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Convertible Loan Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Convertible Loan Agreement

"I need a Convertible Loan Agreement under UAE law for a 2 million AED investment into my tech startup, with conversion rights triggering at the next funding round and a 20% discount on the conversion price."

Document background
The Convertible Loan Agreement is a crucial financing instrument used in the UAE market, particularly for growth companies and startups seeking alternative funding sources. This document is typically employed when investors want to provide funding with the flexibility to convert their loan into equity shares at a future date, often during subsequent funding rounds or upon specific trigger events. The agreement must comply with UAE Federal Law No. 8 of 2004 (Commercial Companies Law), UAE Federal Law No. 18 of 1993 (Commercial Transactions Law), and relevant Central Bank regulations. It includes essential provisions for loan terms, conversion rights, security arrangements, and regulatory compliance specific to the UAE jurisdiction. The document can be structured to accommodate both conventional and Islamic finance principles, making it versatile for various financing needs in the UAE market.
Suggested Sections

1. Parties: Identification of the Lender and Borrower with full legal names and addresses

2. Background: Context of the agreement, including the purpose of the loan and intention for potential conversion

3. Definitions and Interpretation: Key terms used throughout the agreement, including financial terms, conversion-related definitions, and interpretation rules

4. Loan Amount and Purpose: Specification of the loan amount, drawdown conditions, and permitted use of funds

5. Interest: Interest rate, calculation method, payment dates, and default interest provisions

6. Repayment Terms: Repayment schedule, prepayment provisions, and payment mechanics

7. Conversion Rights: Terms and conditions for converting the loan into equity, including conversion price, timing, and mechanics

8. Conversion Mechanics: Detailed process for executing the conversion, including notice requirements and documentation

9. Representations and Warranties: Standard and specific warranties from both parties, including corporate authority and regulatory compliance

10. Covenants: Ongoing obligations of the Borrower, including financial covenants and reporting requirements

11. Events of Default: Circumstances constituting default and consequences thereof

12. Security: Details of any security or guarantees provided for the loan

13. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for disputes

Optional Sections

1. Sharia Compliance: Required if the agreement needs to be Sharia-compliant, detailing the Islamic finance structure

2. Information Rights: Optional provisions granting the lender rights to company information and financial statements

3. Board Observer Rights: Optional rights for the lender to appoint an observer to the board meetings

4. Anti-dilution Protection: Optional provisions protecting the conversion rights from dilution

5. Tag-Along Rights: Optional rights for the lender to participate in future share sales

6. Most Favored Nation: Optional clause ensuring the lender receives the best terms offered to other convertible loan holders

7. Change of Control: Optional provisions dealing with change in company ownership or control

Suggested Schedules

1. Schedule 1 - Conversion Notice: Form of notice to be used when exercising conversion rights

2. Schedule 2 - Drawdown Notice: Form for requesting disbursement of the loan amount

3. Schedule 3 - Conditions Precedent: List of documents and conditions required before loan disbursement

4. Schedule 4 - Company Information: Details of the company's share capital, shareholders, and corporate structure

5. Schedule 5 - Calculation of Conversion Price: Detailed methodology for calculating the conversion price

6. Schedule 6 - Form of Security Documents: Templates for any security documents required

7. Appendix A - Financial Covenants: Detailed financial covenants and calculation methodologies

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

Relevant legal definitions










































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Relevant Industries

Technology

Financial Services

Startups

E-commerce

Healthcare

Real Estate

Manufacturing

Renewable Energy

Education Technology

Telecommunications

Professional Services

Media and Entertainment

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Compliance

Risk Management

Executive Leadership

Investment

Corporate Secretariat

Board of Directors

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Investment Manager

Legal Counsel

Corporate Lawyer

Finance Director

Company Secretary

Investment Banker

Venture Capital Manager

Private Equity Manager

Corporate Development Manager

Treasury Manager

Risk Manager

Compliance Officer

Board Director

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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