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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 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.
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:
- meets or exceeds 5% of the company’s share capital; or
- increases 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 from:
- 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.
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