Generally speaking, the UAE Commercial Company Law (“UAE Company Law”) has relatively clear regulations on the transfer of company shares, including the right to transfer shares, the procedural requirements for transfer, etc. However, different free zone authorities (such as Dubai South Free Zone, Dubai Airport Free Zone, Jebel Ali Free Zone, Dubai Development Authority, DMCC, etc.) have their own regulations, which are different from the rules of a mainland company. Hence, the rules applicable to the share transfer of Dubai company are not as plain as we wish.

As a foreign investor to transfer shares of your Dubai/UAE company, you have to be aware of at least the following:

1. Whether there is a priority right between shareholders for the transfer of shares. According to the provisions of UAE Company Law, in a limited liability company, if a shareholder wants to transfer his shares, the other shareholders have a period of 30 days to excise their priority right to purchase. If the remaining shareholders do not exercise their priority right to purchase shares within such 30 days upon receipt of the notice, the shareholder intending to transfer is free to dispose of their shares. If multiple shareholders request the exercise of the priority right, the transferred shares will be distributed according to the shareholding ratio of the remaining shareholders.

2. The shareholding restrictions. According to the provisions of the UAE Company Law and related regulations, for some activities the shareholding of a limited liability company by locals shall be 100% or not less than 51%. This requirement is not relaxed due to the transfer of shares. Therefore, no matter how the shares are transferred, the final share of the company held by the locals must be 100% or not less than 51%, whichever percentage is applicable.

3. Different document requirements in different scenarios of share transfer. The UAE Company Law stipulates that the transfer of a UAE company’s shares must be done through a written agreement, so it is very important to draft a professional shares sale/purchase agreement to clarify the rights and obligations of shareholders, before and after the share transfer. At the same time, the document requirements are different for the transfer of shares by a natural person and the transfer of shares by a company, and professional institutions are recommended to be engaged to prepare the documents to.

4. Finally, the cost and other expenses of the share transfer. There is no capital gains tax or stamp duty in Dubai/UAE for the share transfer, but the transfer of shares is not without cost. The government will charge various fees, and some of the fees are related to the registered capital of the company. This is often a point being ignored by many investors when taking shares of a UAE/Dubai company.

To buy company shares is a shortcut to enter the UAE/Dubai market, but you have to pay attention to some relevant legal regulations, to have your acquisition not only leave no "defects" but also progress smoothly, saving time and costs.

Should you need any assistance, feel free to contact us.