The Limited Liability Company (LLC) is the most common business structure in the UAE for good reason. It offers a number of advantages for businesses operating in country: the limitation of owner liability for the debts and obligations of the company, flexibility in terms of the number of partners and distribution of profits and losses, the allowance of full foreign ownership and freedom to trade throughout the entire UAE market.
Despite the obvious advantages of the LLC structure, there may, however, be circumstances under which it may be necessary or desirable to transfer shares in an existing LLC to another entity. These can include but are not limited to:
- Investment opportunities : Companies may choose to transfer shares in an LLC to raise capital for new investments or to exit from existing investments. A share transfer could provide an investor with increased liquidity which can then be reinvested elsewhere in different industries or asset classes.
- Change in ownership structure :Companies may want to transfer shares in an LLC to change the ownership structure of the company and align it with changing company goals and objectives such as bringing in new partners or buying out existing partners. This could allow a company to raise equity by selling shares to new investors in the event existing members of the LLC do not have the capital to finance growth or expansion plans.
- Strategic partnerships : An LLC share transfer may help to establish strategic partnerships with other companies or investors. This can help to enhance the company’s market position and competitiveness by providing the LLC with access to new markets, customers or technologies that enhance its market position.
- Succession planning: An LLC share transfer can also support a solid succession planning strategy, such as transferring ownership to the next generation of family members or to key employees. This can help to ensure that the company continues to operate successfully after the current owners of the LLC retire or leave the company and allows the current owners to monetize their investment.
- Tax planning :Tax planning is another common reason for an LLC share transfer. It’s a useful tool in estate planning that allows transferal of ownership to family members or other beneficiaries which can help avoid potential estate taxes and reduce the tax burden on heirs. It can also help to reduce capital gains taxes by transferring ownership to a family member at a lower valuation then the current market value.
How to transfer shares in a UAE LLC
To transfer shares in a UAE Limited Liability Company (LLC), the following steps need to be taken:
- Obtain approval – Before any share transfer can take place, the transfer must be approved by the General Assembly of the LLC. The transfer may also require approval from regulatory bodies, depending on the type of business activity and sector of the LLC.
- Draft a share purchase agreement – A share purchase agreement must be drafted between the buyer and seller outlining the terms and conditions of the share transfer.
- Pay the transfer fees – The parties involved in the share transfer must pay the applicable transfer fees to the relevant government authorities, such as the Department of Economic Development (DED).
- Update the LLC’s records – Once the transfer has been completed, the LLC’s records must be updated to reflect the new shareholding structure. This may involve amending the LLC’s Memorandum and Articles of Association, as well as updating the LLC’s register of members and the DED’s commercial register.
- Obtain regulatory approvals – If the LLC operates in a regulated sector, such as banking or telecommunications, the transfer may require regulatory approvals from the relevant authorities.
How can Global Link help?
It’s important to note that the specific requirements for transferring shares in a UAE LLC may vary depending on the type of LLC, the sector it operates in, and the specific terms outlined in the LLC’s Memorandum and Articles of Association.
Additionally, the process of transferring shares in an LLC may involve legal and financial considerations, such as valuation of shares, drafting legal agreements, and regulatory approvals, which must be carefully managed to ensure compliance with the relevant laws and regulations.
Engaging a reputable corporate services company with experience of the UAE market can make the process of LLC share transfer significantly easier.
Global Link has over 16 years’ experience working with local and global businesses, providing bespoke consultancy services for company incorporation in Dubai and the wider UAE.
We can advise you on how to transfer shares in an LLC, providing support throughout the whole process and liaising with all relevant parties on your behalf.
If you need advice on this or any other aspect of company incorporation, Best PRO services or visa acquisition, please get in touch with us on +971 4 553 9901 or email us at [email protected] and we will be happy to assist you.