How Proper Corporate Restructuring and Share Transfers Structuring Saves Millions

Restructurings and share transfers do not usually go wrong dramatically. They go wrong quietly, and the cost shows up later: a transfer that turns out not to have taken effect, a tax charge that a different sequence would have avoided, a consent obtained after completion instead of before, a price argued about for two years because nobody wrote down how it was to be calculated. The money saved by doing this work properly is mostly money not lost, which is why it is easy to underrate until the first time it happens.

What follows is a plain account of where value leaks in UAE corporate transactions, and what closes each gap.

Leak one: a transfer that never took effect

A share transfer is a legal act with formalities, and the formalities differ depending on where the company sits. For a mainland limited liability company, the Commercial Companies Law, Federal Decree-Law No. 32 of 2021 — which replaced Federal Law No. 2 of 2015 — governs how partners' shares move. The memorandum of association has to be amended and the change recorded with the licensing authority; a signed sale agreement on its own does not make the buyer a partner as against the company or third parties. The Law also gives the existing partners a right of pre-emption when shares are offered to an outsider, so a deal negotiated without dealing with the other shareholders first can be undone by them.

In the DIFC and ADGM the mechanics are those of a common-law companies regime: the transfer instrument, the directors' approval where the articles require it, and the entry in the company's register of members, with filings to the relevant registrar. There is no notarisation step, but there are articles and shareholder agreements that frequently contain restrictions the parties have forgotten about.

The check is unglamorous and takes an afternoon: read the constitutional documents and any shareholders' agreement before agreeing terms, not after signing.

Leak two: legacy ownership arrangements nobody unwound

Many UAE groups still carry structures built for a rule that no longer exists. Federal Decree-Law No. 26 of 2020 removed the requirement that a UAE national hold 51% of a mainland company, and 100% foreign ownership is now permitted for most mainland activities, subject to the list of activities of strategic impact. Nominee holdings, side letters, pledges and declarations of trust created to work around the old position are still sitting in files, and they are a live problem: they complicate any sale, they are difficult to explain to a buyer's counsel, and they can be worth arguing about when the registered holder's circumstances change.

A restructuring is the natural moment to clean this up and align the register with the commercial reality. Note the distinction that survives: a local service agent appointed for the branch of a foreign company is a different arrangement and remains lawful.

Leak three: tax handled after the deal instead of during it

Corporate tax under Federal Decree-Law No. 47 of 2022 applies to financial years starting on or after 1 June 2023, at 0% on taxable income up to AED 375,000 and 9% above. That changes how UAE reorganisations are planned, because the order of steps now has consequences it did not have before. Selling shares, selling a business and moving assets between group members are three different transactions with three different profiles, and relief may be available for qualifying transfers within a group and for certain business restructurings — subject to conditions, and to clawback if things move on again within the period the law specifies. Those conditions are checked at the start or not at all.

VAT at 5%, under Federal Decree-Law No. 8 of 2017 as amended by Federal Decree-Law No. 18 of 2022, is the other half of the picture: a sale of shares and a sale of the underlying business are treated differently, and groups sometimes discover the difference on the return rather than in the deal. Getting a view on both before the structure is fixed is what our tax advisory team is for, and it is the cheapest hour in the transaction.

One legacy item can now be closed out: the Economic Substance Regulations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024, with obligations remaining only for FY2019 to FY2022. Holding structures that were built around ESR filings should be reviewed on their current merits rather than kept alive out of habit.

Leak four: consents discovered at completion

Ownership changes are rarely purely private. A licensing authority or free zone registrar will need to record the change; a regulated business — financial services in the DIFC or ADGM, healthcare, insurance, contracting classifications — needs a change-of-control approval from its regulator before, not after; banks have change-of-control clauses in facility agreements; landlords, franchisors and key customers often have them too. Government contracts and agency registrations can be the most sensitive of all.

Each of these is manageable when identified in week one and expensive when identified in the closing checklist. Building the consent list at the outset also determines the realistic timetable, which is usually longer than the commercial team assumes.

Leak five: a price with no mechanism behind it

Disputes after a share sale cluster around a small number of drafting points: how completion accounts are prepared and by whom, what the earn-out actually measures and who controls the business while it is being measured, what the warranties cover and for how long, what is specifically indemnified because it is already known about, and where the money sits until the position is clear. A valuation methodology written into the shareholders' agreement in advance prevents more litigation than any dispute clause.

The same document should carry the mechanics that make a future exit possible at all: pre-emption on transfer, drag-along and tag-along rights, deadlock resolution, reserved matters, and what happens on the death, incapacity or departure of a working shareholder. This is governance rather than deal-making, and a sound corporate governance framework is what stops a shareholding dispute from becoming an operational one.

People and contracts do not move with the shares

A share transfer leaves the employing entity intact; a business transfer does not. Where a business, rather than a company, changes hands, employment arrangements have to be dealt with under Federal Decree-Law No. 33 of 2021, which replaced Federal Law No. 8 of 1980, and immigration files, establishment cards and end-of-service positions all need attention. Contracts, licences and permits held by the transferring entity may need assignment or reissue, and some simply cannot be moved. That difference is often the reason to buy shares rather than assets, or the reverse.

Sequence beats cleverness

Most of the value in this work comes from doing a handful of things in the right order: read the constitutional documents, map the consents, take a tax view before the structure is fixed, agree the price mechanism in writing, and only then execute. Structures that look elegant on a slide but were never checked against the company's own articles or its regulator's rules are where the millions go.

Related services: corporate restructuring and share transfers, corporate and commercial advice, and tax advice on share transfers.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

Additional Resources

• Annual corporate compliance and maintenance
• Building a corporate governance framework
• Corporate governance advisory in practice
• A guide to corporate restructuring and share transfers in the UAE