Acquiring Shares in a UAE Exchange House: Key Legal Documents and Regulatory Compliance

The acquisition of shares in UAE exchange house licensed by the Central Bank of the UAE (“CBUAE”) is a multi-layered process that demands careful planning, regulatory insight, and meticulous legal documentation. Unlike typical corporate acquisitions, transactions involving exchange houses are subject to a more rigorous oversight framework. These financial institutions are central to the UAE’s robust remittance ecosystem and given the high volume of cross-border funds they process, they are naturally viewed through a strict compliance lens—particularly in the context of anti-money laundering (AML), counter-terrorism financing (CFT), and financial transparency. 

As such, any party looking to acquire shares—whether a partial stake or full control—must be well-versed in the applicable legal instruments, regulatory requirements, and potential pitfalls. This article elaborate on the end-to-end acquisition process, breaking down both the procedural elements and strategic considerations that parties should account for. 

This blog is a part of our Mergers and Acquisitions Services.

Legal and Financial Due Diligence

The process invariably begins with thorough legal and financial due diligence. While buyers often focus on headline numbers, revenue figures, and profitability metrics, acquiring a UAE exchange house requires a deeper dive into regulatory and compliance records. 

Key due diligence focus areas include

1. 1. 1. Compliance history: Has the Exchange House faced any CBUAE sanctions, penalties, or compliance notices? 
      2. AML/CFT framework: Are internal controls robust? Is the house maintaining proper Know Your Customer (KYC) documentation? Have there been past lapses or gaps? 
      3. Litigation risk: Are there any ongoing or threatened legal claims that could affect valuation or future operations? 
      4. Tax exposure: With the UAE now introducing corporate taxation in certain sectors, tax liabilities or non-compliance could materially affect the deal. 
      5. HR and Employment Contracts: Reviewing employee contracts, senior management incentives, and end-of-service obligations is crucial, especially if the acquisition includes key staff retention. 
      6. Ownership structure and UBO declarations: Clear tracing of beneficial ownership helps flag regulatory or reputational risks. 

Often, the findings from due diligence drive deal structuring. For instance, if material compliance issues are discovered, the acquirer may insist on price adjustments, holdbacks, or indemnity mechanisms in the definitive agreements. 

Letter of Intent (LOI) or Term Sheet

An LOI or Term Sheet functions as a roadmap for the transaction and typically precedes formal legal drafting. Although most of its contents are non-binding, these documents are essential to align expectations early and to avoid prolonged negotiations later. 

Key provisions include: 

1. 1. 1. Transaction scope (e.g., number of shares to be acquired), 
      2. Consideration and payment schedule, 
      3. Due diligence rights, 
      4. Timelines and closing expectations, 
      5. Exclusivity clauses (to prevent the seller from negotiating with others), 
      6. Confidentiality obligations. 

In many cases, the LOI also contains “binding” provisions regarding dispute resolution mechanisms, jurisdiction, or costs, especially if the transaction is cross-border in nature. 

Internal Corporate Approvals

Securing the appropriate internal corporate approvals is not a mere formality—it is a critical legal prerequisite. Under UAE law and typical corporate governance frameworks: 

1. 1. Buyers and sellers must obtain board resolutions and/or shareholder resolutions approving the transaction. 
   2. Foreign corporate buyers must also check their own articles of association or shareholders’ agreement to confirm authority to invest in foreign entities, especially in regulated sectors like financial services. 
   3. In some jurisdictions, board approvals may need to be notarised or apostilled to be accepted in the UAE. 

All these internal resolutions may in certain cases form part of the closing deliverables submitted to CBUAE and the Department of Economic Development (DED). 

Share Purchase Agreement (SPA)

The SPA is the backbone of the transaction. It codifies the commercial terms and legal obligations between the parties and includes several crucial clauses such as: 

1. 1. Consideration structure: Whether payment is lump sum, deferred, or milestone-based. 
   2. Conditions precedent: These often include obtaining CBUAE approval, clearance of employee dues, or finalisation of due diligence to the buyer’s satisfaction. 
   3. Representations and warranties: Covering corporate existence, title to shares, compliance with laws, tax obligations, and material contracts. 
   4. Indemnities: Particularly around breach of representations or undisclosed liabilities. 
   5. Closing deliverables: Including board resolutions, share transfer forms, original share certificates, and amended MOA. 

An SPA involving an exchange house should also contain covenants regarding post-closing cooperation, regulatory filings, and transfer of ongoing liabilities or bank guarantees. 

Shareholders’ Agreement (SHA)

If the buyer is acquiring less than 100% of the shareholding, a SHA becomes a vital governing document. It sets out the legal and operational framework of the new shareholding relationship. 

Common SHA clauses include: 

1. 1. 1. Reserved matters: Certain key decisions (e.g., appointing the GM, amending the MOA, issuing dividends) require unanimous or majority consent. 
      2. Board structure: Right to appoint directors and quorum requirements. 
      3. Transfer restrictions: Including right of first refusal, tag-along, drag-along rights. 
      4. Exit strategy: Whether via sale to a third party, IPO, or buyback. 
      5. Dispute resolution: Frequently arbitration in DIFC or ADGM. 

In the case of a full acquisition, the SHA may be replaced by internal governance policies or simply terminated if the acquirer wishes to simplify the structure. 

CBUAE Approval – A Regulatory Must

No acquisition of shares in an exchange house can legally take place without the prior written approval of the Central Bank of the UAE. This regulatory requirement is absolute and non-negotiable. 

CBUAE typically evaluates: 

1. 1. 1. Financial health and liquidity of the buyer, often requiring audited financials. 
      2. Reputation and track record, including criminal or regulatory history of the UBOs. 
      3. Source of funds, supported by bank statements and formal declarations. 
      4. Strategic rationale and how the acquisition will impact the exchange house’s AML controls, technology, and customer service. 

Buyers must also submit: 

1. 1. UBO declarations, 
   2. Certified passport copies, 
   3. Business plans for at least three years post-acquisition, 
   4. Resumes of proposed senior management. 

In many cases, the CBUAE may request interviews with the buyer or their representatives before granting approval. 

Bank Guarantee Requirement for 100% Acquisitions

A unique feature of acquiring an exchange house is the obligation to furnish a fresh bank guarantee to the CBUAE in the event of a full takeover. This guarantee serves as a safeguard ensuring that the entity continues to meet its financial and operational obligations post-acquisition. 

Key details: 

1. 1. 1. The guarantee must be issued by a UAE-licensed bank. 
      2. The format and value are strictly prescribed by the CBUAE (e.g., AED 5 million or more). 
      3. It must be renewed annually unless replaced. 

This obligation also reinforces the importance of buyers having strong banking relationships in the UAE. 

Amendment of Memorandum of Association (MOA)

Once regulatory approvals are in place, the MOA of the company must be updated to reflect the new shareholding structure. This typically involves: 

1. 1. Drafting a shareholders’ resolution approving the new share distribution, 
   2. Having the resolution and amended MOA notarised before a UAE notary public, 
   3. Submitting the amended documents to the DED or equivalent authority (such as the Abu Dhabi DED). 

It’s worth noting that delays in notarisation can cause closing slippages, especially when signatories are located abroad and require legalisation of their powers of attorney. 

Updated Trade License

The final administrative step in the acquisition process is the issuance of a revised trade license from the DED. This document confirms that: 

1. 1. The new shareholders are officially recorded, 
   2. The MOA amendments have been registered, 
   3. The company is authorised to continue operations under its new ownership. 

The updated license is also necessary for routine functions—bank account updates, signing new contracts, or hiring new staff. 

Post-Closing Considerations

After completion, the buyer must remain vigilant about ongoing compliance. Key focus areas include: 

1. 1. Annual compliance with CBUAE circulars, including periodic AML reporting. 
   2. Operational integration, especially if the exchange house will be rebranded or aligned with a group-wide strategy. 
   3. Stakeholder communication, including notifying banks, vendors, and customers of the new ownership structure. 

It is also advisable to conduct a post-closing audit within 90 days to verify that all closing conditions have been properly implemented and to identify any integration risks. 

Acquiring shares in a UAE exchange house is a transaction that extends well beyond traditional M&A playbooks. It calls for a deep understanding of local regulatory nuances, operational risk, and legal documentation. Whether the buyer is a private investor, a regional fintech player, or a corporate group seeking to expand into remittance services, they must prepare for a detailed and often prolonged process. 

Success hinges on assembling a cross-functional team: legal counsel with UAE regulatory experience, financial advisors familiar with AML requirements, and operational experts who can identify gaps early. With the right preparation and support, the acquisition can be executed smoothly and yield substantial strategic value.