Acquisition of Public Joint Stock Companies in the mainland UAE: Legal Framework, Shareholder Protections, and Regulatory Oversight

Over the past two decades, the United Arab Emirates (UAE) has emerged as a leading financial hub in the Middle East, attracting investors and companies from across the globe. In line with this evolution, the UAE has significantly strengthened its legal infrastructure governing corporate governance, capital markets, and investor protections. One of the most important areas of reform has been the regulation of mergers and acquisitions (M&A) involving public joint stock companies (PJSCs). These entities are either listed on local exchanges or have conducted public offerings, thereby becoming subject to the oversight of the Securities and Commodities Authority (SCA). 

The legal framework governing acquisitions of PJSCs in the UAE is grounded in Federal Decree Law No. 32 of 2021 on Commercial Companies (the “Companies Law”), particularly Article 299, and is operationalised through two landmark regulatory decisions issued by the SCA: Chairman’s Decision No. 18/R.M of 2017 (the “Acquisition Rules”) and Federal Administrative Decision No. 62/RT/2017 (the “Technical Requirements Decision”). These regulations form the cornerstone of an increasingly sophisticated regime designed to promote transparency, procedural fairness, and market integrity. 

 This blog is a part of our The Essential Guide to Shareholders’ Agreements blogpost.

Article 299: Statutory Foundation for Regulated Acquisitions 

 

Triggering Acquisition Regulations 

Article 299(1) of the Companies Law establishes the statutory obligation for any person or group who acquires, or intends to acquire, shares or convertible securities in a UAE PJSC to comply with the acquisition regulations issued by the SCA. The provision is triggered not only by direct purchases but also by indirect acquisitions or actions that may result in effective control, including options, derivatives, warrants, and coordinated actions by associated parties. 

The concept of an “associated group” is critical. It includes any parties acting in concert, thereby preventing attempts to circumvent regulatory oversight through nominee arrangements or staggered acquisitions by affiliated entities. This aligns with international standards, including the UK Takeover Code, which similarly regulates concert parties to ensure control shifts are transparent and appropriately supervised. 

Policy Rationale 

The rationale behind Article 299 is twofold. First, it seeks to protect the market from sudden or opaque changes in corporate control that could disadvantage shareholders or destabilise the company. Second, it ensures that shareholders, particularly retail or minority investors, are informed of potential changes that affect ownership dynamics, governance, or future strategic direction. 

 

Squeeze-Out and Sell-Out Rights: Enforcing Fairness and Exit Options 

 

Article 299(2): A Dual Protection Mechanism 

Article 299(2) introduces two complementary mechanisms for acquisitions: the squeeze-out right and the sell-out right. These rights serve to balance the interests of majority acquirers with those of minority shareholders in the context of a control transaction. 

Under the squeeze-out mechanism, a shareholder or group whose ownership reaches a threshold specified by the SCA, typically expected to be 90%, may compel the remaining minority shareholders to sell their shares at a fair market price. Conversely, the sell-out mechanism allows minority shareholders who collectively hold a certain of shareholding to require the acquirer to purchase their shares under similar fair conditions. 

A Comparative Perspective 

These rights mirror practices in mature markets. In the United Kingdom, for example, Sections 979–981 of the Companies Act 2006 provide similar mechanisms post-takeover, allowing for clean-up of remaining shares after a successful bid. The UAE’s framework, however, innovates by embedding both mechanisms into its primary commercial legislation, with operational details delegated to the SCA. 

Hypothetical Scenario 

Consider a scenario in which an institutional investor acquires 92% of a PJSC’s share capital following a public offer. Under Article 299(2), the investor could initiate a squeeze-out of the remaining 8% minority shareholders, ensuring operational efficiency and simplified governance. Conversely, if a group of minority investors holding 12% are dissatisfied with the strategic direction post-acquisition, they may invoke the sell-out right, compelling the majority to buy them out. 

The role of the SCA here is central. It not only determines the ownership thresholds but also ensures that the valuation methodology and procedural safeguards are adhered to, protecting against abuse or undervaluation. 

Share-Based Acquisitions: Capital Increase Under Article 299(3) 

Article 299(3) permits PJSCs to increase their capital by special resolution in order to acquire another company. In such cases, new shares may be issued directly to the shareholders or partners of the acquired entity. This structure is commonly used in share-for-share exchanges, where the acquiring company offers its own equity as consideration, thereby conserving cash and aligning long-term interests. 

The key advantage of this provision is that such capital increases are exempt from the requirements of Articles 199 to 201 of the Companies Law, which would otherwise mandate pre-emptive rights or detailed subscription procedures. This flexibility makes Article 299(3) a valuable tool for structuring mergers and intra-group restructurings. 

SCA Decision No. 18/R.M of 2017: Acquisition Types and Shareholder Protections 

 

Mandatory and Voluntary Offers 

The Acquisition Rules distinguish between mandatory and voluntary acquisition offers. A mandatory offer is triggered when a shareholder crosses a specified threshold. At this point, the acquirer must offer to purchase the remaining shares on equal terms, ensuring that minority shareholders are treated fairly and can exit under the same conditions. 

Voluntary offers may be made at any time, even before the threshold is reached, but are subject to similar disclosure and approval standards. These offers are useful in friendly deals, where the acquirer and target board negotiate terms before approaching the broader shareholder base. 

Target Board Circular and Independent Advice 

The regulation requires the board of the target PJSC to issue a circular expressing its opinion on the offer. This circular must disclose: 

    1. The board’s recommendation to accept or reject the offer; 
    2. The advice of an independent financial adviser approved by the SCA; 
    3. The potential impact on the company’s strategy, governance, and employees. 

This ensures that shareholders can make informed decisions based on objective advice and full disclosure of the implications of the transaction. 

Technical Content Requirements: Federal Administrative Decision No. 62/RT/2017 

 

Offer Document Disclosure Standards 

The Technical Requirements Decision outlines what must be included in an Offer Document, the central disclosure tool in any acquisition. This includes: 

    1. Financial data of the acquirer and target for the past three fiscal years; 
    2. Ownership percentages exceeding 5% for all relevant parties; 
    3. Details of the offer structure, including price, conditions, and consideration; 
    4. Disclosure of any arrangements with directors, shareholders, or related parties; 
    5. If cash is offered, a bank guarantee from a UAE bank proving the acquirer’s solvency. 

Where securities are used as consideration, especially unlisted securities, then the offer must include an independent valuation and a prospectus in accordance with SCA offering rules. 

Disclosure of Dealings and Related Party Agreements 

Parties involved in the acquisition must disclose any transactions involving the target’s securities in the six months prior to the offer. This includes insider trades, coordinated purchases, or voting arrangements. Related-party transactions and compensation arrangements with directors must also be disclosed. 

These provisions are crucial for preventing insider trading, collusion, or unfair treatment of shareholders. The SCA monitors compliance, and non-disclosure may result in regulatory intervention or civil liability. 

Practical Application and the Role of the SCA 

 

Regulatory Supervision 

The Securities and Commodities Authority plays a central role in administering and enforcing acquisition regulations. It reviews all Offer Documents, board circulars, and supporting documents before an offer can be published. It also verifies compliance with disclosure obligations, fairness of pricing, and procedural safeguards. 

In case of disputes, such as challenges to valuation or allegations of unfair treatment, the SCA may act as an adjudicating or supervisory body, ensuring that investor protections are not compromised. 

Institutional Maturity and International Standards 

The UAE’s framework mirrors global standards in many respects including the US SEC’s tender offer rules, the EU Takeover Directive, and the UK Takeover Code. This alignment increases confidence among institutional investors and cross-border acquirers, reinforcing the UAE’s status as a competitive financial jurisdiction. 

International and Regional Context 

 

Relevance to Foreign Investors 

For international investors seeking control in a UAE-listed PJSC, understanding the regulatory architecture under Article 299 and the SCA’s decisions is essential. These rules not only safeguard the interests of minority shareholders but also provide legal certainty, thereby reducing deal execution risk. 

The presence of independent valuation requirements, bank guarantees, and board oversight ensures that offers are robust and withstand scrutiny, even in complex or politically sensitive environments. 

DIFC and ADGM Distinctions 

It is worth noting that this regime applies to mainland PJSCs regulated by the SCA. Companies incorporated in financial free zones such as the Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM) are subject to separate corporate laws and regulatory authorities (the DFSA and FSRA, respectively). While these zones have similar principles, their acquisition regimes differ in procedural detail and jurisdictional scope. 

Conclusion: A Modern Regime for Corporate Transactions 

The UAE’s acquisition regime for public joint stock companies has matured into a comprehensive legal framework that promotes corporate transparency, market efficiency, and investor protection. The combination of Article 299 of the Companies Law, SCA Decision No. 18/R.M of 2017, and Federal Administrative Decision No. 62/RT/2017 provides a robust regulatory system that governs the full lifecycle of public takeovers — from threshold triggers and disclosure obligations to squeeze-out rights and post-acquisition execution. 

This structure supports not only domestic consolidation but also cross-border M&A, strategic joint ventures, and institutional investment. By empowering the SCA with supervisory and enforcement authority, the UAE has reinforced its commitment to capital markets governance, helping to foster an environment where public company acquisitions are conducted with transparency, predictability, and legal certainty. 

As the UAE continues to diversify its economy and attract foreign investment, this legal and regulatory framework will remain a cornerstone of its capital market infrastructure — one that aligns with global best practices and strengthens its position as a hub for financial and corporate activity in the Middle East. 

 

Disclaimer

The opinions expressed in this blog are those of the respective authors. ATB Legal does not endorse these opinions. While we make every effort to ensure the factual accuracy of the information provided in our blogs, inaccuracies may occur due to changes in the legislative landscape or human errors. It is important to note that ATB Legal does not assume any responsibility for actions taken based on the information presented in these blogs. We strongly recommend taking professional advise to ensure the best possible solution for your individual circumstances.

About ATB Legal

ATB Legal is a full-service legal consultancy in the UAE providing services in dispute resolution (DIFC Courts, ADGM Courts, mainland litigation management and Arbitrations), corporate and commercial matters, IP, business set up and UAE taxation. We also have a personal law department providing advice on marriage, divorce and wills & estate planning for expats.

Please feel free to reach out to us at office@atblegal.com for a non-obligatory initial consultation.

Vipul Kulshreshtha

Vipul is a seasoned legal professional with over four years of experience in general corporate practice, mergers and acquisitions, private equity and venture capital fund raise. Vipul is well versed with the regulatory aspects of various sectors such as IT, fintech, healthcare, foreign exchange and financial services.

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