SELLING YOUR UAE BUSINESS? HERE ARE 10 THINGS TO KEEP IN MIND

Most people who own a small or medium business in the UAE sell one only once. The buyer, and the advisers behind them, have done it many times, and that gap shows up in the paperwork.

AT A GLANCE

1. WHAT DUE DILIGENCE SHOULD A SELLER PREPARE BEFORE LISTING?

Get the paperwork in order before going to market, so you are ready when a buyer starts asking questions. Deals here stall on documents more often than on price, because the trade licence says one thing, the memorandum another and the share register a third.

• The ownership trail: the memorandum and its amendments, share certificates, resolutions and a current beneficial ownership register (Cabinet Decision No. 109 of 2023). Check that trademarks and software are registered or assigned to the Company, rather than remaining in the founder’s name.

2. HOW IS A BUSINESS VALUED FOR SALE IN UAE?

No law sets a price. Most businesses this size sell at a multiple of adjusted profit, or asset value plus goodwill. The catch is how much of that depends on things the buyer may not get: the licence, visa quota, lease and biggest contracts may each need consent from someone else.

• Adjust the profit for the owner’s salary, relatives on the payroll and personal costs. A seller who under-declared for years cannot later claim profits it never reported.

3. WHICH LICENSES AND APPROVALS ARE NEEDED TO TRANSFER OWNERSHIP?

A signed contract does not move ownership. On the mainland the licensing authority must approve the change, and the memorandum must be amended and notarised before a Notary Public, under the Commercial Companies Law (Federal Decree-Law No. 32 of 2021). Free zones have their own steps, and nothing is registered while fines or visas are outstanding. Make approvals a condition of completion.

• Who the buyer is can change the answer: most mainland activities are open to full foreign ownership, but strategic and regulated sectors need the regulator’s consent first.

4. SHOULD THE DEAL BE AN ASSET SALE OR A SHARE SALE?

A share sale hands over the company itself, with its licences, contracts, staff and debts attached. An asset sale picks out what the buyer wants, but it then needs its own licence, must move contracts across and re-hire the staff. Buyers want assets, sellers want shares, and tax usually decides.

• VAT (Federal Decree-Law No. 8 of 2017): selling assets as a going concern to another registered business can fall outside VAT. Otherwise five per cent applies.
• Corporate tax (Federal Decree-Law No. 47 of 2022): profit on selling assets is taxed inside the company, while an individual selling personally held shares is usually outside the tax net.

5. WHICH EMPLOYEE LIABILITIES TRANSFER TO THE BUYER?

In a share sale, the employer does not change, so staff keep their service dates and what they have built up stays in the company as the buyer’s cost. In an asset sale, they are terminated and hired again, triggering end-of-service pay and new permits under the Labour Law (Federal Decree-Law No. 33 of 2021).

• Gratuity is broadly twenty-one days’ basic pay for each of the first five years and thirty days after that, up to a cap. Make sure the amount has actually been set aside, and account for any Emiratisation shortfalls that will remain with the Company. 

6. HOW SHOULD DEBTS AND CONTINGENT LIABILITIES BE HANDLED?

Debts do not vanish on completion. In a share sale, they stay where they are. In an asset sale, the Commercial Transactions Law (Federal Decree-Law No. 50 of 2022) treats the sale of a business as a special transaction with its own creditor protections, so a buyer can still be chased for what it thought it left behind.

• Personal guarantees given to banks and landlords do not end when the sale does. Only the bank or landlord can release them, and that takes time.

7. WHAT SHOULD A SELLER’S NON-COMPETE CLAUSE COVER?

Keep it narrow: one defined activity, one area, a fixed period, and named people, including relatives and companies they control, since a promise binding the seller alone is easy to walk around. The widest possible wording is not safe either, because a court may cut it down or ignore it. A promise not to poach customers and staff is usually easier to enforce, and worth paying for.

8. HOW DOES ESCROW PROTECT A SELLER AFTER COMPLETION?

Escrow means part of the price is held by a neutral third party until agreed conditions are met or the claims period ends. There is no general escrow law onshore, so it works only as well as the contract behind it, and the protection lies in how the money is released rather than how much.

• Spell out what triggers release and who decides a dispute, because escrow with no way out becomes the buyer’s bargaining chip. The alternatives are a bank guarantee, a share pledge or cheques, enforceable since 2022 straight through the execution court.

9. WHICH WARRANTIES AND INDEMNITIES SHOULD A SELLER LIMIT?

Warranties are statements about the business a buyer can sue on if they prove untrue. Give only those known to be accurate, disclose the problems, and resist indemnities for risks outside the seller’s control. The protection is in the limits: a ceiling on claims, a minimum size before one counts, and deadlines that run longer for tax.

• The disclosure letter is the seller’s main shield: anything properly disclosed cannot be claimed later, which makes it the best-value work in the deal.

10. WHAT IF THE BUYER DEFAULTS AFTER SIGNING?

It depends on what has already been registered. Once a mainland share transfer is notarised and recorded, undoing it needs the buyer’s agreement or a court order, so handing over shares before the money clears gives away the seller’s leverage. Time registration to payment, and pick a forum where the buyer holds assets.

• A penalty figure in the contract is not the last word. Under the Civil Code (Federal Decree-Law No. 25 of 2025), a court can adjust agreed compensation to the loss actually suffered, so a large number is not the deterrent it looks.

CONCLUSION

Selling a business in the UAE is not conceptually different from selling one elsewhere. However, there is execution risk in unfamiliar places: the licensing authority, the notary, the immigration file and the labour register. Sellers who lose money usually do so on points that were visible beforehand, which is why engaging UAE counsel before signing a term sheet is the cheapest protection here.

Authors: Shantanu Mukherjee, Varun Alase