Preliminary Share Purchase Agreement Template for the United Arab Emirates

A Preliminary Share Purchase Agreement is your essential first step toward completing a share transaction in the United Arab Emirates. This legally binding document establishes the framework for your deal while providing the flexibility needed for thorough due diligence and final negotiations. Unlike a final share purchase agreement, this preliminary version captures your key commercial terms without requiring every detail to be finalized upfront.

When do you need this document?

You need a Preliminary Share Purchase Agreement when you're ready to formalize your intention to buy or sell shares but require time for due diligence, regulatory approvals, or additional negotiations. This situation commonly arises in complex transactions involving UAE companies, particularly when foreign investors are acquiring local businesses or when multiple regulatory clearances are required. The document is especially valuable when you want to secure exclusivity during negotiations, protect confidential information shared during due diligence, or establish binding commitment to proceed while working through remaining details. It's also crucial when your transaction involves companies in regulated sectors that require UAE authority approvals before completion.

Key legal considerations

Your agreement must include robust exclusivity provisions preventing the seller from negotiating with other potential buyers during the agreed timeframe. Confidentiality clauses are essential to protect sensitive business information exchanged during due diligence, with specific penalties for breaches. You should clearly define conditions precedent that must be satisfied before proceeding to completion, such as satisfactory due diligence results, board approvals, or third-party consents. The purchase price mechanism needs careful structuring, whether as a fixed amount or subject to adjustment based on completion accounts. Break fee provisions protect both parties if the transaction fails to proceed due to the other party's breach or if specific conditions aren't met within agreed timeframes.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 32 of 2021, your agreement must comply with commercial company ownership restrictions, particularly the foreign direct investment limitations that may apply depending on the target company's business activities. If foreign investors are involved, you must ensure compliance with UAE Federal Decree-Law No. 19 of 2018 governing foreign ownership. Your agreement should address any required approvals from UAE regulatory authorities, including the Securities and Commodities Authority for public companies or relevant free zone authorities if applicable. The document must be drafted in accordance with UAE Federal Law No. 5 of 1985 governing contract formation and validity. For certain transactions, you may need to obtain clearance from the UAE Ministry of Economy or other regulatory bodies before proceeding to completion, and your preliminary agreement should clearly allocate responsibility for obtaining these approvals.