The real estate sector of the United Arab Emirates (UAE) expects to see a number of significant mergers and business consolidations this year. Why? The UAE real estate market is still struggling to recover after real estate prices slumped in 2008 and it is expected that mergers between real estate developers would be needed to survive through these tough economic times. Read about recent merger discussions between two major real estate companies in the UAE – Aldar Properties PJSC and Sorough Real Estate Co. It will be interesting to see how many company mergers will actually take place in 2012.
Company mergers in the UAE are governed primarily by two distinct regulatory regimes; UAE federal law and UAE free zone laws. The UAE Commercial Companies Law No. 8 of 1984 (Companies Law) regulates all companies formed and operating in the UAE, other than companies formed in the UAE free zones. Articles 276 to 280 of the Companies Law contain the rules on the amalgamation of companies. An amalgamation in which the acquirer secures control can be implemented by either an acquisition or a consolidation (Article 276, Companies Law):
- In an acquisition, one or more companies are dissolved and their liabilities are transferred to an existing company. The assets and liabilities of the acquired company are transferred by operation of law to the acquiring company. Article 277 sets out the procedures to be followed in respect of an amalgamation by acquisition.
- In a consolidation, two or more separate companies are consolidated into a single company. A consolidation differs from an acquisition in that a new entity is created, the liabilities of the consolidated companies are transferred to the new company and the consolidated companies are dissolved.
Generally, the prior approval by the relevant government authority is required for all mergers. In some cases, additional approvals may be required depending on the activities of the company (for example, mergers involving banking or financial institutions require the approval of the UAE Central Bank). Diaz Reus provides advice on all aspects of mergers and acquisitions and general transactional work including inward investment, joint ventures and corporate reorganizations in the UAE.