Whether you are considering selling a small portion of your ownership stake or looking to entirely exit the company, the sale of company shares is more than just finding interested buyers. As a shareholder, it is necessary for you to understand the different nuances associated with selling your LLC company shares in the UAE. Firstly, let us understand the various reasons why shareholders sell their company shares.

Common Reasons Why Shareholders Sell/Transfer Their Shares

1. Company exit

A shareholder may decide to exit the company if he/she has contemplated retirement or looking to venture into some other business. It may also happen that the shareholder who was a company employee, has now been terminated, and selling/transferring shares owned by him/her is necessary.

2. Corporate restructuring

A company may look to realign its operations, organizational structure or capital structure through selling of shares.

3. Raising capital

Shares can be sold for the purpose of having more capital injected into the company by a party ready to invest.

Documents Regulating the Sale of Company Shares

It is crucial to note that the sale of the shares you own must be in compliance with the regulations and terms laid out in the Memorandum of Association (MOA) and Articles of Association (AOA) of your company. The MOA covers key details such as the company name, structure, number of shareholders, share percentage, shareholders’ financial obligations, and benefit sharing. On the other hand, the AOA stipulates the conditions and rules concerning share transfer/sale, dividend sharing, and other aspects of corporate governance. In addition to the terms outlined in the above documents, the share sale/transfer must comply with the provisions stated under the UAE Federal Law on Commercial Companies.

Pre-Emptive Rights of Other Shareholders

The company shares owned can be sold, transferred, or pledged to other shareholders or a third-party buyer. One must bear in mind that the other shareholders of the company have the first right to buy any shares before they can be bought by non-shareholding entities (third-party buyers). These rights are referred to as pre-emptive rights of the shareholders. In case there are multiple shareholders looking to buy the shares that are up for sale, the shares in question shall be divided among these shareholders, and will be in proportion to the respective shares already owned by them.

It is necessary to obtain the consent of the other shareholders before the sale of your shares to a third-party buyer. Additionally, it is your responsibility to provide the other shareholders with all the key details of the buyer as well as the terms agreed for the sale. Only once the consent has been granted and no fellow shareholder is looking to buy your shares, you may proceed with the sale procedure.

Procedure of Selling/Transferring Shares to Third-Parties (For Companies Registered with DED)

  1. Obtain a board resolution or a shareholder resolution, and a power of attorney from the shareholders granting approval to the sale/transfer of shares to a third-party buyer.
  2. Fill up the Department of Economic Development’s BR1 type form with the necessary information including the buyer and seller details. The form must be signed by the parties involved in the sale as well as the company manager.
  3. Submit the BR1 type form along with the fee and relevant documents and obtain an initial approval for the sale of shares from the DED.
  4. Prepare a Share Transfer Agreement (STA) and also a schedule of amendment to the existing MOA.
  5. The STA and MOA must be signed by the parties before the notary public.
  6. The duly signed STA, amended MOA, initial approval, details of current shareholders, the power of attorney, and business license of the company must be submitted to the DED along with the applicable fee.
  7. The DED will then update the business license and issue a new license with the updated shareholding.

Power of Attorney for Share Sale

If for whatever reason, you are unable to fulfill the formalities related to selling and transferring shares, you can prepare a share sale power of attorney and designate an individual to handle this responsibility on your behalf.

JustPOA offers end-to-end assistance for preparing powers of attorney in the UAE. From drafting to translation and notarization, count on our experts to assist you at every stage. Contact us today and have your UAE POA registered right away.