Commercial Disputes Lawyer UAE Guide to Share Purchase Agreements

A share purchase agreement (SPA) in the UAE is a contract whereby the buyer acquires shares of a target company from the seller, governed primarily by Federal Law No. 2 of 2015 on Commercial Companies (CCL) and, where relevant, Federal Decree-Law No. 32/2021 concerning the regulation of commercial companies, both of which apply across the UAE mainland and free zones unless the parties elect a different jurisdiction such as DIFC or ADGM.

Related Services: Explore our Litigation & Dispute Financing and Commercial Disputes services for practical legal support in this area.

WHAT ARE THE ESSENTIAL CLAUSES THAT MUST BE INCLUDED IN A UAE SHARE PURCHASE AGREEMENT?

An SPA in the UAE must contain, at a minimum, the parties' details, a clear description of the shares being sold, the purchase price and payment mechanism, closing conditions, representations and warranties, indemnities, restrictive covenants, governing law and dispute-resolution provisions, and any required regulatory approvals. The CCL requires that the transfer of shares be recorded in the company's share register and, for mainland companies, notified to the relevant licensing authority; free-zone entities must also comply with the specific registrar's rules.

The purchase price clause should specify the currency, any adjustments for net-asset value or working capital, and whether payment is to be made in cash, kind, or via escrow. Representations and warranties typically cover title to shares, capacity, financial statements, tax compliance, employment matters (including gratuity and WPS), licences, intellectual property, litigation, and compliance with anti-money-laundering and data-protection rules (PDPL). Indemnities protect the buyer against breaches of these warranties, often with a survival period of 12-24 months and a monetary cap linked to a percentage of the purchase price. Restrictive covenants (non-compete and non-solicit) must be reasonable in duration, geography, and scope to be enforceable under UAE Competition Law 36/2023. Governing law is usually UAE federal law, with arbitration seated in DIFC or ADGM under DIAC/ICC rules, while interim relief may be sought in onshore courts. Finally, the SPA must note any sector-specific approvals-for example, from the Central Bank for banking entities or from the Dubai Land Department for real-estate holding companies.

HOW DOES THE UAE LAW TREAT WARRANTIES AND INDEMNITIES IN A SHARE PURCHASE AGREEMENT?

Under the CCL, warranties are contractual statements that, if false, give rise to a claim for damages; the law does not prescribe a standard set of warranties, so parties negotiate them based on risk allocation. The seller's warranties are usually qualified by knowledge and disclosure, whereas the buyer seeks absolute warranties on title, capacity, and financial accuracy. Indemnities are contractual obligations to compensate the other party for losses arising from a breach of warranty or a specific indemnity event; they are enforceable provided they are clear, not contrary to public policy, and do not attempt to exclude liability for fraud or wilful misconduct.

The SPA should define the indemnity scope (e.g., tax liabilities, employment claims, environmental issues), the monetary limit (often 10-30 % of the purchase price), the deductible or basket threshold, and the survival period. For employment-related warranties, the UAE Labour Law 33/2021 (articles 51 and 54) governs gratuity, end-of-service benefits, and claims periods, so the SPA must reference these provisions. Tax indemnities refer to Federal Decree-Law No. 7 of 2017 on Tax Procedures and any emirate-level tax regulations; the SPA should state that the seller remains liable for pre-closing tax exposures. The parties may also agree on a "no-wrong-pockets" clause to prevent double recovery, which is recognised under UAE contract law as long as it does not contravene mandatory provisions.

WHAT APPROVALS AND NOTIFICATIONS ARE REQUIRED BEFORE COMPLETING A SHARE TRANSFER IN THE UAE MAINLAND?

Before a share transfer can be effected on the UAE mainland, the parties must obtain any required sector-specific approvals (e.g., from the Central Bank for banks, from the Securities and Commodities Authority for public joint-stock companies, or from the relevant municipality for real-estate activities). The seller must also secure a board resolution authorising the sale and, if the company's memorandum of association imposes restrictions, a shareholders' resolution approving the transaction.

Once internal approvals are in place, the buyer and seller must submit a share transfer request to the relevant licensing authority (e.g., the Department of Economic Development in Dubai) accompanied by the original share certificates, a copy of the SPA, the board and shareholders' resolutions, and proof of payment of any transfer fees. The authority will update the commercial register and issue a new trade licence reflecting the updated shareholding. For companies registered with the Ministry of Economy, the transfer must also be recorded in the UAE Commercial Companies Register.

If the target company holds real-estate assets, the Dubai Land Department (or the respective emirate's land department) must be notified, and the transfer of any associated Ejari contracts or title deeds must be completed. Failure to secure these approvals can render the share transfer void or subject to penalties under the CCL and the relevant sector laws.

HOW ARE DISPUTES ARISING FROM A SHARE PURCHASE AGREEMENT RESOLVED IN THE UAE?

Parties typically elect arbitration as the primary dispute-resolution mechanism, with the seat chosen in either the DIFC or ADGM to benefit from their common-law frameworks and the enforcement-friendly DIFC Courts or ADGM Courts. The arbitration clause should reference the UAE Federal Arbitration Law No. 6 of 2018 (which adopts the UNCITRAL Model Law) and specify the language (usually English), the number of arbitrators, and the applicable institutional rules (DIAC, ICC, LCIA, etc.).

If the parties opt for litigation, the competent court is the civil court of the emirate where the defendant is domiciled or where the contract was performed, applying UAE federal procedural law (Civil Procedure Law No. 11 of 1992, as amended). For claims involving employment matters, the Labour Courts have jurisdiction; for commercial disputes, the Civil Courts hear the case.

Interim relief-such as injunctions to preserve shares or prevent dissipation of assets-can be sought in the onshore courts under Article 14 of the Civil Procedure Law, or in the DIFC/ADGM Courts under their respective laws, which recognise freezing orders and preservation measures. Judgments or arbitral awards are enforceable across the UAE through execution proceedings; foreign awards are enforceable under the UAE's ratification of the New York Convention, subject to attestation and translation requirements.

WHAT ARE THE RISKS ASSOCIATED WITH INADEQUATE DUE DILIGENCE BEFORE SIGNING A SHARE PURCHASE AGREEMENT?

Insufficient due diligence can expose the buyer to hidden liabilities such as undisclosed tax debts, pending litigation, non-compliance with Emiratisation quotas, breaches of the Wage Protection System, or violations of the Personal Data Protection Law (PDPL). These risks may trigger indemnity claims, reduce the value of the acquired shares, or lead to regulatory penalties and reputational damage.

From the seller's perspective, inadequate disclosure can result in claims for misrepresentation, potentially rescinding the contract or awarding damages. The SPA should therefore include a thorough due-diligence clause granting the buyer access to financial statements, tax returns, employee records, licences, contracts, IP registers, and any litigation databases, with a reasonable period (typically 30-60 days) to review the information.

The buyer should also verify that the target company's share register is up to date, that there are no encumbrances on the shares (such as pledges or court orders), and that all statutory filings (ESR, UBO, VAT, corporate tax) are current. Engaging professional advisors-legal, financial, and tax-helps to identify red flags early and to tailor warranties and indemnities accordingly.

HOW DOES THE UAE'S DATA-PROTECTION LAW AFFECT SHARE PURCHASE AGREEMENTS INVOLVING PERSONAL DATA?

The UAE Personal Data Protection Law (PDPL) - Federal Decree-Law No. 45 of 2021 - regulates the processing of personal data and imposes obligations on data controllers and processors. In an SPA, if the target company holds employee, customer, or vendor personal data, the parties must address the lawful basis for data transfer, ensure that appropriate data-processing agreements are in place, and confirm that the seller has complied with PDPL requirements (such as maintaining records of processing activities, implementing security measures, and providing privacy notices).

The SPA should include warranties that the target's data-processing activities are PDPL-compliant, that any cross-border transfers meet the law's conditions (e.g., adequacy decisions or standard contractual clauses), and that there are no unresolved PDPL investigations or fines. Indemnities may cover breaches of PDPL obligations, with survival periods aligned to the limitation period for PDPL claims (generally two years from the date of the breach).

If the transaction involves a free-zone entity that follows its own data-protection regime (e.g., DIFC Data Protection Law 2020 or ADGM Data Protection Regulations 2021), the SPA must specify which regime governs the data and ensure that the transfer complies with both the applicable free-zone law and the UAE PDPL where relevant.

FREQUENTLY ASKED QUESTIONS

What law governs the transfer of shares in a mainland UAE company?
The transfer of shares in a mainland UAE company is governed by Federal Law No. 2 of 2015 on Commercial Companies (CCL), which requires the transaction to be recorded in the company's share register and notified to the relevant licensing authority. The Arabic text of UAE legislation as published in the Official Gazette prevails over any translation.

Can a share purchase agreement include a clause that limits liability for fraud?
No. Under UAE contract law, any clause that attempts to exclude or limit liability for fraud or wilful misconduct is void as it contravenes public policy. The CCL and Civil Transactions Law uphold this principle, so indemnities and warranties must remain enforceable for fraudulent conduct.

How long does the buyer have to bring a claim for breach of warranty under an SPA?
Unless the parties agree otherwise, the limitation period for contractual claims under the UAE Civil Transactions Law is three years from the date the breach is known or ought to have been known. Many SPAs set a shorter contractual survival period (e.g., 12-24 months) for warranty claims, which is enforceable provided it does not defeat the purpose of the limitation law.

Is it mandatory to obtain a no-objection certificate from the Ministry of Human Resources and Emiratisation before transferring shares in a company with employees?
There is no statutory requirement to obtain a MOHRE no-objection certificate solely for a share transfer. However, the seller must warrant that all employment-related obligations (gratuity, WPS, Emiratisation quotas, visa validity) are satisfied, and the buyer may seek indemnities for any pre-closing breaches.

What happens if the target company lacks the necessary licences to operate its business after the share transfer?
If the target company operates without a valid licence, the relevant licensing authority may impose fines, suspend the licence, or initiate closure proceedings. The SPA should include warranties concerning the validity and transferability of all required licences, and indemnities to cover losses arising from licence deficiencies.

Can the parties choose DIFC courts as the forum for disputes instead of arbitration?
Yes. The parties may agree that any dispute arising from the SPA shall be submitted to the DIFC Courts, which apply the DIFC Court Law and DIFC Rules of Civil Procedure. Such a choice must be expressly stated in the governing law and jurisdiction clause, and the DIFC Courts will have exclusive jurisdiction unless the parties later agree otherwise.

Please note that the information provided herein is for general educational purposes only and does not constitute legal advice for any specific situation. For advice tailored to your circumstances, consult a qualified legal professional.

Book a consultation to discuss your legal needs with our experienced team.

If your matter involves Comprehensive Guide to the Stock Purchase and Sale Contract in the UAE: Terms and Risks in the United Arab Emirates, you are welcome to request a consultation with Nour Attorneys. Our team can assess your position under the law currently in force and outline the options available to you. Request a consultation

This article is provided for general informational purposes only and does not constitute legal advice. Reading this article or contacting Nour Attorneys through this website does not create an attorney-client relationship; such a relationship arises only after a conflicts-of-interest check and a signed engagement agreement. Do not send confidential information through this website; information submitted before engagement is not protected by legal privilege. Past results do not guarantee future outcomes. The firm's lawyers practice in the jurisdictions stated in their individual profiles; this article addresses the law of the United Arab Emirates only.