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Convertible Equity Term Sheet Template for United Arab Emirates

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Key Requirements PROMPT example:

Convertible Equity Term Sheet

"I need a Convertible Equity Term Sheet for my Dubai-based AI startup, seeking $2 million investment from a US venture capital firm, with a $10 million valuation cap and 20% discount rate, planned for closing in March 2025."

Document background
The Convertible Equity Term Sheet is a crucial document used in early-stage investment scenarios in the UAE, particularly for startups seeking growth capital while deferring formal valuation discussions. This document serves as a preliminary agreement that outlines the key terms of a potential investment, including the investment amount, valuation cap, conversion mechanisms, and investor rights. It is specifically adapted to comply with UAE legal requirements, including considerations for foreign ownership restrictions, free zone regulations, and local partnership requirements where applicable. The term sheet is typically used as a basis for negotiation and forms the foundation for more detailed definitive agreements. It is particularly relevant in the UAE's growing startup ecosystem, where both local and international investors are actively participating in funding rounds.
Suggested Sections

1. Parties: Details of the Company, Investor(s) and any other relevant parties

2. Background: Brief description of the company, purpose of investment, and context of the transaction

3. Definitions: Key terms used throughout the term sheet

4. Investment Terms: Amount of investment, valuation cap, discount rate, and payment mechanics

5. Conversion Rights: Triggers for conversion, conversion price calculation, and conversion mechanics

6. Company Representations: Key statements about company status, capitalization, and authority

7. Pre-Money Valuation: Agreed valuation metrics and calculation methodology

8. Participation Rights: Rights of investors in future funding rounds

9. Information Rights: Investor's rights to receive financial and operational information

10. Board Composition: Structure and composition of the board post-investment

11. Exit Rights: Provisions regarding sale, IPO, or other liquidity events

12. Term and Termination: Duration of the agreement and termination provisions

13. Confidentiality: Provisions regarding non-disclosure of sensitive information

14. Governing Law and Jurisdiction: Specification of UAE law application and dispute resolution

Optional Sections

1. Anti-dilution Protection: Protection against future down rounds, used when specifically negotiated

2. Drag-Along Rights: Rights forcing minority shareholders to join in sale, included for larger investments

3. Tag-Along Rights: Rights allowing investors to join in sale of majority stake, included for minority investor protection

4. Founder Vesting: Vesting schedule for founder shares, included when founders retain significant control

5. Local Partner Provisions: Required for mainland UAE companies with foreign ownership restrictions

6. Free Zone Specifications: Required when company is or will be established in a UAE free zone

7. Islamic Finance Compliance: Required when transaction needs to be Shariah-compliant

8. Employee Stock Option Pool: Included when company plans to implement ESOP

9. Most Favored Nation: Protection ensuring investors get best terms offered to other investors in the round

Suggested Schedules

1. Schedule 1: Cap Table: Current and post-conversion capitalization table

2. Schedule 2: Conversion Calculations: Detailed methodology for calculating conversion price and share allocation

3. Schedule 3: Company Information: Key corporate details, registrations, and licenses

4. Schedule 4: Investment Timeline: Key dates and milestones for the investment process

5. Schedule 5: Form of Shareholders Agreement: Draft terms for the post-conversion shareholders agreement

6. Appendix A: Compliance Checklist: UAE regulatory requirements and compliance items

7. Appendix B: Required Approvals: List of necessary regulatory and corporate approvals

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Relevant Industries

Technology

E-commerce

Financial Services

Healthcare

Education Technology

Clean Energy

Software Development

Artificial Intelligence

Biotechnology

Digital Media

Fintech

Real Estate Technology

Transportation Technology

Retail Technology

Manufacturing Technology

Relevant Teams

Legal

Finance

Corporate Development

Strategy

Executive Leadership

Investment

Compliance

Corporate Secretary Office

Business Development

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

Investment Director

Venture Capital Partner

Private Equity Manager

Corporate Lawyer

Investment Banker

Business Development Director

Startup Founder

Managing Director

Corporate Development Manager

Legal Counsel

Company Secretary

Finance Director

Strategy Director

Compliance Officer

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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