How Proper Transactions Compliance Advisory Structuring Saves Millions
A UAE transaction checklist drawn up a few years ago is now wrong in both directions: it says nothing about corporate tax and still treats economic substance as a live obligation.
Deals rarely lose money to a penalty. They lose it because completion slips a quarter, a condition turns out to be unsatisfiable, or a liability nobody priced arrives with the shares. This piece maps the approvals that gate a UAE share transfer, the ownership registers a transaction exposes, the tax questions older checklists omit, and the item most of them should now delete.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
"Transactions compliance" is a label wide enough to mean nothing. Broken down, it is a short list of checks that stand between a signed agreement and a completed one — approvals that must be obtained, registers that must be updated, filings that must be current, and consents without which a transfer simply will not be recorded. The money is not usually lost to a penalty. It is lost because completion slips a quarter, because a condition turns out to be unsatisfiable, or because a liability nobody priced arrives with the shares.
This article sets out where those items sit in a UAE transaction, and what has changed recently enough that older checklists are now wrong in both directions — one item added, another removed.
Related: Our Transactions Compliance Advisory team runs these workstreams alongside the deal rather than after it.
Approvals that gate completion
The first question on any share transaction is who has to say yes before the register can be changed.
- The licensing authority. A change in the ownership of an onshore company is effected through amended constitutional documents, notarisation and the economic department of the emirate. In a free zone, it is the zone's registrar. Neither will act on a share purchase agreement alone.
- Sector regulators. Where the target holds a financial services, insurance, healthcare, education, telecoms or similar licence, a change of control usually needs the sector regulator's prior approval — the Central Bank of the UAE, the Dubai Financial Services Authority in DIFC, or the Financial Services Regulatory Authority in ADGM, among others. These approvals have their own information requirements and their own timetable, and they are the most common reason a long-stop date is missed.
- Merger control. An economic concentration that meets the notification thresholds must be cleared by the Ministry of Economy before it is completed. The thresholds are set by Cabinet decision and have been revisited; check the figures in force at the time of the deal rather than the ones you remember from the last one.
- Contractual consents. Change of control clauses in financing documents, distribution and agency agreements, leases and government contracts. On UAE deals the commercial agency position deserves particular attention, because a registered agency is not simply a contract that can be assigned.
Registers, and why they now matter
UAE companies are required to maintain registers of their shareholders, their ultimate beneficial owners and any nominee arrangements, and to keep the authorities updated when those change. A transaction is precisely the event that triggers the update, and it is also the moment when historic failures surface — a register that was never filed, a beneficial owner recorded as the registered shareholder, or a nominee arrangement documented in a side letter that nobody disclosed.
Two practical consequences. Confirm the target's filings are current as a diligence item, not a completion item, because remediation takes time. And expect the buyer's own ownership chain to be examined: the disclosure obligation attaches to the ultimate individuals, not to the first offshore company in the structure.
Related: Board approvals, delegations and register maintenance are handled by our Business Compliance Advisory Solutions in | Nour Attorneys team.
Tax has been added to the diligence list
UAE transaction checklists drawn up before corporate tax arrived usually contain almost nothing on tax. They are now incomplete.
Corporate tax arrived with Federal Decree-Law No. 47 of 2022 and bites on financial years starting on or after 1 June 2023: 0% on taxable income up to AED 375,000, and 9% on anything above that. On a deal the rate matters far less than where the obligations sit. Registration and filing attach to the entity itself, so they stay with the company when its shares change hands, and related-party dealings inside a group are subject to transfer pricing requirements. VAT is charged at 5% under Federal Decree-Law No. 8 of 2017 as amended by Federal Decree-Law No. 18 of 2022, and whether it attaches to a particular transaction turns on how that transaction is put together.
For a buyer this creates three questions that did not previously exist: is the target registered and current on its returns; are its intra-group arrangements — management fees, licence fees, intercompany loans — documented on terms it could defend; and does the transaction itself carry VAT. For a seller it creates a corresponding exposure, because unfiled or under-declared periods sit inside the company and travel with the shares. Blanket assurances that the UAE is a tax-free jurisdiction have no place in a disclosure letter.
Related: Our vat compliance uae team advises on registration, filings and transaction treatment.
Economic substance: mostly a historic item now
This is the item to delete rather than to add, and a surprising number of checklists still carry it as live.
The Economic Substance Regulations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024. Obligations remain only in respect of the financial years from 2019 to 2022. In a transaction, that means economic substance is a backward-looking diligence question — were notifications and reports filed for the years they were required, and were there penalties — and not an ongoing compliance obligation to be built into the post-completion operating model. Advisers still selling substance programmes for current years are selling something that was withdrawn.
Counterparty checks, and what a share purchase inherits
Screening on a deal is not the same exercise as a firm's ordinary customer onboarding. It runs in two directions: the buyer screens the target, its owners and its significant customers, and the seller screens the buyer and the source of the purchase price.
The structural point is one that gets missed. A share purchase takes the company as it stands, including its historic anti-money laundering failures, its unreported suspicious transactions and any regulatory correspondence it has not resolved. An asset purchase generally leaves those behind with the seller. Where diligence turns up a real compliance history, that finding should feed the deal structure, not just the indemnity schedule — restructuring from a share deal to an asset deal is a legitimate response, and it is far cheaper than an indemnity that has to be enforced later.
The data room contains personal data
Employee files, customer lists, medical or financial records shared with bidders are personal data, and Federal Decree-Law No. 45 of 2021 governs what a seller may do with them once a bidder is let into the room. Where the target or the bidder sits in DIFC or ADGM, the applicable rules are that centre's own rather than the federal ones, so a group with entities on both sides of that line cannot run the exercise on a single set of assumptions. In practice that means redaction or pseudonymisation in the early rounds, a defined purpose limitation in the non-disclosure agreement, controlled access rather than a shared folder, and a decision at completion about what the bidders who did not win are required to destroy. It is a small workstream that becomes an expensive one only when it is skipped.
People move differently depending on the structure
Employment is governed by Federal Decree-Law No. 33 of 2021, which replaced Federal Law No. 8 of 1980. A share transaction leaves employment contracts undisturbed, because the employer entity does not change. An asset or business transfer generally does not carry contracts across automatically: staff have to be ended with the seller and engaged by the buyer, end-of-service entitlements crystallise, and visas and work permits have to be cancelled and reissued through the new employer. That is a cost line and a timetable item, and it is one of the clearest reasons the choice between a share deal and an asset deal should be taken early rather than left to the tax adviser at the end.
Sequencing
- Identify every approval and consent, and the realistic time each takes, before agreeing a completion date.
- Run register, tax and licence status checks at the start of diligence, because remediation is slow.
- Decide share or asset structure once the employment, tax and compliance-history findings are in.
- Set up the data room on a lawful basis from the first document, not after the first bidder complains.
- Make the regulatory approvals conditions precedent, with a long-stop date that reflects the regulator's timetable and not the buyer's board meeting.
Related Services: Explore our transactions and AML compliance advisory services for practical legal support in this area.
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
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