Selling a Business in Dubai

Pauline Familara
Pauline Familara
10 January 2024
Selling a Business in Dubai

Often, company owners in the Emirates sell their businesses. The reason for such a decision can be the company’s closure due to relocation to another country. In this case, selling becomes an alternative to going through the liquidation process. Selling a successful business is also resorted to resolving conflicts between owners when there is a desire to invest in a new business direction or due to an urgent need for a large sum of money. This decision is facilitated by the high demand for purchasing operating companies in the UAE.

For the same reason, professional players here are engaged in creating and promoting companies to sell them profitably. In this article, we will discuss the risks involved in selling a business in Dubai, as well as the specifics of the buying and selling process.

Possible Risks for the Seller

Usually, when selling a ready-made business in Dubai, the risks for its owner are minimal or non-existent if serious mistakes are avoided during the preparation stage. Risks for the seller may arise in the following cases:

  • Problems with primary documentation, contracts, labor agreements, and operational and financial activities of the company — to detect and address these promptly, an internal audit should be conducted. After all, the buyer will conduct a similar review, and if discrepancies are found between the declared information and the data obtained, the deal may fall through.
  • Premature announcement of the business sale can cause concern among staff, shareholders, and partners, leading to undesirable consequences for the business. During negotiations, the buyer can be introduced as a new manager.
  • Specifying the company itself as the object of sale in the contract carries the risk of the deal being declared invalid. Instead of “company,” it’s advisable to list what it means: licenses, brand names, trademarks, and other tangible and intangible assets.
  • Selling the business in Dubai to competitors if you cannot demonstrate the operation’s overall picture to the buyer, keeping specific nuances hidden. Otherwise, there is a risk of essential assets being copied, followed by the deal falling apart.
  • Selling the business in stages: if you start by selling the most critical assets first, this can lead to the deal breaking down and financial loss.

To avoid these mistakes, hiring a legal and financial consultant is necessary. The business owner may know everything about their business. Still, only a qualified expert with extensive experience conducting business purchase and sale transactions in the Emirates can assess the legal and financial aspects. Moreover, for the confidentiality of the transaction, it is advisable to seek the assistance of an external lawyer and financier, even if such specialists are available in your company’s staff.

Possible Risks for the Buyer

The main risks lie with the buyer when selling business in Dubai and the UAE. While the seller risks deal failure, invalidation, or crucial information disclosure to competitors, the buyer might do the following:

  • Acquire a loss-making company with a poor credit history and a market reputation on the brink of bankruptcy.
  • Assume responsibility for the debts of the previous owners to third parties.
  • Inherit a poor client base consisting of a few major suppliers and consumers. Upon a change in ownership, they may refuse further collaboration, necessitating the search for new partners and customers, involving additional investment in advertising.
  • Encounter employee resistance toward the new owner, leading to layoffs, high turnover rates, and the need to recruit new specialists.
  • Face immigration issues or labor ministry problems if the workers lack residency visas, labor cards, wage arrears, or face claims and fines from regulatory authorities.

To mitigate these risks, a comprehensive audit of the purchased business can be helpful, including examining the articles of association, contracts, and employment agreements with staff. Engaging an external organization to conduct such checks is advisable. The experts at Dynasty Business Adviser have extensive experience auditing selling businesses in Dubai and can assist buyers in accurately assessing the acquired company.

The Process of Buying and Selling a Ready-Made Business

To sell a business in the Emirates, first and foremost, you must hire financial and legal consultants. In preparation for the sale, it is necessary to gather documents containing information that would interest potential buyers and help them make a decision. The papers should include:

  • Confirmation of ownership and disposal rights of critical material assets and intellectual property.
  • General (non-specific) information about main contractors and suppliers.
  • Financial statements for the last few years.
  • Information on the company’s profits, losses, and turnover on the corporate account over the past few years.
  • Data on company debts.
  • Details about the products offered and a business plan outlining prospects.
  • Market analysis and competitor details.
  • Employee count information.

Subsequently, selling a business in Dubai follows this algorithm:

  1. Preparation of necessary documents: the company’s articles of association, registration certificate, shareholders’ list, and a decision by the founders’ meeting on selling the company.
  2. Finding a buyer can be done through various methods, such as using a broker or a reliable consulting agency. Due to the high demand for profitable businesses in the Emirates, finding a buyer can take only a few days. However, seeking a buyer online is rare here.
  3. Pre-sale preparation involves conducting a detailed audit by the buyer of the company’s financial and operational status and a comprehensive legal assessment of the sold business.
  4. Negotiations occur to agree on the price and payment methods, which can take a long time (up to several months).
  5. Preparation of legal documents and completion of the transaction.

At each stage, independent legal and financial consultants can accompany the seller, guiding their actions or handling the entire transaction process.

Steps after Selling a Business in Dubai

After signing the sale and purchase agreement, it is necessary to re-register shares, tangible assets, and intellectual property in the new owner’s name.

Sometimes, to preserve the financial and operational stability of the company, the buyer may request the seller to continue managing the business for some time after the sale. In this case, the terms of such an agreement should be documented in a separate contract.

Our article provides informational and introductory insights into the nuances of selling business in Dubai or another emirate of the UAE. For professional consultation on this matter, please contact the managers of Dynasty Business Adviser!

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  • "Population, total - Bahrain". World Bank. Retrieved 21 February 2020.

  • "United Arab Emirates profile". BBC News. 14 November 2012. Archived from the original on 27 November 2020. Retrieved 20 February 2023.

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