The M&A deal is nearing closing. You now have to transfer the shares of a limited liability company (“LLC”) in Dubai – how do you go about it? This ‘how-to’ note sets out the key steps involved in transferring shares of a Dubai-based LLC.
Step 1: Fill up the Registration and Licensing Application Form
Fill up a registration and application form, also known as Form BR1, for submission to the Department of Economic Development (the “DED”) in Dubai, which can be downloaded from the DED’s website. Tip: Google it rather than searching for it on the DED’s site.
Form BR1 will have to be filled up in Arabic with basic details of the seller and the buyer. The seller, buyer, and the manager of the company signs the form. Accordingly, make sure the signatories are available to sign these document at the initial stage of the share transfer.
Step 2: Submit Form BR1 and the Supporting Documents to Obtain the Initial Approval of the DED
The next step in the process involves obtaining the initial approval of the DED by submitting Form BR1 and the supporting documents. A nominal fee will have to be paid to the DED for reviewing the application.
The following supporting documents will be typically required for each of the entities in the transaction:
>>Seller Supporting Documents
Copy of the passport and Emirates ID (if a resident of the UAE)
- Copy of the constitutional documents (including trade license/certificate of registration and memorandum and articles of association)
- Notarised or legalised board/shareholder resolution of the seller approving the share transfer to the buyer and appointing an individual to execute the share transfer documents on their behalf.
In relation to item (ii) above, note that if the selling shareholder is a UAE company, then the shareholders of the seller company will have to execute the above resolution before a notary public. If the seller company is a foreign company, then the board or shareholder resolution (as the case may be) will have to be legalized. This process involves getting the resolution notarised in the country of registration of the company and attested at the Ministry of Foreign Affairs and the UAE embassy of that country. Once brought to the UAE, the document will have to be attested at the UAE Ministry of Foreign Affairs, legally translated to Arabic (if required), and then attested at the UAE Ministry of Justice.
>>Buyer Supporting Documents
- Copy of the passport and Emirates ID (if a resident in the UAE)
- Details of the Unified ID number (UID) of the individual, which should normally be found on the residency visa or entry permit of the individual.
- Trade license/commercial registration of the company (this document will have to be legalized if the buyer is a foreign company)
- Legalized Memorandum and articles of association of the company (this document will have to be legalized if the buyer is a foreign company)
- Notarised or legalised board/shareholder resolution of the buyer company approving the acquisition of shares of from the seller and appointing an individual to sign all the transfer documents in the UAE on their behalf.
In relation to item (iii) above, if the buyer is a UAE company, then the buyer will have to notarise the shareholder resolution approving the acquisition of shares and appointing an individual to sign the share transfer documents on its behalf. If the buyer is a foreign company, then the board or shareholder resolution (as the case may be) will have to be legalised.
After submission of Form BR1 and the supporting documents, the DED will normally take between 1 to 8 business days to issue its initial approval to the share transfer (“Initial Approval”), depending on the number of sellers and buyers and the complexity of the deal. During this time, the DED essentially carries out security checks on the new shareholder(s) to make sure that there are no red flags involved.
Step 3: Prepare the Short-Form SPA and the Amendment to the Memorandum of Association of the LLC
A short-form share purchase agreement (SPA) and an amendment to the memorandum of association of the company (“Share Transfer Instrument”) will have to be drawn up reflecting that the seller has agreed to sell the shares in the LLC to the buyer and that the buyer has received the consideration for the shares.
The Share Transfer Instrument will have to be in Arabic or be bilingual. If bilingual, the document will have to be stamped by a sworn legal translator.
Step 4: Execute the Share Transfer Instrument before the Notary Public
The Share Transfer Instrument will now have to be executed before the Notary Public. On the execution date, ensure that you carry all the LLC documents with you, including the Initial Approval. If the seller or the buyer is a corporate entity, make sure that the individual representing the seller/buyer company has powers to do so by way of a notarized/legalized power of attorney from the company concerned or by way of an appointment under the notarised/legalised resolution discussed above.
It is common for sellers and buyers to face issues at this stage as the notary public generally scrutinizes the Share Transfer Instrument in detail along with the powers of the individual representing a seller/buyer company. Many a time, if the document delegating the authority to the individual is not clear, the notary public will not allow the individual to execute the Share Transfer Instrument. At this stage, you will have to be patient and use your persuasion skills if you believe that the individual does have the authority to so.
In relation to notary fees, note that it depends on the share capital of the company and the number of signatories.
Step 5: Submit Share Transfer Documents to the DED and Obtain the New Trade License of the Company
Submit the notarized Share Transfer Instrument along with the Initial Approval and supporting documents to the DED. After paying the DED fees (which depends on various factors including the activity of the LLC), the DED will print a copy of the new trade license, which will refer to the details of the new shareholding of the company. Note that the LLCs in Dubai have an e-trade license (there is no original as such) and that the DED only issues a copy of the trade license.