We advised National Takaful Company (Watania) PJSC (“Watania”) on its merger with Dar Al Takaful PJSC (“DAT”).
Both are Islamic insurance companies licensed by the Insurance Authority (now amalgamated into the Central Bank of the UAE). The transaction was a merger by amalgamation whereby Watania merged into DAT which became the surviving entity. This transaction was the ‘first of a kind’ as it was the first ever major merger in the insurance sector of the UAE. It was also uniquely complex due to the status of DAT. At the time of initiating the merger process and seeking approval from the UAE Central Bank, DAT was in the process of phasing out of the insurance sector. This led to further complexity because DAT’s strategic move was to transform into a holding company, cease to undertake insurance business and transfer its insurance business to its two wholly owned subsidiaries - Noor Takaful General PJSC (“NTG”) and Noor Takaful Family PJSC (“NTF”). Accordingly, the insurance portfolio was to be transferred to NTG and NTF rather than DAT itself as a surviving entity.
Federal Law No. 6 of 2007 on the Establishment of the Insurance Authority and Regulation of Insurance Business (“Insurance Law”) has two separate chapters dealing with the transfer of an insurance portfolio and a merger. Chapter 8 deals with the transfer of an insurance portfolio from one company to another, while Chapter 9 deals with a merger between insurance companies.\
The primary legal challenge, however, was that except for a few provisions under Chapter 9 of the Insurance Law, there were no detailed regulations that addressed the full process of merger. Although the Insurance Law envisages that the Board of Insurance Authority will issue specific detailed regulations in relation to merger, this had not yet happened. Accordingly, any merger in the insurance sector remains regulated by only three Articles (74, 75 and 76) of the Insurance Law.
Moreover, the UAE Central Bank’s legal team was required to accept the immediate transfer of the insurance portfolio from Watania directly to both NTG and NTF rather than it transferring to DAT with a subsequent onwards transfer from DAT to NTG and NTF. This required the creation of a unique process for such a transfer by way of documentation that effectively “married” the provisions of Chapters 8 and 9 of the Insurance Law.
Finally, Watania was listed on the Abu Dhabi Stock Exchange (“ADX”) while DAT was listed on the Dubai Financial Market (“DFM”). This was also unique because all previous UAE merger transactions were between companies listed in the same stock market. The merger resulted in increasing the share capital of DAT from AED 150 million to AED 260,156,250 to reflect the new shares issued by DAT to Watania shareholders. This required the delisting of Watania from ADX and coordination with DFM to have the new shares of DAT properly allocated to the existing Watania shareholders while listing new shares on the DFM.
Although DAT had its own legal counsel for the merger, it had been agreed since inception that only Hadef & Partners would handle all regulatory matters and deal with the regulators, i.e. Central Bank of the UAE and the Securities and Commodities Authority. Therefore, Hadef played a key role in the success of the merger and successfully navigated all legal obstacles.
Our role included conducting legal due diligence on DAT and its two subsidiaries, NTG and NTF. This also included advising on all regulatory aspects of the merger whether in relation to Federal Decree Law No. 32 of 2021 on Commercial Companies as well as the Insurance Law. We handled all regulatory aspects throughout the entire merger process, including notices to creditors and policyholders. We drafted all communications with the regulators in bilingual format (Arabic and English) as well as addressing the detailed legal process of the merger and taking the lead in respect of meetings and communications with the regulators to achieve the objective of our clients.
We advised National Takaful Company (Watania) PJSC (“Watania”) on its merger with Dar Al Takaful PJSC (“DAT”).
Both are Islamic insurance companies licensed by the Insurance Authority (now amalgamated into the Central Bank of the UAE). The transaction was a merger by amalgamation whereby Watania merged into DAT which became the surviving entity. This transaction was the ‘first of a kind’ as it was the first ever major merger in the insurance sector of the UAE. It was also uniquely complex due to the status of DAT. At the time of initiating the merger process and seeking approval from the UAE Central Bank, DAT was in the process of phasing out of the insurance sector. This led to further complexity because DAT’s strategic move was to transform into a holding company, cease to undertake insurance business and transfer its insurance business to its two wholly owned subsidiaries - Noor Takaful General PJSC (“NTG”) and Noor Takaful Family PJSC (“NTF”). Accordingly, the insurance portfolio was to be transferred to NTG and NTF rather than DAT itself as a surviving entity.
Federal Law No. 6 of 2007 on the Establishment of the Insurance Authority and Regulation of Insurance Business (“Insurance Law”) has two separate chapters dealing with the transfer of an insurance portfolio and a merger. Chapter 8 deals with the transfer of an insurance portfolio from one company to another, while Chapter 9 deals with a merger between insurance companies.\
The primary legal challenge, however, was that except for a few provisions under Chapter 9 of the Insurance Law, there were no detailed regulations that addressed the full process of merger. Although the Insurance Law envisages that the Board of Insurance Authority will issue specific detailed regulations in relation to merger, this had not yet happened. Accordingly, any merger in the insurance sector remains regulated by only three Articles (74, 75 and 76) of the Insurance Law.
Moreover, the UAE Central Bank’s legal team was required to accept the immediate transfer of the insurance portfolio from Watania directly to both NTG and NTF rather than it transferring to DAT with a subsequent onwards transfer from DAT to NTG and NTF. This required the creation of a unique process for such a transfer by way of documentation that effectively “married” the provisions of Chapters 8 and 9 of the Insurance Law.
Finally, Watania was listed on the Abu Dhabi Stock Exchange (“ADX”) while DAT was listed on the Dubai Financial Market (“DFM”). This was also unique because all previous UAE merger transactions were between companies listed in the same stock market. The merger resulted in increasing the share capital of DAT from AED 150 million to AED 260,156,250 to reflect the new shares issued by DAT to Watania shareholders. This required the delisting of Watania from ADX and coordination with DFM to have the new shares of DAT properly allocated to the existing Watania shareholders while listing new shares on the DFM.
Although DAT had its own legal counsel for the merger, it had been agreed since inception that only Hadef & Partners would handle all regulatory matters and deal with the regulators, i.e. Central Bank of the UAE and the Securities and Commodities Authority. Therefore, Hadef played a key role in the success of the merger and successfully navigated all legal obstacles.
Our role included conducting legal due diligence on DAT and its two subsidiaries, NTG and NTF. This also included advising on all regulatory aspects of the merger whether in relation to Federal Decree Law No. 32 of 2021 on Commercial Companies as well as the Insurance Law. We handled all regulatory aspects throughout the entire merger process, including notices to creditors and policyholders. We drafted all communications with the regulators in bilingual format (Arabic and English) as well as addressing the detailed legal process of the merger and taking the lead in respect of meetings and communications with the regulators to achieve the objective of our clients.
Other firms involved:
Ibrahim & Partners represented Dar Al Takaful
Hadef Team:
Yasser Omar – Partner, Head of Corporate and Commercial, Abu Dhabi
Mahmoud El Gharabawy – Senior Legal Counsel