The United Arab Emirates’ two financial free zones—the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM)—maintain sophisticated regulatory frameworks designed to safeguard financial stability, transparency, and market integrity. Both jurisdictions impose strict oversight on changes in ownership and control of regulated financial services firms.
These regimes ensure that only fit and proper investors may acquire significant influence over licensed entities. Any proposed acquisition or disposal that results in a person or entity obtaining, increasing, or reducing a controlling interest requires early engagement with the relevant regulator. Depending on the nature of the transaction and the investor’s domicile, this may involve advance notification and, in some cases, prior regulatory approval.
Change of Control in the DIFC
All financial services firms operating in the DIFC are regulated by the Dubai Financial Services Authority (DFSA). The DFSA defines a “controller” as any person or entity that, directly or indirectly:
- Holds 10% or more of the voting rights or shares in a DFSA-regulated firm; or
- Has the ability to exercise significant influence over the management of that firm.
Accordingly, any transaction that results in a party becoming or ceasing to be a controller triggers a notification or approval requirement.
Notification and Approval Thresholds
The DFSA distinguishes between notification (for foreign investors) and prior approval (for domestic investors).
Foreign investors must notify the DFSA when they:
- Acquire 10% or more of a DFSA-regulated entity (becoming a controller);
- Reduce their holding below 10% (ceasing to be a controller);
- Increase their interest from below 30% to 30% or more;
- Increase from below 50% to 50% or more; or
- Reduce their stake from 50% or more to below 50%.
Notifications are submitted electronically through the DFSA’s online portal, typically by the regulated firm or its counsel. The process involves disclosing shareholding details, ownership structure, and background information on the acquiring party.
Domestic (UAE) investors, however, must obtain prior DFSA approval before acquiring or reducing holdings that reach or cross the thresholds of 10%, 30%, or 50%. This requirement reflects the regulator’s more direct supervisory interest in domestic market participants.
Regulatory Assessment Criteria
When reviewing an application for approval, the DFSA evaluates the applicant’s:
- Fitness and propriety, including experience and reputation;
- Financial soundness and capacity to support the regulated entity;
- Regulatory and compliance history; and
The proposed acquisition’s potential impact on the entity’s ability to meet its ongoing obligations under DIFC law.
The DFSA may grant unconditional approval, approve subject to conditions, or refuse consent if it deems the applicant unsuitable.
Failure to notify or obtain required approval constitutes a serious regulatory breach, potentially leading to fines, sanctions, or even revocation of the regulated firm’s license.
Transaction Timing and Standstill
For foreign investors, the notification requirement does not impose a standstill obligation. Transactions can typically close while the DFSA review is ongoing, provided notification is made promptly and any follow-up queries are addressed.
For domestic investors, by contrast, approval must be obtained before closing. Parties must therefore allocate adequate time for document preparation, DFSA review, and potential follow-up requests.
In practice, the DFSA processes applications efficiently, but the review timeline depends on the complexity of the transaction and the completeness of the submission.
Treatment of UAE Nationals and Strategic Investors
The DFSA’s rules apply uniformly, including to UAE nationals and government-affiliated entities. There is no formal exemption based on nationality or ownership. Nevertheless, the DFSA may expedite review of transactions involving well-known national investors or strategic state-linked entities, particularly where the investor has a proven record of regulatory compliance.
Such administrative efficiency, however, does not replace the requirement for formal approval and does not limit the DFSA’s authority to impose conditions or refuse consent where appropriate.
Change of Control in the ADGM
The Financial Services Regulatory Authority (FSRA) administers a parallel regime in the ADGM. Here too, the underlying principle is that any person acquiring significant ownership or influence over a regulated firm must demonstrate suitability to hold that position.
Under the ADGM Financial Services and Markets Regulations, a controller is defined as a person or entity that holds, directly or indirectly, 10% or more of the shares or voting rights in a regulated entity, or otherwise exercises significant influence over it.
FSRA Approval Requirements
Any person or entity seeking to become a controller or increase an existing interest in a regulated firm beyond the thresholds of 20%, 30%, or 50% must obtain prior approval from the FSRA.
The process begins with submission of a Change in Control (CIC) Form, accompanied by supporting documentation regarding ownership structure, financial capability, and strategic intent. The FSRA assesses:
- The applicant’s integrity and competence;
- The financial strength of the proposed controller;
- The purpose and rationale of the acquisition; and
- The likely effect on the firm’s ongoing compliance and risk management capacity.
The FSRA may approve the application, impose conditions, or deny approval if it considers the change inconsistent with regulatory objectives.
Failure to notify or to obtain approval prior to closing can result in administrative fines, enforcement actions, or restrictions on the firm’s authorization.
Comparison Between DIFC and ADGM Regimes
While the DIFC and ADGM frameworks share similar policy objectives, there are several important distinctions in how each system approaches change of control. Both define a controller as a person or entity holding 10% or more of the shares or voting rights in a regulated firm. However, the DFSA recognizes additional control thresholds at 30% and 50%, while the FSRA applies progressive thresholds at 20%, 30%, and 50%.
Another key difference lies in the treatment of investors and transaction timing. In the DIFC, foreign investors are generally required only to notify the DFSA when crossing the relevant thresholds and are not subject to a standstill obligation. By contrast, domestic investors—those based in the UAE—must obtain prior approval before completing the transaction, meaning they cannot close until DFSA consent is granted.
In the ADGM, the rules are uniformly applied to all investors, regardless of nationality. Both foreign and domestic investors must obtain prior approval and observe a standstill obligation until the FSRA issues its decision. Neither regime offers exemptions for UAE nationals or state-affiliated entities, though both regulators may expedite reviews for well-known national or strategic investors.
Practical Considerations
Both the DFSA and FSRA emphasize early engagement. Parties planning an acquisition or restructuring involving a regulated entity should:
- Assess control thresholds early to determine notification or approval requirements.
- Prepare detailed documentation, including ownership charts, financial statements, and business rationale.
- Engage with regulators before signing to confirm procedural expectations and timing.
- Allow sufficient time for review—especially in transactions involving multiple controllers or complex group structures.
Where prior approval is required, implementation before consent is obtained risks regulatory sanctions, reputational damage, and delays in post-closing integration.
Conclusion
The DIFC and ADGM have each developed robust frameworks governing changes of control in financial regulated businesses. While the two regimes share the same policy objectives, they differ in procedural details and timing obligations.
For investors and regulated firms, early planning and regulator engagement remain essential to ensure smooth execution. Whether the transaction involves a cross-border acquisition, a restructuring of shareholdings, or an internal reorganization, compliance with the change-of-control rules is critical to preserving authorization and maintaining confidence in the UAE’s international financial markets.
Questions About Regulatory Approvals in the UAE?
Contact our offices to learn how Bremer can assist with change-of-control notifications, regulatory filings, and approvals before the DFSA and FSRA.
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