Core Elements of Declaration of Assigning Shares for a UAE Company

A declaration of assigning shares is a document utilized in transferring ownership of shares of a corporation from a registered owner or assignor to the assignee or the buyer/purchaser of the shares. The written document should specify the designation and names of the concerned parties, date of the share transfer, number of the share/stock certificate which represents shares that will be transferred, as well as number of shares which will eb transferred.

A declaration of assigning shares is also utilized in conjunction with subscription and share purchase agreements, when the payment is made for the shares of the vendor or assignor. Both the vendor and the purchaser need to sign the declaration.

Note: A declaration of assigning shares in UAE can also be used with estate freezes. The document will contain clauses which state the intention of parties in complying with tax regulations in the country, providing a fair price adjustment mechanism for in the event the local tax authority finds out later that the value that was attributed to the transferred shares was inaccurate. A declaration would have clauses as well giving power of attorney onto a corporation in making the necessary elections in complying with local tax regulations.

If the assignment of share ownership isn’t done due to tax purposes, clauses that deal with tax legislation compliance will be taken out of the document. 

What are the core components of a declaration of assigning shares of a company in UAE?

These include the background, a definition of the assignment of shares, a definition of the shares in consideration, purchase price, date of transfer, liability, payment, representations and warranties, creditors, and closing. A declaration of assigning shares of a company in UAE that is used in a ‘rollover’ or assignment of shares with payment of shares being in the form of the purchaser’s corporation, the document can include tax filings and elections necessary acts, power of attorney, and price adjustment.

The information that’s also typically included in declarations of share assignment in UAE include:

  • Company information
  • Expectations of the parties involved
  • The agreement in purchasing/acquiring shares
  • Rights that are attached to the ownership of shares
  • Voting preferences
  • Redemption and liquidation preferences
  • Terms for termination prior the completion
  • Confidentiality provisions
  • Nomination onto board
  • How the returns are going to be paid out

Terms and conditions must be included in a declaration of assigning shares for a company in UAE. The clauses containing conditions should protect the private company. A shareholder is required in sticking to the agreed terms and conditions for an agreement to be enforceable. An indemnity clause in a declaration of assigning shares can mean a purchaser or assignee will repay or indemnify should the company suffers monetary damages from misrepresentation.

Related documents that are required with a declaration of assigning shares include the following:

  • Shareholders’ resolution – with a privately held company, a shareholders’ resolution approving the assignment of shares is required.
  • Minute book – it is where the business records are kept. Copies of the declaration of assigning shares can be kept within the minute book owned by the corporation which issued the assignment of shares.
  • Directors’ resolution – an assignment of shares has to be ratified with the directors of a corporation whose shares will be transferred.
  • Subscription agreement – the agreement for assignment of shares between the vendor and the purchaser of company shares.

What are the common mistakes in writing a declaration of assigning shares?

  • Making the document too complicated – although the required legal information has to be covered throughout the document, try as much as possible to keep it simple and straightforward. For instance, you can mention that the purchaser has read a private placement memorandum instead of repeating all of the information that were disclosed in the memorandum. It will avoid potential confusion, most especially when disclosures are paraphrased.
  • Not getting legal advice – being an important legal document, it is absolutely necessary to have the guidance of a legal expert who specializes in corporate and finance legislation. A corporate lawyer in UAE will be able to explain the legalese that is used in the document and will make sure that your best interests are protected.

Acknowledgement of Declaration of Assigning Company Shares in UAE

The declaration of assigning company shares also needs an Acknowledgement. The acknowledgement is the act of a legal entity stating the signatures of the document were voluntarily affixed by the signatories and the document should be executed as the free, voluntary act of the signatories.

Notarization of a declaration of assigning shares in UAE is also required as it will legalize the document and turn it into a public instrument. A public instrument or document is self-authenticating. This means there is no other evidence required to prove a document’s execution. To know more, call Notary Dubai!

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