10 Things to Check When Buying a Business in UAE

The UAE has a dynamically developing business environment, where you will find a lot of offers for the sale of business. To select a profitable project, it is necessary to thoroughly analyze it and collect data on the actual financial situation and potential development of the acquired company. When buying an existing business, buy all the assets and liabilities and you are good to go. Below is a guide for those looking to buy a business in the United Arab Emirates where we have mentioned all the important details and the main stages of acquiring a ready-made business in UAE.

Businesses for sale in the UAE will be listed on local websites, in local magazines, and in local directories. By using the services of a business broker or business transfer agent, you will also be informed about other businesses coming on to the market, and businesses that are for sale, but which are not publicized. A good agent will have many, many businesses on their books and will be able to guide you through the choices.

When you buy a business, it is important to understand why that business is for sale. Either it is due to retirement or illness? Does the owner need to fund other projects? Has the business reached its highest level of turnover and the profitability is at its optimum level? is the business in struggling phase? There is no right or wrong answer to these questions, these are simply facts that you need to know.

Buying a business in the UAE is likely to be the nicest investment you ever make, so it goes without saying that the legal and financial aspects of buying a business are hugely important. By looking through the financial statements you will be able to determine turnover and profit percentages, and perhaps find some ways to save money, or make more money. Analyze the primary documentation, obtain bank statements and confirm the turnover. Always try to engage the services of an accountant who understands how to buy a business, and who can help you drill down into the figures to make sure the price you are paying for the business is fair.

As a business owner, you should carefully read the contracts you need to enter such as with Suppliers, Customers, Employees, or Business Leases. We encourage you to seek legal advice whenever possible and it is also important to note that the company is not receiving profit from several large contracts, otherwise there is a risk that the contracts will be terminated.

A professional team of employees is the key to business success. Make sure that the employment relationship with employees is properly managed and go through printouts of key employee labour agreements where you will find each and everything about the establishment, employee profession, basic and total salary, allowances, annual leave details, gratuity and many more useful things for both parties.

Check the lease terms if the location of the business plays an important role in attracting customers and check the owner's intention to continue cooperation. Generally, the buyers inspecting the properties in Dubai is not really common. As a rule, specialists from different fields are responsible for this work: real estate agents, lawyers, notaries, investment project analysts. In most cases, the firm organizes expert consultations to assist clients at all stages of the transaction.

A sound legal structure plays an essential role in protecting the interests of the business and business owners throughout the life of the business. Check out the legal documents every business should have in the United Arab Emirates. The important documents to check include company's charter documents, Trade license, Company by-laws, immigration establishment card (every company, regardless of whether it is a mainland or a free zone company, is required to obtain an immigration establishment card), Establishment Card from Ministry of Labour (only mainland companies are required to obtain a labour establishment card), non-disclosure agreement, and Trademark registration certificates.

Make sure that the visas of the owners and former employees are closed. Check whether the company is blocked by the Ministry of Labor for violations.

Due diligence is the process of gathering as much information as possible before buying a business. During this time, you will need to work with your accountant or attorney to obtain all the information you need to proceed with the process. As a buyer, you should have a good accountant by your side to check your company's financials. It is also beneficial to have a good commercial attorney who will represent you in negotiations and help you understand how the deal will be structured. Before commencing due diligence, the seller will most likely require a signed confidentiality or non-disclosure agreement. By signing, you agree not to disclose confidential information about the transaction revealed during the due diligence process. This protects the seller if, after reviewing all the documents, you decide buying the company isn't for you.

During or after the due diligence phase, the parties will begin negotiating a stock purchase (or sale) agreement (SPA). This is the document that ultimately governs the terms under which business assets are sold. This document outlines payment terms, closing arrangements, and warranties and indemnifications provided by Seller.

Disclosure is the most important "insurance policy" for sellers regarding warranties. This includes the preparation of disclosure statements by the Seller's attorneys that set out exceptions to the warranty's factual statements and pass the risk on to the Buyer.

Signing the Deal

Once the SPA and disclosure letter are in an agreed form (and any outstanding issues resolved in a due diligence process), both parties can sign the SPA. However, this does not mean that the transaction has ended. There can be a gap between signing the SPA and actually closing the deal. During this period, the seller and the buyer can fulfill all the conditions of the sale (including obtaining third party approval, resolution of legal/operational issues, etc.). Once the conditions are met, the parties come to the competent authority's office to sign the transfer form and also sign all supporting documents ( for example, resolution of the board of directors, letter of resignation, letter of appointment, etc.).

Conclusion

In conclusion, when you are looking to buy a business in UAE, your first step is to determine what type of business you want to buy considering the industry, size of the business, and your own personal skills and experience. Plus, you need to do some research to find the right one and there are a number of resources you can use, including online listings, business directories, and word-of-mouth. After assessing the financials, the business model, and the competitive landscape. You should also make sure that you are comfortable with the seller and that they are reputable. Your final step is to make an offer and negotiate the terms of the sale. When the deal is final, you need to transition the business to your ownership which includes the business licenses, setting up new bank accounts, and notifying authorities of the change in ownership.

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