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Convertible Note Purchase Agreement for United Arab Emirates

Convertible Note Purchase Agreement Template for United Arab Emirates

A comprehensive legal agreement governed by UAE law that documents the terms and conditions under which investors provide funding to a company in the form of convertible notes. These notes represent debt that can convert into equity under specified conditions. The agreement includes detailed provisions on conversion mechanisms, interest rates (or profit sharing mechanisms for Islamic-compliant versions), maturity dates, conversion triggers, and investor rights. It complies with UAE Federal Law No. 32 of 2021 (Commercial Companies Law) and related regulations, while incorporating necessary protections for both the company and investors within the UAE legal framework.

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What is a Convertible Note Purchase Agreement?

The Convertible Note Purchase Agreement is a critical financing instrument in the UAE's growing startup and scale-up ecosystem. It provides companies with a flexible funding mechanism that initially operates as debt but can convert into equity upon triggering events such as qualified financing rounds, exits, or maturity. This document type is particularly valuable in the UAE market where companies seek to balance traditional debt structures with equity opportunities, while potentially accommodating Islamic finance principles. The agreement must comply with UAE Federal Laws including the Commercial Companies Law, Civil Code, and relevant free zone regulations where applicable. It typically includes comprehensive terms covering conversion rights, valuation caps, discount rates, interest/profit mechanisms, and investor protections, making it suitable for early-stage companies seeking bridge financing or growth capital.

What sections should be included in a Convertible Note Purchase Agreement?

1. Parties: Identification of the Company (Issuer) and the Investor(s) (Note Purchaser(s))

2. Background: Context of the investment and brief description of the Company's business

3. Definitions: Key terms used throughout the agreement, including financial terms, conversion mechanisms, and trigger events

4. Purchase and Sale of Notes: Terms of the note purchase, including purchase price, closing conditions, and delivery mechanics

5. The Notes: Detailed terms of the notes including principal amount, interest rate, maturity date, and ranking

6. Conversion Rights: Mechanisms and conditions for converting the notes into equity, including conversion price, adjustments, and procedures

7. Company Representations and Warranties: Standard company representations including corporate authority, capitalization, financial statements, and material contracts

8. Investor Representations and Warranties: Investor's representations regarding investment intent, sophistication, and compliance with securities laws

9. Covenants: Ongoing obligations of the Company, including information rights, corporate governance, and operational restrictions

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

11. Miscellaneous: Standard provisions including notices, amendments, governing law, and dispute resolution

What sections are optional to include in a Convertible Note Purchase Agreement?

1. Islamic Finance Compliance: Required if the agreement needs to comply with Shariah principles, including profit-sharing mechanisms instead of interest

2. Registration Rights: Include if investors require rights to register their shares post-conversion

3. Board Observer Rights: Optional section granting investors the right to appoint board observers

4. Pre-emptive Rights: Include if investors are to have rights to participate in future financing rounds

5. Most Favored Nation Provision: Optional protection ensuring investors receive the benefit of more favorable terms granted to subsequent investors

6. Anti-dilution Protection: Include if specific anti-dilution protections beyond standard conversion price adjustments are required

7. Information Rights: Detailed reporting requirements beyond standard covenants, if required by investors

What schedules should be included in a Convertible Note Purchase Agreement?

1. Form of Note: The formal convertible promissory note document

2. Capitalization Table: Current and pro-forma capitalization of the Company

3. Disclosure Schedule: Exceptions to representations and warranties

4. Conversion Mechanics: Detailed calculations and procedures for conversion

5. Required Corporate Actions: List of corporate actions needed to authorize the transaction

6. Investment Amounts: Schedule of investors and their respective investment amounts

7. Form of Legal Opinions: Required legal opinions from Company counsel

8. Subsidiaries and Group Structure: List of Company subsidiaries and corporate structure

Authors

Alex Denne

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

Publisher

Ƶ

Document Type

Purchase Agreement

Cost

Free to use
Relevant legal definitions

























































Clauses






























Relevant Industries

Technology

E-commerce

Financial Services

Healthcare

Education Technology

Renewable Energy

Real Estate Technology

Logistics

Food and Beverage

Media and Entertainment

Manufacturing

Professional Services

Biotechnology

Artificial Intelligence

Software Development

Relevant Teams

Legal

Finance

Corporate Development

Executive Leadership

Investment

Compliance

Corporate Secretarial

Treasury

Risk Management

Business Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

General Counsel

Corporate Lawyer

Investment Manager

Venture Capital Associate

Private Equity Manager

Company Secretary

Financial Controller

Business Development Director

Startup Founder

Investment Banker

Legal Counsel

Compliance Officer

Board Director

Industries







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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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