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International Corporate / M&A - United Arab Emirates

posted 12 months ago

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Ahmad Al Khalil

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+97152*****
Ahmad Al Khalil
Hamdan Alshamsi Lawyer & Legal Consultants

As a leading law firm, our practice encompasses a wide range of legal services. We specialise in providing comprehensive legal counsel to individuals, businesses and organisations in many different areas of the law.

We offer a unique approach to mergers and acquisitions which is innovative and comprehensive and considers the interests of both parties involved in the transaction, aiming to create the best possible outcome for everyone. Our team is highly specialised in the different aspects of M&A, including structuring, negotiating and closing transactions. We also stay abreast of the latest trends and legal developments in the M&A field, so that our clients can be confident that they are getting the most up-to-date advice and counsel.

We strive to provide personalised service to all our clients and take the time to understand their individual needs and objectives. Moreover, we leverage our extensive network of contacts to identify potential opportunities and increase the likelihood of successful transactions. Our goal is to ensure that all our clients reach their desired outcomes with the highest levels of efficiency and satisfaction.

In addition to our strong M&A expertise, we have the knowledge and experience in other areas such as DIFC/ADGM disputes, property, criminal, bankruptcy, insurance, labour/employment, construction and governmental affairs.

The corporate legislation in the United Arab Emirates (UAE) is governed by a number of laws, regulations and decrees issued by the Federal Government and the individual Emirates.

UAE Federal Decree-Law No. 32/2021 On Commercial Companies (the “Commercial Companies Law”) is the main legislation regulating the establishment and operations of companies in the UAE. It applies to all commercial companies registered in the UAE and sets out the requirements for the incorporation, capital requirements, management structure, shareholder rights and obligations, and other matters related to the operation of businesses in the UAE.

The UAE also has several other laws and regulations related to corporate matters. The UAE Civil Code, for example, governs matters such as corporate contracts, shareholder rights and liabilities, and the registration of companies. The UAE Commercial Transactions Law governs the formation and operation of companies, and the Commercial Agency Law regulates the registration and operation of commercial agents in the UAE. The UAE Labour Law regulates the employment of workers in the UAE.

The UAE corporate legislation differs from that of neighbouring jurisdictions in a number of ways.

The UAE has a unified commercial code that governs all business activities in the country. In contrast, other jurisdictions may have separate laws that apply to different areas of business, such as shipping, banking and insurance. The UAE is composed of seven separate Emirates, each with its own distinct licensing and regulatory regimes. Additionally, the UAE has free zones, which offer independent legal environments, separate licensing and regulatory regimes, the potential for 100% foreign ownership, and other potential tax benefits.

The Dubai International Financial Centre (DIFC) is one of the free zones in the UAE, that provides regulated and non-regulated licences to various types of entities in a well-regulated tax friendly environment. DIFC financial activities range from banking, insurance, asset management to securities trading. DIFC has its own regulatory framework based on English Common Law, with a range of legislation and regulations designed to protect investors. The DIFC has been instrumental in making the Emirate of Dubai a renowned centre of innovation and technology with its FinTech Hive, the largest financial technology accelerator along with its Innovation Hub.

The Abu Dhabi Global Market (ADGM) is a free zone and an international financial center located in the Emirate of Abu Dhabi, with a regulatory framework based on English Common Law as well. It is the first jurisdiction in the world that has introduced a sophisticated and bespoke regulatory system for spot virtual asset operations. ADGM focuses on creating regulations for ecologically-friendly financial goods and services with an emphasis on sustainability.

Every Emirate is able to set their own rules for foreign investors in terms of shareholding levels, board participation and other restrictions. It is vital for international investors to understand any potential legal or operational limits that may apply to their specific investments.

In the present climate where the demand for corporate legal services in the UAE is driven by the country’s strong economy, growing business opportunities and complex regulatory environment, corporate matters that are in high demand include commercial contract drafting and review, company formation and registration, corporate governance, joint ventures, drafting of shareholders agreement, corporate structuring and restructuring, mergers and acquisitions, employment, intellectual property, compliance and regulatory advice, tax planning and data privacy.

The demand for the above services can be linked to UAE’s highly regulated business environment. The country is a major hub for international business and commerce, so legal services are essential in order to ensure that businesses are compliant with the laws and regulations of the country. Additionally, the UAE is home to a number of innovative startups, so legal advice is needed to help these businesses navigate the complex legal landscape in the country. Corporate legal services also help businesses to protect their intellectual property, comply with regulations and ensure their contracts are legally sound. Additionally, corporate legal services are in demand as businesses look to restructure, merge or acquire other companies. Finally, companies need legal advice when resolving disputes and developing tax strategies.

Below are some of the matters we have handled in 2022 that were noteworthy and, in some circumstances challenging:

• Performed due diligence and drafted Red Flag Report as well as Sale and Purchase Agreement on behalf a Multinational Corporation that specialises in childcare to acquire 2 entities in the UAE for twenty two million Dirhams (AED 22,000,000);

• Advised on the roll out of various corporate governance mechanisms and updating for constitutional documents for a Fortune 500 beverage company;

• Drafted share purchase and shareholders agreements for a partial share sale by one of the largest healthcare and network providers in the Gulf Region for seventeen million Dirhams (AED 17,000,000); and

• Instructed international digital marketing agency on a share sale of its holding company based on a post-money valuation of three million and five hundred thousand US Dollars (USD $ 3,500,000).

The beginning of 2023 is filled with uncertainty, as the world economy is threatened by potential recession and increasing interest rates, as central bankers take on the challenge of controlling inflation in many parts of the world. Investors are still feeling the effects of the post COVIC era, combined with the war in Ukraine, other geopolitical issues, supply chain disruption, and an increase in government oversight.

Nevertheless, the UAE has demonstrated its durability in the face of a global economic recession. Taking advantage of the recent surge in oil prices, diversification of their economies, and the loosening of Covid-19 restrictions, the UAE has become an attractive destination for foreign direct investment, private equity investments and sovereign wealth funds. The UAE recorded three of the region’s largest M&A deals, led by Canadian fund Caisse de Depot et Placement du Quebec’s acquisition of a 22 per cent stake in three of DP World’s Dubai-based assets for $5 billion. The UAE, renowned for its open doors to outside investment, has cities such as Dubai and Abu Dhabi as great places to conduct business. Mergers and Acquisitions in the UAE have yet to reach their peak and are expected to continue to grow in the coming years.

The current economic circumstances suggest that there is a favourable environment for mergers and acquisitions, provided that companies have plans in place and the necessary resources (as well as the courage) to go through with transformative deals- ones that can shape their businesses and help them succeed in the long run. Despite the uncertainty surrounding the short-term economic outlook, caused by the global recession, rising interest rates and other factors, executives have the chance to seize the opportunity provided by the reset in valuations, lack of competition and new assets coming to market and use M&A to gain better returns and grow.

Technology, real estate and hospitality are some of the sectors in the UAE that could attract future foreign direct investment. Start-up firms in the fintech sector are supported by tech hubs subsidised by the governments of Abu Dhabi and Dubai which make them an attractive option for investors. Moreover, the UAE is making efforts to position itself as a global travel destination by investing in new hotels and resorts which is attracting numerous new acquisitions. Finally, real estate in the UAE has been a major draw for investors from abroad, both for residential and commercial purposes.

In addition to the above, there is a rise in mergers between entities such as sovereign wealth funds and private equity firms as this allows international private equity firms to work with local private equity firms to leverage their local knowledge and expertise in return for access to the larger international markets. Similarly, the increase in oil price has led to an increased demand for renewable energy, causing sovereign wealth funds to consider investing in these projects.

In recent times we have been working with SMEs to help grow their businesses by way of debt or equity raises. We have a mixture of clients we are working with going through seed funding with the other side looking for series funding instead. We are involved with entities who are at the start of their journey, assisting with the documentation and structure of the business for the operation of that business, in the middle of seed funding, due diligence and the relevant paperwork, all the way to series A and B.

We have significant expertise in providing legal advice to entrepreneurs. We provide comprehensive legal advice to ensure that their business operations are secure and are built on solid foundations from the beginning. Our advice covers a wide range of topics, such as contract drafting and negotiation, intellectual property protection, prevention of dispute resolution and litigation, employment law, corporate governance, tax planning and compliance, and privacy protection. We advise clients on the potential legal risks and liabilities associated with their particular business operations, as well as the legal requirements that are applicable to their specific industry. For instance, we help clients draft employment agreements in line with applicable laws that protect their business interests, develop corporate governance policies to ensure compliance with applicable laws, and negotiate contracts to protect their intellectual property rights. Additionally, we can assist with the implementation of tax plans as recently introduced by the UAE government to ensure that these are tailored to their business operations, as well as provide guidance on any privacy issues that may arise. Ultimately, our goal is to help entrepreneurs understand their legal obligations and make informed decisions that will protect their business interests.

We try to ensure a well-informed global advisory scope for our clients who are based overseas, or have operations in other jurisdictions, by taking a multi-disciplinary approach. This approach involves the use of teams of lawyers who are admitted to practise as lawyers in multiple jurisdictions. In our teams, we have both common law qualified solicitors and experts in the UAE law. Our lawyers have experience working in the jurisdictions in which the clients are based or have operations in and are up to date on the latest developments in other jurisdictions. This way, our law firm ensures that our clients have access to the best possible legal advice and services, no matter where they are based. Because of the background and various disciplines our teams provides, we are sensitive to assisting our global clients with specific attention to cultural and market requirements and sensitivities. Additionally, we have a network of experienced lawyers in other jurisdictions, such as in Europe, Asia, and Latina America which allows us to provide our clients with comprehensive advice on a global scale. Furthermore, we strive to attend international conferences and seminars to stay abreast of changes in international law and to connect with international lawyers and firms.

Moreover, we are constantly attending and participating in networking events that relate to current matters such as blockchain advancement and their applications, artificial intelligence, corporate tax, corporate governance and startup pitch days.

Some of the recent UAE laws include:

a) The Federal Decree-Law No. 32 of 2021 on Commercial Companies Law, which came into effect from 2 January 2022. The Companies Law introduced the Special Purpose Acquisition Company (SPAC) as a new form of public joint stock company, with the Securities and Commodities Authority (SCA) providing further guidance for its regulation. The Companies Law also made changes to limited liability and joint stock companies, such as notice periods and quorum requirements, and remuneration limits for directors with the aim of bringing the UAE’s commercial regime in line with international best practice.

b) The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses which will levy a federal corporate tax on business profits for financial years starting on or after 1 June 2023. The tax rate is 9% on profits over AED 375,000 and 0% on profits under this amount. Companies incorporated in free zones will continue to be exempt from taxation, and there will be no withholding taxes on domestic and cross border payments. Loss utilisation rules and foreign tax credits will also be available.

c) The Virtual Assets and Related Activities Regulations 2023 (“VARA Regulations”) which set out the authority’s comprehensive Virtual Asset Regime for the Emirate of Dubai which it prohibits engaging in virtual asset activities in the UAE (excluding the ADGM and DIFC) without obtaining approval and a licence from the UAE Securities and Commodities Authority (“SCA”) or a local licensing authority (such as VARA). VARA issued a range of rulebooks which sets out the obligations of Virtual Asset Service Providers.

d) The Law on Intellectual Property include Federal Decree Law No. 36 of 2021 on Trademark, Federal Law No. 38 of 2021 on Copyrights and Neighbouring Rights and Federal Decree Law No. 17 of 2002 on Regulation and Protection of Industrial Property of Patents, Industrial Drawings and Designs, which provide protection and sets out the procedures for the registration of trademarks, copyrights and patents in the UAE.

e) The Federal Decree Law No. 33 of 2021 Regulating Labour Relations brought about more flexibility for employees in the private and public sector, addressing key issues such as abolishing unlimited employment contracts, introducing different employment types and flexible working, along with additional leave types.

Our core services include corporate law, real estate law, contract law, estate planning, family law, tax law and various litigation. We also have extensive experience in bankruptcy law, and intellectual property law. Our team of experienced attorneys is equipped to handle any legal matter, no matter the complexity.

Our team of experienced attorneys assists clients in setting up and managing their businesses, dealing with contract disputes, negotiating leases, and other legal matters. We also help with the formation of partnerships, limited liability companies, and other business entities. We are also knowledgeable in other areas of the law, including insurance law, labour and employment law, construction law, and governmental affairs.

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