Company shares are of the company’s property; however, they may be sold or transferred to other individuals or corporate entities as per the UAE Company Act of 2015. Shares of a company may be transferred for a variety of reasons. There are people that will transfer ownership of shares in order to exchange them for cash whilst there are those that exchange company shares for goods and/or services. Company shares in the UAE may also be used in writing off debts. There are also cases wherein family members are gifted company shares. if a shareholder no longer wants to be involved or be considered a participant of a company, then shares may be transferred to another individual or corporate entity for no payment.
There are restrictions regarding to share transfers in UAE, which is why it is absolutely imperative a director or company administration checks the company’s shareholders’ agreement and articles of association prior to allowing such activity to begin.
A share transfer application has to be completed in order to be able to carry out the transfer.
The details that are most likely required are as follows:
- Name of the business
- Company registration number
- The quantity of shares that will be sold
- The class of the shares that will be sold
- Name of the transferee or the new shareholder
- Contact number of the transferee or the new shareholder
- Name of the transferor or the existing shareholder
- Contact number of the transferor or the existing shareholder
- Amount for each unit that’s unpaid or settled
- A non-cash settlement or payment (details must be provided)
- Stamp duty liability (only as required)
Take note: for any share transfer, there is a need to ensure that first exemption certificate which is at the back of stock transfer form is complete although the certificate doesn’t have to be completed if there is nothing that is paid for the transfer of shares. There is a need to send in the application for share transfer as well as the share certificate onto local authorities whether there was payment for the shares transferred or not.
There are cases wherein the transferee is liable in paying stamp duty. More often than not, it’s going to take weeks for the local authorities to deal with transfers of shares. It is absolutely necessary to make sure that the form has been properly filled out and completed in order to avoid getting rejected by the authorities.
The registrar of the business (typically the company director) has to receive the form when it’s sent back by authorities and the share certificate will be cancelled. A company director will have to issue a brand new share certificate. Company share transfer is considered as a private transfer. It is advised to seek the assistance of business consultants in UAE for completing the transaction as they can provide more specific advice in relation to the existing structure of the business.
The information laid in this article serves as a guide in the changing of shares. Professional advice is always best. If you need to talk to a Corporate PRO consultant in UAE, don’t hesitate to call us here in FAR Consulting Middle East today!
Is due diligence necessary for share transfer?
Due diligence is a necessary step as it will help you ascertain the assets and liabilities of a company, as well as its legal status. The process of due diligence can help in the determination of whether a business whose shares you’ll be acquiring has an outstanding loan, legal case, credit, and also uncover the company’s financial position.
What are the requirements for a share transfer in UAE?
The application form is necessary apart from the license amendment form to be passed to the local authorities including the Department of Economic Development UAE and the transfer of the share agreement. Other paperwork required includes the buyer’s Emirates ID or any national ID or trade license in the case of a corporate entity. The memorandum of association of a company has to be attested prior to the submission and the shareholder’s resolution.
Apart from the buyer’s documents, the seller of shares will also have to submit relevant documents that are not limited to shareholders’ resolution, trade license, and memorandum and articles of association.
Can a transfer of shares be implemented without expert help?
Yes, it is possible. However, business consultants in UAE can help hasten the completion of the process and improve the likelihood of its approval with authorities. A team of professionals can review relevant documents that are required and help in the drafting of requisite contracts such as sale of shares. It is also best to talk to an expert prior to the commencement of the process to committing violations of corporate regulations in the country.