Legal Challenges in M&A Involving UAE-Based Entities

There comes a time in many UAE companies’ growth when dealmaking becomes part of the picture. That might mean bringing in outside capital, handing over control, or acquiring a competitor. It’s happening more often. Over 120 transactions closed in 2023, with local founders stepping back, regional firms consolidating and foreign buyers acquiring a foothold.

Full foreign ownership now applies across most sectors. Add in low tax, fast incorporation and a maturing private market and the conditions are in place for a steady run of M&A.

But higher volume also means more friction. Many UAE businesses use layered structures like offshore holding companies, onshore operating arms and legacy nominee setups. Deals involving family-owned firms or cross-border elements often uncover legal gaps, unclear control rights, or delays tied to filings and local approvals.

This article looks at where the legal risks sit, and how to work through them early to keep the deal moving.

Structuring across jurisdictions
Buyers often end up dealing with multiple jurisdictions in the same deal. Mainland LLCs, DIFC holding companies and offshore entities each come with their own rules. Some require notarisation, others don’t. Some filings are quick, others aren’t. These details shape what’s possible and how long it takes.

Many UAE targets sit in hybrid setups. It’s not unusual to see onshore operations, IP held in a free zone, and a BVI parent on top. That can raise questions around valuation, control, and enforceability. Family-run companies can be even trickier, especially where old nominee clauses or outdated shareholder terms still apply.

These aren’t dealbreakers. But they do add steps, and slow things down if left unaddressed. Buyers need to know early what they’re dealing with. Sellers should be clear on what needs untangling.

Regulatory delays and surprise approvals
Once the structure is mapped out, attention quickly shifts to approvals. This is where delays often creep in. Transactions involving banks, insurance firms or telecoms operators may trigger a review by the Central Bank or sector regulator. Others may need clearance from the MoE under the competition regime or, in some cases, the SCA. The rules aren’t always clear at the start, and the timeframes rarely line up with commercial expectations.

Since the Competition Law amendments took effect in late 2023, more deals are caught by merger control thresholds which are now based on turnover rather than market share. The filing obligation can apply even where the buyer has no local presence, and where the transaction has no obvious antitrust impact. Many buyers only realise a notification is required once due diligence is underway, which can stall progress just as the deal picks up speed. Even straightforward transactions can face delays if filings are missed or wrongly assumed not to apply.

The best approach is to get ahead of this early by pressure-testing the deal for approval triggers. This gives parties more control over timing and helps keep things moving at pace.

Minority friction and contract gaps
Even where the regulators are aligned and the structure is sound, minority friction can slow things down. Many UAE businesses still rely on outdated shareholder agreements or loosely worded MoAs, while others operate on handshake terms backed by side letters that never made it into practice. Once a deal is on the table, these gaps tend to surface.

Minority shareholders often hold more sway than expected. If their rights and responsibilities aren’t clearly set out in writing, they may block key resolutions, delay approvals, or resist integration efforts once the deal is done. UAE law gives little statutory protection to minority interests, so enforceability usually comes down to what’s written in the contracts. If the documents are silent, vague or contradictory, the deal can stall, or worse, close with unresolved issues that resurface months later.

Working through these gaps early, with a firm handle on decision-making thresholds and legacy arrangements, helps prevent surprises later on.

Due diligence and blind spots
Well-run businesses can still carry hidden issues below the surface. Long-serving employees may have informal claims or unpaid entitlements that never made it into HR records. UBO registers might be incomplete, or missing altogether, especially in older structures. Financials sometimes rely on handshake deals, off-books arrangements or intercompany loans with no paperwork.

There’s no central source of truth for private UAE companies, so these issues tend to surface only once the process is underway. This risk is sharper with family-run businesses or fast-growing firms that scaled without tightening controls. Early diligence, even before heads of terms, can give buyers a clearer picture and flag deal-breakers while there’s still room to negotiate.

Bribery, sanctions and cross-border exposure
Foreign buyers often need to meet stricter compliance rules, especially those covered by the US or UK anti-bribery laws. While most UAE firms follow local requirements, their internal controls are not always set up to meet international standards. Issues often show up around third-party payments, missing registers or unclear procurement records.

These problems don’t necessarily always point to misconduct, but they can slow the deal, raise questions or trigger further checks. It helps to spot them early. Starting compliance reviews at the front end gives buyers time to fix gaps, clean up records or adjust the deal before they become a sticking point.

Dispute risk and enforcement limits
Enforcing complex deal terms through UAE courts is rarely straightforward. Local litigation can be slow and unpredictable in corporate disputes, so parties often rely on arbitration. But even that only works if the clauses are well drafted. DIFC and ADGM offer better tools, though they still come with limits, especially when the deal cuts across onshore and offshore jurisdictions.

It helps to think early about how any disputes would play out in practice. That means structuring security and indemnities in a way that stands up across borders, and avoiding over-reliance on foreign judgments that may prove hard to enforce locally.

Final steps and forward planning
UAE M&A deals can move quickly, but only when key hurdles are tackled early. Delays often come from predictable snags lime board approvals, notarised documents or slow asset transfers—that can be built into timelines. A clean execution depends less on speed and more on preparation.