Development of transfer of shares for businesses in the UAE
The process of transfer of shares in the UAE is a procedure that must follow a certain formality, in accordance with the regulations contained in the General Law of Corporations for Corporations (ordinary, closed, or open). This formality arose from the type of corporation modality in question for the particular case. The sole transfer of shares is not likely to be registered in the registry of legal persons.
In this article, we will explain the entire process of share transfer for companies in the UAE. When a share is changing, the information about the members or shareholders of the company has its change. It is for this reason that these modifications must be in the Mercantile Registry, following the provisions of the law.
- What are the shares of a company?
- Why are public partial companies public fractional?
- How are stock transfers formal?
- Requirements for the sale of shares of a public limited company
- What should a share transfer statement contain?
- Process of the transfer of shares
- How are stock transfers finished?
- How can we help you obtain more information about the process to share transfers for a company in UAE?
1. What are the shares of a company?
The shares of a company are:
Securities (instruments that incorporate patrimonial rights, are there to circulate, and must comply with the essential requirements traditional by law) that represent the capital of a corporation. They grant their holder the quality of shareholder and therefore rights to speak and vote (except in the case of shares without voting rights) and the right to participate in the profits of the company. They represent an aliquot part of the social capital, that is, each process of share transfer in the UAE represents the smallest part in which the capital of a company has its division.
2. Why are public companies partial?
When a corporation has its start, the partners receive in exchange a certain number of shares and these can be the subject of acts of disposition or transfer.
All corporations must have a book called stock registration book, which must be legal, and which the partners of the company and their shares must be registered. A shareholder is a person who is in the share registration book. In other words, if someone needs to formally prove their status as a shareholder, they must do so by showing such fact in the share registration book, not with the constitution testimony, nor with the registration item of public records.
These documents only prove who the founding partners are or were. In conclusion, corporations are anonymous because the only way to be certain of who the shareholders really are is by having access to the share registration book.
3. How are stock transfers formal?
In traditional Public Partial Companies (SA), the partners are free to make the process of transferring their shares in the UAE for consideration or free of charge to another partner or to a third person, unless the bylaws contemplate the so-called preferential acquisition right, according to which the partner who intends begin the process to transfer shares in the UAE must first be to the partners of the company so that they may be by them pro data or by one of them totally.
In Secure Stock Companies (SAC) there is the presumption of the right of preference for the acquisition of shares, that is to say, that, in SACs, this right must be sure to the partners of the company to acquire the shares of the partner who intends to transfer them, unless the statute has waived this right.
As the shares are securities (they are issued in favor of a specific person, there are no bearer shares in the Middle East), their transfer is formal through an act called assignment of rights. This transfer can be official orally or in writing, but in any case, the transfer of shares must be in the share registration book.
By express provision contained in the companies registry regulations, the process of transfers of shares in the UAE are not registrable in the public registries. If this take place, the Public Partial Companies would cease to be anonymous.
3.1 Shareholders book
The law establishes that the instrument in which control is kept of who the shareholders of a company are is the shareholders book. Which must contain, in addition to their name, their ID number, and address. As well as any other information to better identify and locate the person.
These shareholders’ books must be registered in the same commercial registry in which the company is. Thus, its content must be authentic and cannot have erasures or amendments. In addition to the identification and location of the shareholders, the book must express the number of shares owned by each one. As well as the value assigned to each of those shares. The shareholders’ book is the means to prove the ownership of the shares of an anonymous company.
3.2 Stock value
Stocks have different values. The first is the nominative. Which is the one particular by the shareholders at the time of setting up the corporation or at subsequent meetings. This is due to an increase or decrease in the capital stock. In addition to the nominal value, there is also the equity value. Which is resolute by the sum of the assets and liabilities of the company and the market value.
The equity value is by doing an exercise that is like this: “If we sold all the assets of the company and have all its debts, how much of the remaining amount would correspond to each share considered individually?” That amount is the minimum that any rational person would be willing to pay for that action.
There is also the market value of the shares. It consists of assigning a financial value to the sum of assets and liabilities. And also, to qualitative circumstances such as corporate governance, management practices, production, intellectual property, innovations, the good name and reputation of the company and your brands, your potential to generate profits in the market you are in, and so many other considerations
According to this, the assessment of a company and its shares must be done by measuring not only financial indicators. And also, operational indicators such as quality standards, customer satisfaction, internal processes, and expectations. As well as innovation and continuous improvement activities. In this way, it will be possible to estimate not only what the company’s financial performance has been up to now. Additionally, how likely it is that the company will continue to have positive results in the future; which definitely impacts the value assigned to it.
4. Requirements for the sale of shares of a public companies
Those who want to buy shares in a company must agree on the price and number of shares to buy. As the shares are rights, in the law the only requirement to sell or buy them is the mutual agreement between the parties. Once the parties (individuals or corporations with capacity and their representatives fully empowered) have agreed on their intention to buy and sell, the number of shares determined and the price. Those actions automatically become the property of the buyer and his is the risk and revenue that said actions suppose.
Once the agreement has been got, the seller and the buyer must go to the administrator of the company whose shares exists to register the operation in the shareholders’ book. This registration must have his sign in handwriting by the seller or assignor of the process of transfer of shares for companies in the UAE. Also, by the buyer or assignee.
If both parties cannot attend to sign the book, they can sign a document in front of a notary. This is to certify the sale and the company administrator can then use that instrument as proof for the registration of the operation in the book.
In short, the only requirement to buy and sell the shares of a company is the contract between the parties. Especially on the value given to them. Once that agreement has been perfected, what remains is to make the registration in the shareholders’ book. Thus, they need to provide proof to the other shareholders and the company itself. Sometimes, some registry officials or notaries insist that it must be through a registered assembly.
5. What should a share transfer statement contain?
- General data of the shareholder who transfers the shares.
- General data of the person who receives, or purchaser of the shares.
- Common information of the company or commercial company.
- The number of shares and their value.
- A statement authorizing the transfer of rights from the selling shareholder to the buyer.
It should be noted that it is possible for a company to have restrictions on the transfer of shares. The bylaws will contain the clauses by which the transfer of shares will be governed. Otherwise, the company or partner will adhere to the provisions of the law on commercial companies at the time of making a transfer or sale of shares.
In the case of partial liability companies, the transfer of social quotas is a little stricter. These are not by negotiable titles. A partner may not assign the social quotas if he does not have the consent of the partners who represent at least a third quarter (3/4) of the social quotas.
When a member decides to sell his social shares, the other members will have priority over third parties. In such a sense that one of the members could acquire the offer on the sale if he wishes, before a new member joins.
6. Process of the transfer of shares
- Through a private contract. This contract must contain the conditions under which the transfer will be. Above all, stating whether they will be free of charge or for a fee.
- Through a general shareholders’ meeting. The minutes of the general shareholders’ meeting must contain, like the contract, the conditions under which the transfer will take place.
However, in order for the new shareholder to be able to fully exercise their rights in the company, the transfer must be registered in the company’s share registration book.
For the assignment or transfer of shares, whoever assigns or sells must notify the company. This is by means of a request for the approval of the sale. In this request, you will indicate the general information of the assignee, the number of shares, and the price. Once the request is correct, you will need a sale contract or declaration of transfer of shares.
7. How are stock transfers finished?
In Traditional Stock Companies (SA) the partners are free to transfer their shares for consideration. Also, for free of charge to another partner or to a third person. This is unless the statutes expressly contemplate the so-called right of preferential acquisition. According to which the partner who intends to transfer its shares, it must first offer them to the partners of the company so that they may be acquired by them pro rata or by one of them totally.
8. How can we help you obtain more information about the process to share transfer for company in UAE?
EOR Middle East provides a wide range of services to organizations looking to expand into our market. Our team will assist you in establishing a business in any Middle Eastern country. Amongst our services are:
- Employer of record.
- Payroll outsourcing.
- HR management.
- Professional employment organization.
- Immigration solutions.
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- Contractor hire.
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Our professionals will assist you with the complexities of dealing with regulations and additional paperwork. While also saving you money and time. Providing answers to any questions you might have about the procedure. Your business will grow thanks to our team of professionals, technology, and abilities.
Do you want to be in contact with EOR Middle East? Reach us now! [email protected] is the email address we have for you. You can also give us a call at +971 43 316 688. One member of our staff will be happy to speak with you and answer any questions you may have.