Notification and clearance timetableFiling formalities
What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?
For transactions that trigger the notification obligation, the Regulations provide that filing must be made at least 30 days prior to the conclusion of the draft contract or agreement bringing about the economic concentration.
It is not entirely clear how this provision relating to a ‘draft contract or agreement’ will operate in practice, and whether the sale and purchase agreement may in fact be signed, with closing conditional on receipt of competition clearance. Parties may be reluctant to approach the competition authority until they have a firm deal, evidenced by a legally binding agreement.
Failure to notify a notifiable transaction may result in fines of between 2 and 5 per cent of the infringing company’s annual revenue deriving from the sale of the relevant goods and services in the UAE. Alternatively, where this cannot be assessed, a fine of between 500,000 and 5 million UAE dirhams may be imposed.
The Competition Law also provides that a court may order the closing down of an infringing establishment for a period of three to six months, with the infringement decision published in daily newspapers.
Further, third parties who have been harmed by an infringement may also seek damages.
As noted in question 1, the Competition Law is still in its very early stages, and there have not been any enforcement cases to date.
Which parties are responsible for filing and are filing fees required?
The Competition Law and Regulations require that the ‘concerned entities’ submit a notification for approval of the transaction. Notification is to be made by one entity, authorised to make the filing by the other concerned entities by power of attorney. While the term ‘concerned entity’ would obviously include the entity or entities acquiring control, and information is also required of the target, it is not clear to what extent responsibility for filing (and any liability for failing to file) may also fall on the business being acquired. This may be clarified in due course through the issuance of further Cabinet Resolutions. The Competition Law and Regulations do not currently mention any filing fees.
What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?
Once a notification has been received and all the formal requirements fulfilled, the Ministry will issue a notice to the notifying party confirming that the notification is complete and starting the timetable for review.
From then, the Minister must issue a decision on the concentration within 90 days, which may be extended by an additional 45 days. If no decision is issued during this period, the concentration will be deemed approved.
Notification under UAE merger control law is suspensory, meaning that the parties cannot close prior to clearance.Pre-clearance closing
What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?
Closing before clearance, or any other form of integration before clearance (gun jumping), may result in a fixed fine of between 50,000 and 500,000 dirhams. Other penalties, including the temporary closing down of the establishment for three to six months, or damages claims by affected third parties, may also be applicable (see question 9). As mentioned, the Competition Law is still in its very early stages and there have been no enforcement cases to date for failing to notify, or for closing before clearance.
Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?
As noted in question 7, the Competition Law and Regulations do not distinguish between mergers involving local or foreign entities. While there has not been any enforcement practice to date, in the future, it cannot be excluded that sanctions would apply in the context of foreign transactions, where these meet the notification thresholds in the UAE.
What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?
As noted in questions 7 and 13, the Competition Law and Regulations do not distinguish between mergers involving UAE-based or foreign entities, and a transaction that triggers the notification requirement in the UAE should therefore not be closed prior to obtaining clearance, regardless of the location or nationality of the parties.
As there is currently no enforcement practice of the new Competition Law in the UAE, it is not clear whether and to what extent ‘hold-separate’ or other arrangements, by which the UAE business alone might be made subject to merger clearance in the UAE, may be deemed acceptable by the UAE authorities. These and other possible solutions will need to be tested with the Ministry as competition law and practice develop in the future.Public takeovers
Are there any special merger control rules applicable to public takeover bids?
Mergers and takeover bids relating to public companies listed on the Abu Dhabi Securities Exchange or Dubai Financial Market are subject to discretionary prior approval from the Emirates’ Securities and Commodities Authority and to filing with the relevant stock exchange and potentially with other local regulators in the relevant emirate. Stake building in public companies is also subject to discretionary approval.
The Competition Law, however, does not deal specifically with the issue of public takeover bids, and there are therefore no special merger control rules applicable in this context.Documentation
What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?
The procedural requirements for a merger control filing are set out in the Regulations. Notification must be made in Arabic using the official form from the Ministry and three copies submitted. The following documents must also be appended to the filing, for both the acquirer and the target (including a certified translation of each document that is not originally in Arabic):
- memorandum or articles of association;
- draft share or asset purchase agreement;
- audited financial statements for the past two financial years; and
- details of shareholders and their levels of shareholding.
The notifying parties must also submit a report on the economic dimensions and the competition effects of the concentration. This includes, in particular, a requirement to identify upfront any potential competition issues resulting from the transaction, and to suggest possible remedies.Investigation phases and timetable
What are the typical steps and different phases of the investigation?
The timetable for review is 90 days from receipt of a complete notification, which may be extended by a further 45 days. The Competition Law and Regulations do not currently provide for an expedited review process. This may in part be explained by the fact that the merger control regime is intended to apply only to those transactions that, prima facie, are likely to raise competition concerns, therefore making an expedited review less likely. It remains to be seen, however, whether in practice, faster clearances may be obtained.
What is the statutory timetable for clearance? Can it be speeded up?
Once a notification has been received, a review of the transaction will be undertaken by the Competition Regulation Committee, which may hold meetings with the notifying parties and with other stakeholders. The Committee may also seek the views of third parties and other authorities in the UAE.
After it has completed its review (within a maximum 135 days from receipt of the notification), the Committee will submit a report on the transaction to the Minister of Economy, with a recommendation on the appropriate resolution to be issued. As in other jurisdictions, the transaction may be either approved or prohibited, or alternatively approved subject to conditions.