Squeeze-out and sell-out rights in the UAE allow a majority shareholder to compulsorily acquire remaining minority shares, or conversely allow minority shareholders to demand that the majority buy them out, once defined ownership thresholds are crossed. These mechanisms are codified primarily under the UAE Companies Law and the Securities and Commodities Authority (SCA) regulations governing public joint-stock companies, with additional rules applying in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGB) free zones. For any acquirer planning a full buyout of a listed or unlisted UAE company, or for a minority investor seeking an exit route, understanding the precise thresholds, valuation methodology, and procedural steps is essential. This guide covers the legal framework, the step-by-step process, valuation and pricing rules, the rights of minority shareholders, common pitfalls, and strategic considerations for both sides of the transaction.
The primary statutory basis for squeeze-out and sell-out rights in the UAE sits within Federal Decree-Law No. 32 of 2021 on Commercial Companies (the Companies Law), which replaced the earlier Companies Law and introduced more detailed provisions on compulsory acquisition. For public joint-stock companies listed on the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM), the SCA';s Takeover Code and related resolutions layer additional procedural and disclosure requirements on top of the Companies Law framework.
Under the Companies Law, a shareholder who reaches or exceeds a prescribed majority threshold in a joint-stock company acquires the right to compulsorily purchase the remaining shares. The law simultaneously grants minority shareholders the right to require the majority to purchase their shares once the same threshold is crossed. This symmetry is deliberate: the legislature recognised that a dominant majority can effectively deprive minorities of liquidity and meaningful participation, so the sell-out right provides a statutory exit.
In the DIFC, the Companies Law 2018 (DIFC Law No. 5 of 2018) contains its own squeeze-out and sell-out provisions modelled closely on English company law, with a 90% threshold and a 90-day notice window. ADGM';s Companies Regulations similarly follow an English-law approach. These offshore financial centre regimes operate independently of the onshore UAE framework, so the applicable rules depend entirely on where the company is incorporated.
For private limited liability companies (LLCs) - the most common vehicle for foreign investment in the UAE - the Companies Law provides general provisions on share transfers and pre-emption rights, but dedicated squeeze-out mechanics are less developed than for joint-stock companies. In practice, LLC shareholders typically address compulsory acquisition through carefully drafted shareholders'; agreements rather than relying solely on statute.
The threshold at which squeeze-out and sell-out rights arise is the central operational concept. Under the current UAE Companies Law framework for public joint-stock companies, the relevant threshold is set at 90% of the total share capital. Once a single shareholder, or a group acting in concert, holds 90% or more of the shares, the squeeze-out right crystallises.
The 90% figure applies to the total issued share capital, not merely to the shares acquired in a particular offer. This distinction matters in practice: an acquirer who already held 15% before launching a tender offer and acquires a further 76% through the offer will reach the threshold, but the calculation must account for all shares, including any held by associates or parties acting in concert under the SCA';s definition.
The sell-out right mirrors the squeeze-out threshold precisely. A minority shareholder holding shares in a company where a single party controls 90% or more may serve a notice requiring that party to purchase their shares at a fair price. The minority shareholder does not need to demonstrate any particular harm or prejudice; the mere fact of the threshold being crossed is sufficient to trigger the right.
In the DIFC, the 90% threshold applies to the shares acquired pursuant to a specific scheme or offer, not to total shareholding. This is a meaningful difference: a DIFC acquirer who already owned 20% and acquires 75% through an offer reaches 95% total but only 75% through the offer, which is below the DIFC threshold. Founders and advisers structuring acquisitions across onshore and offshore UAE entities must map the applicable regime carefully before assuming squeeze-out rights will arise automatically.
A common mistake among foreign acquirers is assuming that reaching 90% of voting rights is equivalent to reaching 90% of share capital. UAE law counts economic ownership, not voting power, for threshold purposes. Where a company has issued non-voting preference shares, these count toward the denominator.
The squeeze-out process for a public joint-stock company involves several sequential stages, each with defined timelines and regulatory touchpoints.
Confirming the threshold. The acquirer must first obtain a formal confirmation from the company';s share registrar - typically the ADX or DFM central registry - that the 90% threshold has been reached. This confirmation is a prerequisite for serving any compulsory acquisition notice and typically takes between five and ten business days.
Engaging an independent valuer. Before serving notice, the acquirer must appoint an independent financial adviser or valuation firm approved by the SCA to determine the fair value of the remaining shares. The valuation must comply with the SCA';s prescribed methodology, which generally requires a discounted cash flow analysis, a comparable transactions analysis, and a net asset value assessment, with the highest resulting figure forming the floor price. The valuation process typically takes three to six weeks depending on the complexity of the company';s balance sheet.
SCA notification and approval. The acquirer submits the proposed squeeze-out notice, the independent valuation report, and supporting corporate resolutions to the SCA for review. The SCA may request additional information or require adjustments to the offered price. This regulatory review stage commonly takes four to eight weeks.
Serving the compulsory acquisition notice. Once SCA approval is obtained, the acquirer serves a formal written notice on each remaining minority shareholder. The notice must state the offered price, the payment mechanism, and the deadline by which minorities must respond. Under current practice, the response period is typically 30 days from the date of service.
Payment and share transfer. The acquirer deposits the aggregate consideration into an escrow account designated by the SCA or the relevant exchange. Shares are transferred to the acquirer upon confirmation of deposit, regardless of whether individual minority shareholders have actively accepted. Unclaimed funds remain in escrow for a statutory period, after which they may be transferred to a designated regulatory account pending claim by the former shareholder.
Deregistration or delisting. Following completion of the squeeze-out, the acquirer typically applies to delist the company from the relevant exchange and to convert it to a private joint-stock company or LLC, depending on its post-acquisition structure.
In practice, founders should consider that the entire process from threshold confirmation to completed transfer commonly takes three to five months for a listed company, with the SCA review stage being the principal variable. Engaging experienced UAE corporate counsel before reaching the threshold - rather than after - significantly reduces delays.
If you are planning a full acquisition of a UAE company and need to structure the squeeze-out correctly from the outset, contact us at info@vlolawfirm.com. We can help structure the setup correctly the first time.
The sell-out right is the minority shareholder';s counterpart to the squeeze-out. It arises automatically once the 90% threshold is crossed and does not require the majority shareholder';s consent or cooperation beyond the obligation to pay.
To exercise the sell-out right, a minority shareholder serves a written notice on the majority shareholder stating the number of shares to be sold and requesting payment at fair value. The notice must be served within the statutory window, which under current UAE practice is typically 90 days from the date on which the minority shareholder became aware, or reasonably should have become aware, of the threshold being crossed.
The majority shareholder must respond within a defined period - generally 30 days - and must either agree the price or refer the valuation to an independent expert. If the parties cannot agree on the fair value, either party may apply to the competent court or, in the case of DIFC or ADGM companies, to the relevant financial centre';s court, for a judicial determination of fair value.
A non-obvious requirement is that the minority shareholder must hold shares continuously from the date the threshold is crossed until the date of completion. A shareholder who sells even a single share in the interim may lose the right to invoke the sell-out mechanism for the remaining shares, depending on how the company';s articles of association are drafted.
Scenario one: a foreign institutional investor. A European private equity fund holds 8% of a UAE-listed industrial company. A strategic acquirer launches a tender offer and reaches 92% ownership. The fund, which did not tender its shares, now has a statutory right to require the acquirer to purchase its 8% stake at fair value. The fund serves a sell-out notice within 60 days of the threshold being publicly announced. The acquirer is obliged to pay within 30 days of the valuation being agreed or determined.
Scenario two: a family business restructuring. A UAE family holding company owns 91% of a private joint-stock company following a series of share transfers. The remaining 9% is held by a former business partner. The holding company wishes to consolidate full ownership. It engages a valuer, obtains SCA guidance on the applicable procedure for unlisted joint-stock companies, and serves a compulsory acquisition notice. The former partner, rather than contesting the price, exercises the sell-out right simultaneously to ensure the process proceeds on the statutory timeline rather than the acquirer';s preferred schedule.
Valuation is the most contested aspect of any squeeze-out or sell-out transaction in the UAE. The Companies Law and SCA regulations require that the price offered to minority shareholders represent fair value, but the statute does not prescribe a single formula, leaving room for significant disagreement.
The SCA';s guidance identifies three principal methodologies: discounted cash flow, market comparables, and net asset value. Where the company is listed, the volume-weighted average price (VWAP) over a defined reference period - typically the six months preceding the threshold date - serves as an additional reference point. The offered price must be at least equal to the highest of these values.
A common mistake is for acquirers to anchor the offered price to the tender offer price without conducting a fresh independent valuation. If the tender offer was made at a discount to intrinsic value - for example, during a period of market dislocation - the squeeze-out price may need to be higher. The SCA has the authority to reject a proposed squeeze-out price it considers inadequate and to require a revised valuation.
Minority shareholders who believe the offered price undervalues their shares may challenge it through the SCA';s dispute resolution process or through the courts. In practice, the threat of a court challenge often leads acquirers to negotiate a modest price improvement rather than face a lengthy judicial process. Many underestimate the leverage that a well-advised minority holder can exercise at the valuation stage, even when holding only a small percentage.
For DIFC companies, the DIFC Courts apply English-law principles to fair value determinations, including the principle that minority shares should generally not be discounted for lack of control in a squeeze-out context, since the minority is being compulsorily removed rather than voluntarily selling.
Hidden costs at the valuation stage include the fees of the independent valuer (which are borne by the acquirer), potential SCA advisory fees, and the cost of any court proceedings if the price is disputed. These can add meaningfully to the total transaction cost, particularly for mid-sized companies where the disputed amount is significant relative to the professional fees involved.
For an acquirer, the decision to trigger a squeeze-out is rarely purely mechanical. Several strategic factors influence the timing and approach.
Timing relative to the tender offer. An acquirer who structures a tender offer knowing that a squeeze-out will follow has an incentive to set the tender offer price at a level that will also satisfy the squeeze-out fair value test. Setting the tender price too low risks a protracted SCA review of the subsequent squeeze-out, adding months to the timeline and increasing uncertainty.
Articles of association and shareholders'; agreements. For private companies, the articles of association and any shareholders'; agreement may contain provisions that modify or supplement the statutory squeeze-out and sell-out rights. An acquirer should review these documents before reaching the threshold to identify any consent requirements, tag-along rights, or valuation mechanisms that could affect the process.
Regulatory approvals beyond the SCA. Depending on the sector, a full acquisition may require approval from sector-specific regulators - for example, the Central Bank of the UAE for financial institutions, or the Telecommunications and Digital Government Regulatory Authority for telecoms companies. These approvals must be obtained before or concurrently with the squeeze-out process, and their timelines can extend the overall transaction significantly.
Tax and structuring considerations. The UAE does not impose capital gains tax on share disposals at the federal level, which simplifies the economics of a squeeze-out for both the acquirer and the minority. However, where the company holds real property, transfer fees may apply to the deemed transfer of underlying assets, and this should be factored into the cost model.
For minority shareholders, the strategic calculus is different. A minority holder who anticipates being squeezed out has several options: accept the offered price, challenge the valuation, exercise the sell-out right proactively to control the timeline, or negotiate a negotiated exit at a premium before the formal process begins. In practice, a negotiated exit often produces a better outcome than the statutory process, since it avoids the delays and costs of the SCA review and any subsequent dispute.
Scenario three: a venture-backed technology company. A UAE-incorporated joint-stock company has raised multiple rounds of venture capital. The lead investor acquires additional shares in a secondary transaction, crossing the 90% threshold. Two smaller investors, holding 3% and 7% respectively, face a squeeze-out. The 7% holder, advised by counsel, exercises the sell-out right immediately and simultaneously opens negotiations with the lead investor for a price above the VWAP-based floor. The 3% holder waits passively and ultimately receives the statutory minimum. The difference in outcome illustrates the value of proactive legal advice at the threshold-crossing moment.
If you are a minority shareholder facing a squeeze-out or considering exercising sell-out rights in the UAE, contact us at info@vlolawfirm.com. We can assist with documents and filings.
What happens if the majority shareholder refuses to pay the sell-out price?
If a majority shareholder refuses to honour a valid sell-out notice, the minority shareholder may apply to the competent court for an order compelling payment. In the case of listed companies, the SCA also has supervisory authority and can take enforcement action against a non-compliant majority holder. Courts in the UAE have generally been willing to enforce statutory sell-out rights, and the majority shareholder risks regulatory sanctions as well as a court judgment. In practice, outright refusal is rare; the more common dispute is over the quantum of the price rather than the obligation to pay.
How long does a squeeze-out typically take in the UAE, and what does it cost?
For a listed public joint-stock company, the end-to-end process from threshold confirmation to completed share transfer typically takes three to five months. The principal cost items are the independent valuation fee, SCA filing fees, legal advisory fees, and escrow administration costs. For a mid-sized listed company, total professional and regulatory costs borne by the acquirer commonly run into the mid-to-high hundreds of thousands of dirhams, depending on the complexity of the valuation and whether the price is disputed. For DIFC or ADGM companies, the process can be somewhat faster given the more streamlined court system, but professional fees tend to be comparable.
Can squeeze-out and sell-out rights be modified or excluded by contract?
For public joint-stock companies, the statutory rights cannot be excluded by contract, since they are mandatory provisions of the Companies Law and SCA regulations. However, the articles of association and shareholders'; agreements can supplement the statutory framework - for example, by setting a higher threshold, providing for an agreed valuation mechanism, or granting additional rights to minority shareholders. For private LLCs, where the statutory framework is less prescriptive, contractual provisions in the shareholders'; agreement play a much larger role and can effectively create bespoke squeeze-out and sell-out mechanics. Any such provisions should be reviewed by UAE-qualified counsel to ensure they are enforceable and do not conflict with mandatory statutory requirements.
Squeeze-out and sell-out rights in the UAE provide a structured legal mechanism for resolving minority shareholding positions following a change of control. The framework is most developed for public joint-stock companies under the Companies Law and SCA regulations, with parallel regimes in the DIFC and ADGM. Successful execution requires careful attention to threshold calculations, independent valuation, regulatory approvals, and procedural timelines. Both acquirers and minority shareholders benefit from engaging experienced UAE corporate counsel before the threshold is crossed rather than after.
VLO Law Firms advises international clients on corporate transactions and shareholder rights in the UAE. We can assist with squeeze-out and sell-out procedures, independent valuation oversight, SCA filings, and shareholder agreement drafting. To request a consultation, contact: info@vlolawfirm.com