UAE Law Considerations On Asset Deals

The article looks into the method of structuring an M&A transaction in the UAE where the buyer acquires the assets and liabilities of the target company (or in certain instances, the assets and liabilities of a certain business segment operated by the target company)

As transactional lawyers will know, there are two methods of structuring an M&A transaction. The first is to structure it as a share deal, where the buyer acquires the share capital of the target company, thereby acquiring ownership of the target company. The second method of structuring such a transaction is for the buyer to acquire the assets and liabilities of the target company (or in certain instances, the assets and liabilities of a certain business segment operated by the target company). This article focuses on the latter deal structure and the particular issues an asset deal raises in the United Arab Emirates (the UAE). It is not intended to be and is not an exhaustive summary of all issues that may be relevant. Advise must be sought in the context of a particular transaction.

Asset deals and issues to consider

Local transfer agreement: In the context of a cross border asset deal, a key issue often asked is whether there is a requirement under UAE law for the parties to the transaction to also enter into a local agreement which governs only the transfer of the UAE assets and liabilities. This will depend on the extent to which the “master” sale and purchase agreement is adequate to cover any relevant UAE law issues. While there is no requirement in law to necessarily prepare a separate document to address UAE law matters, this is often preferred for the sake of simplicity so as to keep the master agreement focused on the key commercial issues, with local law issues to be addressed in a local asset transfer agreement. Such an arrangement is sometimes also preferred from an accounting perspective, particularly where a vendor has concerns or particular requirements with respect to the payment or allocation of the purchaser price in each jurisdiction.