Ahmed Ibrahim, Malack El Masry and Maryam Quadri, IN’P IBRAHIM .N. PARTNERS
6.7 Types of Deal Security Measures Material adverse change clauses (“MAC clauses”) are often used in M&A transactions to give the acquirer the right to walk away from a deal in the event of a material adverse change occurring between the sign - ing and the closing of the transaction. Acquirers have become more focused on MAC clauses as a result of COVID-19. There has also been a reduction in break-up fees in view of the uncertainty created by COVID-19; however, we are seeing more appetite for such fees recently. In relation to non-solicitation, this of course remains a very important requirement that attempts to provide some certainty to the parties. 6.8 Additional Governance Rights In private M&A transactions, shareholders can seek to control the company through the board. However, this becomes a less likely option for public transactions, as board members are appointed by cumulative vote. 6.9 Voting by Proxy Voting by proxy is standard in the UAE, and is permit - ted and regulated under applicable laws and regula - tions. 6.10 Squeeze-Out Mechanisms Minority squeeze-outs are referred to as “manda - tory acquisitions” under the CMA M&A Rules, which only apply to joint stock companies that are listed. An acquirer who acquires, or as a result of an acqui - sition, will hold 90% plus one share or more of the total share capital of a publicly listed company may apply to the CMA for approval to force the remaining minority shareholders to sell or swap their shares to the acquirer within 60 days of the date of the final set - tlement of the primary offer (the “Offer Period”). The minority shareholders can object and take the mat - ter to court; however, the mandatory acquisition will not be suspended save by court order. If there is no objection or no court order to suspend the mandatory acquisition, it will be completed seven days after the Offer Period. The articles of association of the publicly listed com - pany must permit the mandatory acquisition for it to be valid.
there has been an increase in the use of purchase price adjustment mechanisms by buyers and sellers in determining the consideration to be paid. Where the purchase price is subject to adjustment, this is most commonly based on completion accounts (earn-out mechanisms being relatively rare, although they do exist in certain types of management buyouts). 6.4 Common Conditions for a Takeover Offer Generally, a takeover offer is subject to the following corporate/regulatory conditions: • receipt of all required government, corporate, regulatory and statutory approvals, exemptions and/or waivers in connection with the transaction, including receipt of the final written approval(s) of the CMA in relation to the transaction; • provision to the target of all the information required or requested by the CMA in relation to the transaction; • dispatch of the offeree circular to the shareholders (and no subsequent revocation of or change to 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); • the shareholders’ passing of the requisite resolu - tions in relation to the offer at the general assem - bly; • no material breach of certain undertakings or war - ranties given by the target having occurred; and • no material adverse effect having occurred. 6.5 Minimum Acceptance Conditions Where the acquirer wishes to make an MTO, it will be completed if such offer results in the acquirer holding at least 50% plus one share or more shares in the capital of the publicly listed company. If this threshold is not reached, the offer is cancelled and the acquirer’s share ratio must be reduced to 30% or less. The CMA can make exceptions to this rule, including for government-owned companies, distressed com - panies and securities acquired through inheritance. 6.6 Requirement to Obtain Financing The acquirer’s financial consultant may be required to provide confirmation that the acquirer has the neces - sary funds to execute the tender offer.
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