Country snapshot

Trends and climate

What is the current state of the M&A market in your jurisdiction?

After a relatively quiet start to 2017, the M&A market in the United Arab Emirates and the broader Middle East and Africa region is showing signs of strong activity into 2018. M&A activity has increased by 14% during the fourth quarter of 2017, the fastest rate of growth in six quarters. 

Have any significant economic or political developments affected the M&A market in your jurisdiction over the past 12 months?

The UAE economy is affected by the global oil price – both directly as an oil producer and indirectly as a financial, legal and cultural hub for the Middle East region. As the oil price has recovered from below $30 per barrel in 2016 to over $60 per barrel in 2018, the M&A market has strengthened. The United Arab Emirates is also seeking to diversify its economy away from a dependency on oil, which is driving M&A activity in non-oil sectors, such as digital technology.

In early Summer 2018, the government announced that restrictions on foreign ownership of companies would be eased. This has historically been a limiting factor for M&A transaction activity, and it is anticipated that once the detailed changes are known (expected in late 2018) this may be a stimulus for increased M&A activity – particularly by foreign parties.

Are any sectors experiencing significant M&A activity?

The strongest growth in deal announcements in 2018 is from the UAE’s healthcare, materials and consumer and retail sectors. The top performing sectors for M&A in 2017 in the region included:

  • financial services, with 16 deals at a value of $4.5 billion;
  • industrial and chemicals, with 13 deals at a value of over $3.9 billion; and
  • telecoms, with seven deals at a value of over $3.2 billion.


Are there any proposals for legal reform in your jurisdiction?

In 2015 the United Arab Emirates enacted a new commercial companies law. Companies had until 30 June 2017 to amend their memoranda and articles of association to comply with the law. In 2016 the UAE Ministry of Economy issued Resolution 694, which had the effect of deeming companies’ memoranda and articles of association to be amended in accordance with the new law. Further, in 2016 the United Arab Emirates enacted a new bankruptcy law. Therefore, while it is expected that further implementing regulations for both laws will be issued, it is unlikely that a new companies or bankruptcy law is imminent. However, as set out below, there are proposals to relax the United Arab Emirate’s foreign ownership rules in certain circumstances.

As indicated above, there are also proposals to ease limitations on foreign ownership of UAE companies – details of which are expected to be announced in late 2018. Such easing of restrictions is expected to stimulate M&A transaction activity, particularly by foreign investors.

Legal framework


What legislation governs M&A in your jurisdiction?

Most UAE companies incorporated outside a UAE free zone (ie, ‘onshore’ companies) are regulated by the Federal Law concerning Commercial Companies (2/2015). Part 7 of the law sets out the rules for transformations, mergers and acquisitions.

There is also significant corporate activity within the numerous free zones established throughout the United Arab Emirates. The laws of the relevant free zones apply to companies established therein (ie, ‘offshore’ companies). However, the Federal Law concerning Commercial Companies (2/2015) also applies to offshore companies insofar as it is not varied by the relevant free zone rules and to the extent that offshore companies may undertake activities onshore.


How is the M&A market regulated?

The M&A market is regulated by the Federal Law concerning Commercial Companies (2/2015) and its ancillary legislation. Listed companies are also regulated by the mandatory Corporate Governance Code and other circulars and regulations issued by the Securities and Commodities Authority. Companies incorporated in the Dubai International Finance Centre (DIFC) free zone are regulated by the Dubai Financial Services Authority, whose regulatory mandate covers financial services and any activity undertaken by DIFC entities.

Are there specific rules for particular sectors?

In addition to offshore companies, the Federal Law concerning Commercial Companies (2/2015) does not apply to the following companies, provided that a special provision to that effect is included in the company’s memorandum and articles of association:

•companies that are excluded by a Federal Cabinet resolution or special federal law;

•companies wholly owned by the federal government, a local government or any other companies wholly owned by such companies; and

•energy or infrastructure companies in which the federal government or a local government directly or indirectly holds 25% of capital.

Relevant rules may also impact M&A activity in certain sectors – for example, Ministry of Health regulations will affect activity in the healthcare sector and Central Bank regulations will affect activity in the banking sector.

Types of acquisition

What are the different ways to acquire a company in your jurisdiction?

Part 7 of the Federal Law concerning Commercial Companies (2/2015) allows UAE companies to be acquired by way of:

•a merger, through which the merged companies expire and a new legal entity is created which is the legal successor to the merged entities; or

•an acquisition, through which the buyer becomes the shareholder of the target company.


Due diligence requirements

What due diligence is necessary for buyers?

As in other comparable jurisdictions, the buyer should consider what level of due diligence is required based on the target’s business and the transaction’s circumstances. In the United Arab Emirates, it is particularly important to verify the ownership of the target given that generally at least 51% of an ‘onshore’ company (ie, a UAE company incorporated outside a UAE free zone) must be owned by a UAE national or entity (although see the proposed changes to foreign ownership rules below).


What information is available to buyers?

Company searches are generally unavailable for onshore UAE companies. Only the relevant company (or an individual authorised by a power of attorney given by that company) can obtain a copy of the trade licence and commercial registration certificate, so the ownership structure should be verified through the due diligence process.

What information can and cannot be disclosed when dealing with a public company?

Under UAE law, the following actions are not permitted:

•the provision of false information, statements or data that could affect the market value of securities and an investor’s decision on whether to invest; and

•the exploration of undisclosed information to achieve personal benefits that could affect the prices of securities.

As regards target companies in the Dubai International Finance Centre free zone that are listed on NASDAQ Dubai, if a bidder, the target or any persons acting on behalf of a bidder or the target deals with securities during the bid period, this must be disclosed to the Dubai Financial Services Authority (DFSA).


How is stakebuilding regulated?

The UAE stock exchanges are:

•the Dubai Financial Market (DFM);

•the Abu Dhabi Stock Exchange (ADSE); and

•NASDAQ Dubai.

The M&A regimes applicable to target companies listed on the DFM and the ADSE are broadly the same. The regime applicable to target companies listed on NASDAQ Dubai is different to the DFM/ADSE regime and is broadly similar to the UK regime.

Bidders for companies listed on the DFM or ADSE must make an immediate post-transaction disclosure when:

•a shareholding in the company:

omeets or exceeds 5% of the company’s share capital; or

oincreases by 1% over the 5% threshold; or

•a shareholding in a parent, subsidiary or affiliate of the company meets or exceeds 10%.

The bidder must also make a pre-transaction disclosure before purchasing 20% or more of the company’s shares. The Securities and Commodities Authority and the relevant stock exchange have the right to prevent such an acquisition.

Bidders for companies listed on NASDAQ Dubai must notify the DFSA and the target within five business days after:

  • any holding of 5% of votes attaching to all securities; or
  • any further increase or decrease of 1% in the bidder’s shareholding in the company above or below 5%.

Any dealings by the bidder and any person acting in concert during the bid period must be disclosed without delay to the DFSA and NASDAQ Dubai and be announced on the target’s website.


Preliminary agreements

What preliminary agreements are commonly drafted?

The outline terms of a transaction are often recorded in writing in a heads of terms. The parties should consider whether they wish to be legally bound by the heads of terms and review the wording accordingly. This is particularly the case in the United Arab Emirates, where the requirement of good faith may create an enforceable obligation to proceed in accordance with the heads of terms. The heads of terms may be governed by either UAE or foreign law.

Principal documentation

What documents are required?

The documents generally required for a private transaction include:

•an information memorandum;

  • a confidentiality agreement;
  • a process letter;
  • an offer letter;
  • an exclusivity agreement;
  • an acquisition agreement;
  • a disclosure letter;
  • ancillary agreements;
  • signing authorities; and
  • filings.

Which side normally prepares the first drafts?

The seller will usually draft the confidentiality agreement, process letter, information memorandum and exclusivity agreement and the buyer will draft the offer letter. Either party may draft the acquisition agreement, disclosure letter and ancillary agreements.

What are the substantive clauses that comprise an acquisition agreement?

Substantive clauses in an acquisition agreement typically include:

  • a sale and purchase agreement;
  • a purchase price;
  • accounting mechanics and the passing of risk;
  • completion mechanics;
  • warranties and indemnities; and
  • post-completion covenants and separation issues.

What provisions are made for deal protection?

Deal protection may be strengthened by a requirement for the buyer to pay a refundable deposit into an escrow account when a non-binding offer is given. The deposit will be:

  • refunded to the buyer if the seller does not proceed with the transaction; or
  • paid to the seller if the buyer does not make a binding offer at the end of the due diligence stage.

Closing documentation

What documents are normally executed at signing and closing?

In addition to the principal documentation listed above, on a share sale, the parties must sign a standard share transfer form (in Arabic or dual English/Arabic) before a UAE notary to transfer the shares from the seller to the buyer.

Are there formalities for the execution of documents by foreign companies?

UAE law contains no specific provisions relating to the execution of a UAE law-governed agreement by a foreign entity. However, it is not uncommon for a local counterparty to require a foreign counterparty to execute a contract pursuant to a power of attorney. Further, there is no requirement for the power of attorney to be notarised, unless it is to be used in a government process, such as registering an amendment to a company’s memorandum of association.

Are digital signatures binding and enforceable?

The use and enforceability of electronic signatures is governed by the Federal Law concerning E-Transactions and E-Commerce (1/2006). An electronic signature which meets the requirements of the law has legal force and effect. The term ‘electronic signature’ is broadly defined and includes all types of signature (eg, alphabetical, numerical, symbolic or vocal) which is attached to or logically associated with an electronic agreement and which serves as a method of authentication. Reliance on electronic signatures must be reasonable, which is generally based on the following factors:

  • the nature, value and importance of the transaction being supported by the electronic signature;
  • the appropriate steps taken by the relying party to verify the identity of the electronic signatory;
  • evidence of prior breach or revocation of the electronic signature;
  • previous reliance on an electronic signature between the contracting parties; and
  • any other relevant factors.
  • In addition, there are certain categories of transaction and document for which the use of an electronic signature is not allowed, including:
  • negotiable instruments;
  • transactions involving immovable property;
  • documents legally required to be attested before a notary; and
  • any other document or transaction exempted by a special law.

Foreign law and ownership

Foreign law

Can agreements provide for a foreign governing law?

Share purchase agreements and ancillary documents are often governed by English law or another generally recognised law commonly used in international M&A transactions. If all of the parties are UAE nationals, it is common (although not compulsory) for the documents to be governed by UAE law.

Foreign ownership

What provisions and/or restrictions are there for foreign ownership?

Currently, at least 51% of an ‘onshore’ company (ie, a company incorporated outside a UAE free zone) must be owned by a UAE national or entity. However, up to 100% of an ‘offshore’ company (ie, a free zone company) can be foreign owned.

In May 2018, the UAE cabinet passed a resolution to relax the onshore foreign ownership requirement that UAE companies be owned at least 51% by UAE nationals or entities, to allow non-nationals to own up to and including 100% of ‘onshore’ companies. Currently, 100% foreign ownership is permitted on a discretionary basis to a limited number of companies only. Further details of this resolution are not yet available, so it is unclear whether the relaxation will apply to all UAE companies or only to those which meet certain criteria.

Valuation and consideration


How are companies valued?

There are no specific valuation requirements for private companies.

On the takeover of a public company, the value of the shares must be assessed by a financial consultant to be elected by:

•the Securities and Commodities Authority (SCA) from its roll of approved financial consultants; or

•entities with financial and technical valuation experience approved by the SCA.

The SCA may object to the assessment and appoint another assessor as required.

M&A transactions between companies listed on NASDAQ Dubai are regulated by the Takeover Rules Module of the Dubai Financial Services Authority Rulebook. The rulebook provides that the person providing a valuation of assets must ensure that the valuation is supported by the opinion of an appropriate external and independent valuer.


What types of consideration can be offered?

UAE law has no requirements concerning the form of consideration. Cash is a common form of consideration used in acquisitions in the United Arab Emirates. In the Dubai International Finance Centre free zone, there are general requirements that consideration must be cash or a cash alternative.


General tips

What issues must be considered when preparing a company for sale?

The same issues apply in the United Arab Emirates as in other jurisdictions: company books, accounts and filings should be up to date and the scope of the target business should be clearly defined. In the United Arab Emirates, many target companies will be government or family owned and, where this is the case, it is particularly important to consider the separation of the target business from other interests.

What tips would you give when negotiating a deal?

When negotiating in the United Arab Emirates, it is important to be aware of cultural sensitivities. It is also worthwhile establishing who will be the key decision maker for the transaction, as this may not be the general manager or local partner.

Hostile takeovers

Are hostile takeovers permitted and what are the possible strategies for the target?

As UAE foreign ownership restrictions prevent a foreign company from acquiring majority ownership and control of an onshore company, a hostile bid by a foreign entity is impossible. A UAE company could launch a hostile bid against a UAE public company (both of which are wholly or majority owned by UAE entities). However, this is unlikely in practice given the UAE business culture in which many public companies are government or family owned.

If a target were subject to a hostile takeover, it could approach the regulatory authorities with a view to blocking the takeover or requiring the bidder to increase its offer price.

Warranties and indemnities

Scope of warranties

What do warranties and indemnities typically cover and how should they be negotiated?

Warranties and indemnities cover a broad range of issues relating to the target, including:

  • authority and capacity;
  • title;
  • accounts;
  • contracts;
  • employees;
  • real estate;
  • intellectual property;
  • information technology; and
  • environmental matters.


A tax covenant may not be required given that many of the taxes applicable in other jurisdictions do not apply in the United Arab Emirates, although value added tax has been levied in the United Arab Emirates since 1 January 2018.

Limitations and remedies

Are there limitations on warranties?

A seller may seek to limit its potential exposure to warranty claims, as is customary in other jurisdictions.

What are the remedies for a breach of warranty?

A buyer’s remedy for a breach of warranty is a claim for damages for breach of contract.

Are there time limits or restrictions for bringing claims under warranties?

The Civil Code provides a 15-year limitation period for civil claims. As in other civil systems, UAE law requires parties to perform their obligations under a contract in good faith, which may prevent a claim – for example, if a buyer has knowledge of a seller’s breach of warranty when a contract is entered into and subsequently attempts to bring a claim for breach of warranty.

Tax and fees

Considerations and rates

What are the tax considerations (including any applicable rates)?

At present, the United Arab Emirates has no corporation, income, capital gains, withholding or sales taxes.

All Gulf Cooperation Council (GCC) members agreed to introduce value added tax (VAT) by 1 January 2019. In the United Arab Emirates, the government issued Federal Decree-Law 8/2017 concerning Value Added Tax, which introduced VAT with effect from 1 January 2018 at a rate of 5%. Businesses with turnover in excess of Dh375,000 (approximately $100,000) must register.

A transfer fee of 0.5% of transfer value capped at Dh15,000 (approximately $4,000) is payable to the notary on the transfer of shares in UAE companies. A transfer fee of between 1% to 4%, depending on the emirate and the nature of the interest being transferred, is generally levied on the transfer of real estate in the United Arab Emirates.

The UAE government is also exploring other tax options in an effort to diversify its tax base. However, these are still being considered and the government has stated that, at present, it is not considering introducing personal income taxes.

Exemptions and mitigation

Are any tax exemptions or reliefs available?

Not applicable in this jurisdiction.

What are the common methods used to mitigate tax liability?

Not applicable in this jurisdiction.


What fees are likely to be involved?

Notary fees are payable in connection with the execution of agreements to transfer shares, real estate and other assets.

Management and directors

Management buy-outs

What are the rules on management buy-outs?

No specific rules or typical structures for management buy-outs exist in the United Arab Emirates and the transaction will be determined by the relevant parties. 

Directors’ duties

What duties do directors have in relation to M&A?

In accordance with the Federal Law concerning Commercial Companies (2/2015), a director must act in accordance with the company’s objectives and the powers granted to him or her by the shareholders. Therefore, a director must ensure that he or she has obtained the necessary internal approvals before entering into any arrangement to bind the company.

Each director is liable towards the company and third party for any fraudulent actions that he or she carries out and will be required to compensate the company for any losses or expenses incurred due to his or her:

  • abuse of power;
  • violation of the provisions of any law in force, the company’s memorandum of association or his or her contract of appointment; or
  • gross error.

Any provision in the memorandum of association or the contract of appointment contradicting this provision is null and void.

A director must not undertake any activities competing with the company’s line of business unless he or she obtains approval from the company’s shareholders. In addition, a director may not vote on any resolution in which he or she has a direct or indirect interest and is required to report in writing to the other directors with full details of such matter.

A director is prohibited from utilising or disclosing company secrets or attempting to damage the company’s business. If the director violates this prohibition, he or she may be imprisoned for up to six months and fined no less than Dh50,000 (approximately $14,000).

In addition, the code for listed joint stock companies provides that a director shall, when exercising his or her powers and duties:

  • act honestly and faithfully, taking into consideration the interests of the company and its shareholders;
  • make the utmost effort; and
  • adhere to applicable laws, regulations and resolutions, as well as the company’s articles of association and internal regulations.

The Securities and Commodities Authority may enforce such provisions with a range of administrative penalties, including a warning, delisting and fines.


Consultation and transfer

How are employees involved in the process?

No specific obligation to consult with employees on a merger or acquisition exists in the United Arab Emirates.

What rules govern the transfer of employees to a buyer?

On a share sale, an employee’s contract remains in place and unchanged (except where the parties agree otherwise) as there is no change to the employer. Should the employer wish to terminate the employment contract, the employer would have to follow normal procedures (by serving a contractual notice period and paying contractual and statutory entitlements).

There is no statutory provision for the automatic transfer of employees on a business sale. Usually, the seller agrees to terminate employees’ employment contracts by giving the contractual notice period required (or a payment in lieu of notice) and paying their contractual and statutory entitlements. The buyer then agrees to re-hire the employees, usually on the same terms and conditions (subject to any necessary changes for group arrangements). Arrangements must also be made to cancel the immigration sponsorship of the employee by the seller and to install the buyer as the new immigration sponsor.

Alternatively, the seller may be able to redeploy employees employed in the business unit being sold to other parts of its business. If an employee refuses to take up employment with the buyer and the seller has no role for him or her, he or she is effectively made redundant. It would therefore be possible for an employee in this situation to claim arbitrary dismissal, raising a complaint with the Labour Department and potentially a labour court.

An employee’s employment contract cannot be terminated where he or she is on maternity or annual leave or off work for health reasons. However, an employer may terminate an employee’s employment contract if he or she is unable to resume work after 90 days of sick leave.


What are the rules in relation to company pension rights in the event of an acquisition?

Only certain UAE nationals and Gulf Corporation Council nationals working in the United Arab Emirates are eligible for state pensions. Other employees are instead entitled to an end of service gratuity. A private pension scheme may be offered as an alternative to an end of service gratuity provided that it is no less beneficial, but such schemes are not widely used in the United Arab Emirates. The end of service gratuity payment is calculated with reference to the employee’s length of service and the last basic pay received before termination.

As there are no regulations in the UAE providing for the automatic transfer of employees pursuant to a business transfer or reorganisation, the movement of employees following an acquisition must be effected by a process of termination and re-hire. On termination of employment, the accrued entitlements – including end of service gratuity, payment in lieu of accrued untaken holiday and contractual notice – become due. In practice, these entitlements may be rolled over into the new employment with the new employing entity by way of an express agreement with each employee to be transferred (unless the employee insists on being paid the accrued entitlements).

Other relevant considerations


What legislation governs competition issues relating to M&A?

The Federal Law concerning Regulating Competition Law (4/2012) regulates competition within the United Arab Emirates and provides for three types of anti-competitive behaviour:

  • restrictive agreements;
  • the abuse of a dominant position; and
  • economic concentrations.


In accordance with Cabinet Resolution 13 of 2016, the provisions relating to the abuse of a dominant position and economic concentrations are triggered only where the market share of the relevant parties exceeds 40% of the total transactions in the relevant market. The prohibition on restrictive agreements will not be enforced if the parties to them have no more than a 10% share of the relevant market. The relevant percentages may be amended by the Federal Cabinet.

The Federal Law concerning Regulating Competition Law (4/2012) contains a number of exemptions, including with regard to:

  • the telecoms sector;
  • the financial services sector;
  • the media sector;
  • the gas and petrol sector;
  • the pharmaceutical production and distribution sector;
  • the utilities sector;
  • the transportation and railways sector; and
  • establishments of which at least 50% is owned by the federal or an emirate government.


The relevant parties may apply to the UAE Ministry of Economy Competition Authority for an exemption from the rules on restrictive agreements and dominant practices no less than 30 days before the execution of an amendment to the restrictive agreement or practice relating to a dominant position. The parties must prove that such an amendment will lead to:

  • the enhancement of economic development;
  • the improved performance of the establishments and their competitive ability;
  • the development of production or distribution systems; or
  • the achievement of other benefits for consumers.


Where a merger or acquisition would result in the combined business having a market share in excess of 40% of the relevant market, an application to have that economic concentration pre-approved should be submitted to the authority at least 30 days before the combined operations take effect.

When considering any application, the authority will consider:

  • the relevant market;
  • the relevant parties’ market shares;
  • the relevant parties’ revenues and assets;
  • the actual or potential level of competition for a number of competitors;
  • the price or quantitative variance in commodities or services from the expected levels in the absence of such practices;
  • the production volume of and demand for the relevant commodities or services;
  • the level of impact on supply or aggregate demand of the relevant commodities or services;
  • the diversity of the relevant commodities or services;
  • the impact of the practice on market access, expansion or exit therefrom;
  • the ease of access to financial facilities from capital markets;
  • the time during which such practices emerge;
  • the date of competition among competitors in a certain market; and
  • the impact of the practice on consumers.



Are any anti-bribery provisions in force?

Under the UAE Penal Code, bribery is a criminal offence which can be committed by public officers or private individuals.

It is an offence to offer a public officer a donation, advantage or promise of any kind in order to commit or omit an act in violation of the duties of his or her functions, even if the public officer does not accept the bribe. It is also an offence for a public officer to accept for him or herself or another a gift, benefit or privilege to influence him or her as a public officer.

The perpetrator will be exempt from prosecution if he or she reports the bribery offence to the judicial or administrative authorities before the offence is discovered.

Penalties range from fines to up to 10 years’ imprisonment.


What happens if the company being bought is in receivership or bankrupt?

The new Decree by Federal Law concerning Bankruptcy (9/2016) came into force in December 2016. As with the Federal Law concerning Commercial Companies (2/2015), the bankruptcy law applies to ‘onshore’ companies (ie, UAE companies incorporated outside a UAE free zone) and ‘offshore’ companies (ie, free zone companies) to the extent that the rules of the relevant free zone allow the offshore company to operate onshore. The bankruptcy law sets out the following procedures for companies in financial difficulty.

Preventative composition A debtor company can apply to the court for a resolution of preventative composition provided that it:

  • has not failed to pay due debts for more than 30 consecutive working days; and
  • is not insolvent.


If the resolution is granted, the court will appoint a trustee to manage the company’s business. The resolution itself does not crystallise or cancel the company’s debts. The company may not dispose of any assets or shares or borrow any sums and must continue to perform its obligations unless the trustee successfully applies for a court resolution otherwise. All creditors must be notified in two local widespread daily newspapers (one of which must be printed in Arabic and the other in English). Within 45 working days after the resolution, the trustee must submit a preventative compensation scheme to the court, which must be approved by the majority of creditors representing two-thirds of accepted debts and then by the court. Secured creditors cannot vote on the scheme unless they waive security in advance. The scheme must be executed within three years after the court’s approval or within a further three years if extended by the majority of creditors who own two-thirds of the debts not paid according to the scheme.

Restructuring If a debtor company has not paid its debts for more than 30 consecutive working days, the company must, and creditors with an aggregate debt of at least Dh100,000 (approximately $27,000) may, initiate bankruptcy proceedings. As with a preventative composition resolution, if the court accepts the bankruptcy proceedings, it will appoint a trustee who will notify the company’s creditors of the proceedings. The trustee will prepare for the court a report on the company’s business with assessments of the possibility of restructuring or liquidating the business. If the company expresses its willingness to continue its business and the court issues a resolution to restructure the company, the trustee must submit a restructuring scheme to the court within three months, which must be approved by the majority of creditors representing two-thirds of accepted debts and then by the court. Secured creditors cannot vote on the scheme unless they waive security in advance. The scheme must be executed within five years after the court’s approval or within a further three years if extended by the majority of creditors who own two-thirds of the debts not paid according to the scheme.

Bankruptcy Following the submission of the trustee’s report, the court may decide that the company should be liquidated rather than restructured if restructuring would be inappropriate in the circumstances. Within three working days after the judgment of the bankruptcy declaration, the trustee must publish the judgment in two local widespread daily newspapers (one of which must be printed in Arabic and the other in English). The court may permit the company, on request from and under the supervision of the trustee, to carry on its business with the aim of obtaining the best possible price for up to six months, with a possible extension of a further two months. The trustee will sell the company’s assets and during the bankruptcy period all correspondence relating to the company’s business must state that the company is in liquidation. All of the company’s debts become immediately payable on the court’s judgment. The trustee must submit for the court’s approval a distribution list of liquidated assets in accordance with the order of priority set out in the bankruptcy law. If it is evident that the company’s assets are insufficient to pay for at least 20% of its debts, the court may order the directors or managers to pay all or part of the company’s debts if they were responsible for the company’s losses. The following disposals made during the two years before the initiation of the bankruptcy proceedings are not enforceable against the creditors by third parties:

•donations, gifts or free services;

•transactions in which the company’s obligations notably exceed the other party’s obligations;

•payment of any debts before maturity or by a method other than that agreed between the debtor and creditor; and

•arrangement of any guarantee to secure a previous debt.

During bankruptcy proceedings, the company may not manage or dispose of its own assets and the trustee may order the company to do anything necessary to maintain the interests of its business.

On a preventative composition, restructuring or bankruptcy resolution, the company’s litigation and judicial proceedings other than in respect of secured debts shall cease until the relevant scheme is approved. However, on a bankruptcy resolution, unlike on a preventative composition or restructuring resolution, all of the debtor’s debts, including secured debts, become immediately payable.

As the bankruptcy law is new and repeals “any provision violating or contradicting” the law, it is unclear to what extent the bankruptcy provisions of the earlier Federal Law concerning Commercial Companies (2/2015) will continue to apply. The latter provides that a company, even in liquidation, can merge with another company with shareholder approval. However, a merging company’s creditors may object to a merger. Each merging company must, within 10 working days after the approval of the merger by the shareholders, notify its creditors and publish a notification in two local widespread daily newspapers (one of which must be printed in Arabic). The notification must stipulate the right of a creditor of any of the merging companies, a holder of debenture bonds or sukuk (ie, Islamic bonds) or any other person concerned to object to the merger at the company’s main office and to hand over a copy of the objection to the Ministry of Economy or the Securities and Commodities Authority, as the case may be, provided that the objection is made within 30 days after the date of notification. If no objection is made within 30 days, the merger can proceed.

A creditor who objects and has not been repaid within 30 days after the date of notification may appeal to the competent court to obtain a merger suspension order. If it is proved that the merger will unlawfully damage the applicant’s interests, the court may issue an order to suspend the merger. The merger will remain suspended unless:

•the objector waives his or her objection;

•the court dismisses the objection by a conclusive judgment; or

•the company pays the debt if it has matured or provides sufficient guarantees if it is deferred.

Under the Federal Law concerning Commercial Companies (2/2015), if at any time losses of a company amount to half its capital, the directors must propose the dissolution of the company to the shareholders. Where losses exceed 75% of the company’s share capital, shareholders holding greater than 25% of the company can require its dissolution.