The UAE continues to attract significant foreign investment, and minority stakes in established UAE businesses offer investors access to proven operations without requiring full control. However, recent regulatory developments, including the UAE’s new competition framework which came into full effect in 2026, mean that investors must approach these transactions with heightened legal awareness. Below are five key legal considerations for any minority investment or M&A transaction in the UAE.
1. Legal Due Diligence: Know what you are buying
The first question is not simply how many shares are being acquired, but what those shares actually give the investor.
Legal due diligence should establish the company’s ownership structure, constitutional documents, licences, material contracts, debt, litigation, employment obligations, intellectual property and regulatory compliance. The investor should also determine whether the shares are subject to existing pledges, transfer restrictions or other third-party rights.
The transaction structure matters too. A subscription for newly issued shares puts capital into the company, potentially diluting existing shareholders but strengthening the balance sheet. Purchasing existing shares, by contrast, transfers ownership from an existing shareholder without injecting funds into the business – meaning the investor inherits any liabilities or obligations attached to those shares and may need to negotiate warranties directly with the seller rather than the company.
2. Protect your position as a minority shareholder
A minority investor cannot rely on default shareholder rights (minority protections) alone. Under UAE law, the protections available to minority shareholders depend on the company type.
Private Companies (LLCs)
For private companies, the UAE Commercial Companies Law provides limited statutory protection for minority shareholders. Key decisions such as amendments to the memorandum of association, capital changes, and mergers typically require supermajority approval, but day-to-day management and dividend decisions often rest with the majority. A well-drafted shareholders’ agreement is therefore essential. It should address “Reserved Matters” requiring minority consent, board representation, information rights, restrictions on related-party transactions, and protections against dilution.
Listed Companies
For listed companies, the regulatory framework offers additional safeguards. The Capital Market Authority has introduced mechanisms allowing minority shareholders to participate meaningfully in general meetings, access disclosure on related-party transactions, and where prescribed ownership thresholds are met, challenge certain resolutions.
Regardless of company type, minority investors should not assume that legal protections will substitute for negotiated rights. The stronger the contractual framework agreed at the outset, the better positioned the investor will be if the relationship with the majority shareholder deteriorates.
3. Plan for the exit before you enter
A minority stake is only as valuable as the investor’s ability to realise returns from it. Whether through dividends, a trade sale, an IPO, or a strategic acquisition, the path to value should be mapped out before the investment is made – not left to chance.
The investment documents should secure the mechanisms that protect and maximise future returns: negotiated put options, tag-along rights that allow the investor to participate in a sale by the majority, drag-along protections that ensure fair treatment in an exit, and pre-emption rights that preserve the investor’s ability to increase its stake if the opportunity arises.
M&A as a liquidity path: Many minority investments are ultimately realised through a sale of the company or a merger. If an acquirer approaches the majority shareholder, a well-structured tag-along right ensures the minority investor can sell on the same terms. Investors who negotiate these rights at the outset position themselves to capture full value when the opportunity materialises, rather than finding themselves locked in or squeezed out.
4. Navigate the UAE’s new merger control regime
Cabinet Resolution No. 59 of 2026 introduced the Executive Regulations under Federal Decree-Law No. 36 of 2023, and minority investments are squarely within scope.
The change: Before 2026, merger control in the UAE was largely theoretical. The Executive Regulations now require parties to notify the Ministry of Economy of economic concentration transactions that meet prescribed turnover thresholds and to wait for clearance before closing.
The impact on minority stakes: A transaction does not need to transfer majority control to be caught. If the investor acquires veto rights, board representation, or the ability to influence commercial decisions, the deal may constitute an economic concentration regardless of the shareholding percentage. The test is whether the transaction confers decisive influence – not whether it crosses 50%.
The consequences: Closing without required clearance can result in fines, an order to unwind the transaction, or both. Investors should obtain specialist legal advice early in the transaction to assess whether notification is required and to build regulatory clearance into the deal timetable.
5. Get the shareholders’ agreement right from the start
The shareholders’ agreement is the single most important document for a minority investor. It defines rights, protections, and remedies that UAE company law does not provide by default and it is far easier to negotiate before the investment closes, than after.
A well-drafted agreement should address:
- Deadlock mechanisms
- Reserved matters requiring minority consent
- Restrictions on share transfers and new issuances
- Information and audit rights
- Dividend policies
- What happens on a change of control
- Disputes: governing law, jurisdiction (onshore UAE courts, DIFC or ADGM) and whether arbitration applies
In the UAE’s evolving regulatory environment, the agreement must also account for compliance with the new merger control regime: if a future transaction requires Ministry of Economy notification, the parties’ obligations and the deal timetable should be clear.
M&A scenarios deserve particular attention. The agreement should set out what happens if the majority shareholder receives an acquisition offer, if the investor wants to sell its stake, or if the parties jointly pursue a trade sale or IPO. Tag-along and drag-along rights, exit valuation mechanisms, and non-compete obligations on exit should all be addressed upfront – not improvised when a deal is on the table.
Experienced legal advisers should be involved at the outset. A shareholders’ agreement that is poorly drafted, incomplete, or misaligned with UAE law can leave an investor exposed precisely when protection matters most. The cost of getting it right at the outset is a fraction of the cost of resolving a dispute later.
Get Expert M&A Legal Advice in the UAE
For investors considering a minority stake in a UAE company, obtaining experienced legal advice before signing the term sheet or investment agreement can help identify risks that may otherwise become difficult and expensive to address after completion.
James Berry & Associates advises investors, funds, and corporate acquirers on minority investments, joint ventures, and M&A transactions across the UAE. If you are considering an investment and want to understand your legal position before you commit, our team is ready to help. Speak to our M&A lawyers in Dubai now.
