How to Make Share Transfer in your Company in the UAE?

Among other changes, that might be required by your company, once it is already operational, is a share transfer. As you might have learnt it by now, although corporate amendment procedures, share transfer including, will essentially contain similar steps regardless of the registration authority, assisting you on this; still various registration authorities may have slightly different requirements. Additionally, fees for such corporate amendments will also vary from one registration authority to another.

 

 

   

As such, in this specific chapter we will cover the share transfer steps, which are common for most registration authorities, as well as we will give you the understanding of general requirements and share with you the range of applicable fees.

First of all, when would you require to transfer shares? Let’s pretend that you have an existing company, where you have four company owners/shareholders and two of your business partners want to sell their shares to you and your other partner, so that only you two remain the owners and your partners exit. Or imagine, that you have a company that you own 100%. Your company is growing rapidly and you need to attract investments. You found a prospective business partner, who agreed to invest in the company and, therefore, wishes to also become the owner of the company, although with a smaller share. Or one more instance, when you are appointed by a corporation, in which you are one of the shareholders, to represent a company in the UAE and you go on a business trip to establish a subsidiary. Since you were not aware that legalized corporate documents of mother company would be required, you and other shareholders agreed that you would register the company under your name first and in one to two months transfer ownership to the mother company. Within one or two months, once all corporate documents are legalized, you come back to the UAE and do the transfer of ownership/shares from you to the mother company - that corporation. These are just several examples, as to when the share transfer may be needed.

Based on the examples we just shared, one can distinguish the following types of share transfer:

1)    transfer of shares between the existing shareholders (the example, where two of your partners sell their shares to you and your other partner),

2)   transfer of shares to a new individual shareholder (the very first example with attracting an investor), and finally,

3)    transfer of shares to a new corporate shareholder (the case with corporation we just shared).

In all cases, a current shareholder or shareholders may transfer part, or all of their shares to the new owner or owners.

The transfer of shares between the existing shareholders would be associated with the most straightforward process due to a number of reasons. Registration authority would not require to conduct due diligence on the shareholders, as the information on them is already available in their system, as it is filed at the time, when the company is initially registered. Therefore, you would not need to produce any specific documentation, such as passport pictures, utility bills, or complete and sign KYC forms or provide specimen signatures.

Next comes the share transfer type, where shares are transferred to a new individual shareholder. Although, here more supporting documents would be required, as compared to the transfer between existing shareholders, still these documents can be easily arranged in a short time. The additional documents we are talking about are exactly those ones, that would not be required for a transfer between the existing shareholders. Let’s recall them: passport pictures, utility bills, completed and signed KYC forms, specimen signatures.

Finally, we came to the transfer of shares to a new corporate shareholder. This share transfer type can be rightfully called the most time consuming, the most expensive and the most convoluted, because a lot of coordination will be involved.  Longer share transfer time frame and considerable expenses are the result of the need to legalize corporate documents of a foreign company, that will become a new shareholder. It always takes companies weeks to get the documents legalized in the home jurisdiction and have them mailed or delivered to the UAE.  Additionally, these companies usually need to legalize three, four or sometimes even five corporate documents, which cost them thousands of dirhams. Usually, the following corporate documents are requested: 1) Board Resolution for Acquisition of Shares, 2) Certificate of Incumbency, 3) Certificate of Registration, 4) Memorandum of Association/Articles of Association, and 5) completed Ultimate Beneficiary Owner form. Here is one tip from us. If you require to appoint someone to act on behalf of the new corporate shareholder and you also need to legalize Board Resolution for Acquisition of Shares, you may cover both in the Board Resolution for Acquisition of Shares. This way you will need to legalize only one document instead of two, and you will significantly cut your expenses. Finally, each jurisdiction has its own set of corporate documents issued to companies. Therefore, as soon as a new foreign corporate shareholder starts preparing documents for share transfer, there is a coordination with a registration authority required. This is needed to see that all documents correspond to the requirements of the respective authority.

While each of share transfer types requires its own set of documents to complete the transaction, there is still a number of documents, which remain the same for each of the types. In other words, there are certain documents, which need to be prepared, regardless of the type of share transfer you plan. These documents are Board Resolution for selling of shares, completed and signed in front of the authority Share Transfer Form and Power of Attorney and Passport copy of the Power of Attorney (POA), if there will be someone else representing either of the sides.

We urge you to confirm the exact list of requirements with that registration authority, where your company is incorporated. It may happen they require less documents or, vice versa, additional documentation would be needed.

Prior to any share transfer, you would need to seek a pre-approval of the registration authority. To do this, you would first need to prepare and submit all relevant documents and wait for 3 to 10 days, until everything is cross-checked and the due diligence on new shareholders is completed. Once pre-approved, you will have to make a relevant payment first. Depending on the registration authority you will be working with, this payment can be between AED 1,750 to AED 10,000. After payment completion, both share transferor and share transferee will need to appear in front of the registration authority for signing of share transfer documents. Additionally, you will need to bring all originals prepared and legalized for the share transfer, and return back all original corporate documents of the company, where share transfer takes place, for amendments. You may also be requested to publish an ad in a local newspaper, informing of the share transfer in the company.

The actual share transfer after pre-approval may take between 2 to 3 weeks. After that you will receive back all amended corporate documents, that you should not forget to furnish to the bank.

So, prepare all the documents, plan the share transfer accordingly, allocate the relevant budget and there will be nothing to worry about.

 

    If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.

 

 Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.

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