The way an acquisition is structured matters as much as what you pay for it. If you are buying a business in the UAE, one of the first and most important decisions is whether to acquire the company’s shares or its assets. This article explains the key differences between a share purchase and an asset purchase in the UAE, the risks and advantages of each structure, and why getting the right legal advice before committing to a deal can make all the difference.
What Is a Share Purchase? Buying the Company and Its History
Under a share purchase, the buyer acquires shares in the target company. The company remains the same legal entity, so its assets, contracts, employees, licences and liabilities generally remain with it. The terms of the deal are documented in a share purchase agreement (SPA).
Advantages of a share purchase
This can be attractive where the target already holds the licences, permits and regulatory approvals needed to operate the business. A share purchase avoids the need to reapply for these or to transfer every asset and contract individually. Employees remain employed by the same entity, customer and supplier relationships continue without interruption, and financing arrangements may stay in place.
For sellers, a share sale may also be more tax-efficient, which can make negotiations easier.
Risks of a share purchase
The risk is that the buyer is also acquiring the company’s history.
Undisclosed litigation, tax liabilities, regulatory breaches, employee claims, environmental issues, problematic contracts or other historic liabilities do not disappear because the shareholders have changed. They remain liabilities of the target company and after completion, they become the buyer’s problem. This is why thorough legal, financial and tax due diligence is essential before signing an SPA.
Buyers should also be aware that existing contracts may contain change of control provisions. A change in shareholders can trigger termination rights, consent requirements or renegotiation clauses – even though the contracting party (the target company) has not changed. Key customer contracts, supplier agreements, financing facilities and leases should be reviewed for these provisions before the transaction completes.
Where the target is incorporated in a free zone such as DIFC or ADGM, the free zone’s own rules on share transfers and approvals will also apply.
The acquisition agreement should address these risks through carefully negotiated warranties, indemnities and disclosure provisions. Warranty and indemnity insurance may also be available to bridge gaps in protection, particularly where a seller is unwilling or unable to stand behind its representations.
What Is an Asset Purchase? More Control Over What You Acquire
When an asset purchase makes sense
Where a target company carries significant historic risk such as legacy disputes, uncertain tax positions, problematic contracts or regulatory exposure – an asset purchase can be the more attractive option.
This structure can acquire the target’s equipment, intellectual property, inventory and key customer contracts while avoiding the seller’s corporate entity and its wider liabilities. Contingent claims, ongoing disputes and historic obligations can be excluded from the transaction entirely. An asset purchase can also be useful where the buyer only wants part of the business, or where the seller is retaining other operations within the same corporate vehicle.
Challenges of an asset purchase in the UAE
Unlike a share purchase, an asset transaction requires each asset, contract and licence to be identified and transferred individually. Some contracts may require third-party consent, others may contain restrictions on assignment, and regulatory licences held by the seller do not automatically follow the business; in some cases, the buyer will need to apply for its own licence before it can operate. Employees do not transfer automatically either; UAE labour law requires the transition to be carefully managed, whether through termination and re-engagement or a compliant transfer arrangement.
A transaction that looks straightforward at headline level can become considerably more complicated once the parties work through what needs to move and how. Without early legal input, buyers often discover these issues late in the process when timelines are tight, leverage has shifted and renegotiation is difficult.
These challenges are not insurmountable. An experienced M&A lawyer can map out the transfer requirements, identify consent and licensing issues early, structure the employee transition correctly and build appropriate protections into the acquisition agreement. The key is to engage legal M&A counsel before commitments are made – not after the deal terms have already been agreed.
Share Purchase vs Asset Purchase: Key Differences at a Glance
The table below summarises how the two structures compare for a UAE acquisition.
| Factor | Share purchase | Asset purchase |
|---|---|---|
| What you acquire | The company itself, as the same legal entity | Selected assets, contracts and parts of the business |
| Historic liabilities | Stay with the company and pass to the buyer | Can be excluded and left with the seller |
| Contracts | Continue, subject to change of control clauses | Must be assigned individually; consent may be needed |
| Licences and permits | Generally remain in place | Do not transfer automatically; new licences may be needed |
| Employees | Remain employed by the same entity | Transition must be managed under UAE labour law |
| Tax | Often more tax-efficient for the seller | May qualify for going-concern VAT treatment if conditions are met |
| Key document | Share purchase agreement (SPA) | Asset purchase agreement (APA) |
How UAE Tax, Competition and Regulatory Rules Affect Your Deal Structure
A transaction structure that works commercially may not work from a tax or regulatory perspective.
UAE Corporate Tax and VAT on share and asset transfers
The UAE Corporate Tax regime and VAT rules treat share transfers and asset transfers differently. A transfer of a business as a going concern may qualify for different VAT treatment if the applicable conditions are met. Getting the structure wrong, or failing to consider these issues until the deal is already in motion, can result in unexpected tax liabilities that erode the value of the transaction.
Merger control under UAE competition law
Competition law adds another layer. The UAE’s competition regime has recently been strengthened under Federal Decree-Law No. 36 of 2023, with new Executive Regulations introduced by Cabinet Resolution No. 59 of 2026. Depending on the size of the transaction and the market involved, notification to the competition authority may be required before completion.
Sector-specific approvals in regulated industries
Sector-specific requirements can create further complications. In regulated industries, a change of ownership, control or business operator may require prior approval from the relevant authority and proceeding without it can put the entire transaction at risk.
These are not issues to address at the end of the deal. A buyer should obtain legal advice at the structuring stage before signing heads of terms, so that any required approvals, filings or restructuring can be built into the transaction timeline.
Choosing the Right Acquisition Structure in the UAE: Get It Right From the Start
There is no universally better structure. A share purchase preserves contracts, licences and relationships but carries historic liabilities. An asset purchase offers more control but creates transfer, consent and regulatory complexity.
Our experienced M&A lawyers at James Berry & Associates can advise on transaction structure, identify risks early, navigate regulatory and tax issues, and ensure your acquisition agreement protects your interests. Whether you are buying shares or assets, we can run due diligence, draft and negotiate your SPA or APA, and manage the approvals your deal needs.
Planning an acquisition in the UAE? Contact our M&A team today to discuss the best structure for your transaction before you sign heads of terms.
