This article concerns the purchase of onshore
(i.e. non-free zone) limited liability companies in the UAE.
The United Arab Emirates (“UAE”) has emerged as one of the Middle East's most attractive destinations for mergers and acquisitions, with its business-friendly environment and strategic location drawing investors from around the globe. For parties considering acquiring a Limited Liability Company (“LLC”) in the UAE, understanding the legal requirements and processes is crucial for a successful transaction.
Why LLCs Are Popular in the UAE
The LLC is the most common onshore corporate form in the UAE. It combines limited liability protection for shareholders with operational flexibility. An LLC may have between one and fifty shareholders and can be licensed across a very wide range of activities; in practice, the onshore licensing frameworks across the Emirates collectively recognise thousands of distinct commercial and professional activities, which makes the LLC a versatile vehicle for startups, small and medium-sized enterprises, and international groups establishing local operations.
The Legal Framework: What Has Changed
Onshore LLCs are regulated by Federal Decree-Law No. 32 of 2021 (the “CCL”) which has been in force since 2 January 2022.
In parallel, the UAE has introduced a modern merger-control regime under Federal Decree-Law No. 36 of 2023 (the “Competition Law”), with implementing measures now in effect. The regime is mandatory and suspensory for transactions meeting specified thresholds: either (i) combined turnover in the relevant UAE market exceeding AED 300 million in the preceding fiscal year or (ii) a combined market share exceeding 40% in the relevant UAE market. Where either threshold is met, a notification to the Ministry of Economy (the “MoE”) is required, and completion is prohibited until clearance has been obtained. Larger acquisitions that meet these criteria now require pre-closing approval; routine small and mid-market transactions will generally fall outside the thresholds but should still be screened.
Tax Implications
The UAE’s Federal Decree-Law No. 47 of 2022 introduced a federal corporate tax at 9%, effective for financial years beginning on or after 1 June 2023. Tax is now a front-end issue in UAE share deals. It is market practice for share purchase agreements to include tax warranties and, where appropriate, specific tax indemnities covering pre-completion periods, so that unexpected pre-existing liabilities are borne by the seller rather than the purchaser. Transaction modelling should factor in corporate tax alongside any value added tax (“VAT”) and withholding considerations in the purchaser’s home jurisdiction.
Acquisition Routes: Share Purchase vs. Asset Purchase
There are two principal methods for acquiring an LLC in the UAE. The first, and by far the most common, is a share purchase, whereby the purchaser acquires shares from existing shareholders and thereby steps into ownership of the company with all of its assets, liabilities, contracts, and obligations. The second is an asset purchase, which is technically possible but less common in onshore practice because it generally demands multiple third-party consents and detailed re-papering of transferred relationships. Investors therefore tend to prefer share deals for execution certainty and speed, accepting that due diligence must be correspondingly thorough because liabilities remain with the entity.
Documentation in Arabic and the Notarisation Pathway
Implementation of a share transfer in an onshore LLC requires a short-form Arabic share transfer instrument. Where a bilingual (Arabic/English) document is used, it must be produced through a UAE court-certified legal translator, and as a matter of practice the Arabic text will prevail in case of inconsistency.
Typically, two complementary documents are prepared:
- a comprehensive share purchase agreement (SPA), commonly in English, setting out the commercial and legal terms; and
- a short-form Arabic share transfer instrument aligned with the SPA which is used solely for registration purposes.
The share transfer instrument must be executed before a notary public. Execution is not a purely remote or lawyer-only formality; all existing and incoming shareholders, or authorised representatives holding notarised and, if issued abroad, legalised powers of attorney, must attend before the notary. In Dubai, the Dubai Courts Notary Public allows e-Notary (online) execution for signers who can authenticate via the UAE PASS e-platform; others typically sign through a UAE-based attorney holding a duly notarised and, if issued abroad, legalised power of attorney (“POA”). In Abu Dhabi, the Abu Dhabi Judicial Department (“ADJD”) also offers online notary sessions for qualifying parties; where a signer is overseas or cannot meet the digital verification requirements, a UAE-based attorney holding a duly notarised and, if issued abroad, POA can sign on behalf of the signer concerned.
It is important to note that Arabic text will prevail over any translation, and completion is effective only once the Notary Public accepts the documents and the amended trade licence is issued by the relevant authority in the Emirate.
Where the purchaser is a corporate entity, the relevant Emirate’s economic department and the Notary Public will require constitutional documents and shareholder or board resolutions authorising the acquisition. For foreign corporate purchasers, such documents must be legalised up to the UAE embassy in the place of incorporation, attested by the UAE Ministry of Foreign Affairs (“MOFA”), and then translated into Arabic by a UAE court-certified translator.
Pre-emption Rights in Onshore LLCs
Shareholders of an onshore LLC generally benefit from statutory rights of pre-emption on transfers to third parties. As such, and as a practical completion step, any non-selling shareholders issue express waivers so that the transfer can be registered. Failure to obtain the necessary waivers will prevent completion.
Due Diligence: Scope and Objectives
UAE market practice is to complete legal, financial and tax due diligence before execution of definitive documents.
Typical review areas include corporate records; licensing and regulatory approvals; financing arrangements; material contracts; real estate and leases; employment and immigration compliance; intellectual property; insurance; litigation; and tax/VAT.
Particular attention is paid to ownership structure and any historical nominee arrangements, licensing against actual activities conducted, related-party transactions, real estate registration status, and workforce compliance. Findings from due diligence drive the SPA protections: representations and warranties, conditions precedent, specific indemnities, purchase-price retentions, and closing mechanics.
Sequence of Documents and Regulatory Filings
The documentation sequence generally follows a predictable pattern.
Parties usually begin with a non-disclosure agreement (“NDA”) to facilitate the exchange of confidential information. Once headline commercial terms are aligned, a non-binding letter of intent (“LOI”) or term sheet is executed; LOIs frequently include binding exclusivity and confidentiality covenants. For larger or more complex transactions, a due diligence access protocol may be agreed to structure data-room access, management meetings, and Q&A.
The SPA then records the detailed legal and commercial agreement, including price and payment terms, conditions precedent, representations and warranties, indemnities (often including tax), and any post-completion undertakings. The Arabic share transfer instrument is prepared in parallel for notarial execution and registration.
Ancillary documents typically include escrow arrangements for consideration and documents, shareholder and board resolutions of both seller and purchaser, employment agreements for key management who will remain in their posts, novations or consents for contracts that require third-party approval, lease consents, and new bank account mandates.
Where merger-control thresholds are met, then as mentioned above, a filing must be submitted to the MoE, and closing must be suspended until clearance is granted.
Separately, filings must be made with the competent emirate authority to update the company’s records and trade licence—such as the Dubai Department of Economy and Tourism (“DET”) or the Abu Dhabi Department of Economic Development (“ADDED”) so that the new shareholder(s) and any change of manager are reflected in the licence and the memorandum of association.
Timelines and Practical Critical-Path Items
A typical timeline from LOI to completion ranges from approximately eight to sixteen weeks, depending on transaction complexity, diligence findings, regulatory approvals (including any merger-control review), Arabic translation and legalisation lead-times, and the number of shareholder approvals required. Arabic document preparation, notarisation scheduling, and legalisation of foreign corporate authorities frequently sit on the critical path.
In parallel, banks in the UAE run independent know-your-customer (“KYC”) processes and generally require sight of the updated trade licence and authorised signatory documentation before amending bank mandates; this can affect post-completion cash management if not planned for.
Bottom Line
Acquiring an onshore LLC in the UAE remains a practical and widely used route to market entry. Successful execution turns on early screening for merger-control and sector-specific approvals, disciplined due diligence, alignment of the SPA and Arabic notarial instruments, timely legalisation of foreign corporate authorities, and making completion conditional on issuance of the amended trade licence and receipt of all required regulatory consents.
Disclaimer
This article provides general information only and does not constitute legal, tax, or regulatory advice.