Key Provisions of Agreement to Sell a Commercial Shop in UAE

An agreement to sell a commercial shop in UAE governs a final sale of a business to an acquirer or buyer. Contents of a sale and purchase agreement (SPA) for a commercial shop in UAE can vary significantly, large depending on a deal’s legal structure and other factors.

Clauses to be added in standard SPAs:

  • Business combination – it states the transaction’s legal structure, as well as when it’s going to happen. Language to be used will differ, depending on the kind of legal structure. It can also differ if the transaction involves purchase of select assets.  
  • Payment – if payment will be in the company’s stock, then the exchange ratio in which the shareholders will exchange their shares for shares of the buyer or acquirer has to be stated. 
  • Cash payment – in the event that cash payment has been agreed, the clause should state the method in which funds will be transferred. 
  • Payment of debt – if payment will be in debt, a clause should state terms of a promissory note. It can include a reference to another security agreement which states a secured position of a seller in assets of an acquirer or buyer. Detailed debt documents should be included in accompanying exhibits. 
  • Representation and warranties – the clause contains a set of representations that the details provided by all parties involved are true. It is to be expected that there’ll be a lot negotiating between attorneys in determining the items that are included and excluded in/from the section, and the extent of associated liabilities should representations are proved to be false.  
  • Termination of options and warrants – the buyer doesn’t want to be inheriting unexercised stock options and warrants. The clause states that options and warrants are going to be exercised or considered terminated before the acquisition of the commercial business, leaving not a single residual obligation a buyer is to settle. 

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There may be a few other clauses to add with an agreement to sell a commercial shop in UAE. The clauses can deal with different circumstances that are specific to a sale and purchase transaction. Such clauses are the following:

The clauses specific to a sale and purchase transaction:

  • Basket – it is a clause which sets a fixed amount of losses a buyer or acquirer has to record from a seller prior to it being able to pursue damages under the provisions of indemnification of a SPA. For instance, a basket of AED 100,000 will prevent a buyer from being able to claim reimbursement for a first loss of AED 100,000 
  • Collar – should payment of a commercial business in UAE to the seller will be made in stock, it’s set at a specific exchange ratio of the stock of the seller. A collar clause states the exchange ratio that’s to be reset in order to maintain an intended total price for purchase if the stock price of the acquirer or buyer changes beyond a specific amount. The clause will reduce risk to the acquire or seller of suffering from a reduction in price paid. 
  • Material adverse change – the clause allows a buyer in exiting from a sale and purchase transaction should the condition of a business declines to an extent before the deal is closed. 
  • Earnout – the clause describes the calculations that are used in determining the additional payments to be made to the selling business, including timing and form of the payments. 
  • True up provision – the clause entitles a seller to an additional acquirer stock should it be paid originally in stock but then the market price for the buyer’s stock subsequently declined. The clause isn’t normally utilized unless an acquirer is held publicly, where there’s a market for the stock which can be referenced. It is not the same as a collar provision as a true up will only occur several months following a purchase and sale transaction has been completed. 

An agreement to sell a commercial shop in UAE can contain hundreds of pages. This is especially so when there are appendices included. The agreement will require massive amounts of thorough reviewing by all parties involved in order to make sure that all of the terms are acceptable. 

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Does an agreement to sell a commercial shop in UAE need notarization?

In general, corporate documents don’t require notarization in UAE as the signed contracts themselves are legally binding. But, documents of businesses are likely to come with potential legal disputes between concerned parties. Notarizing a sale and purchase agreement will, therefore, be very beneficial. With a notary public in Dubai notarizing an agreement, there will be proof to the parties involved on them entering into a contract.

To make sure that your document is considered valid and legal in the eyes of the law, trust only a reputable public notary in Dubai. At Notary Public Dubai, our seasoned and licensed professionals can address and meet your notarization and legalization needs. Call us today!