The Preference Shares Agreement is a critical document used when UAE companies seek to raise capital through the issuance of shares with preferential rights, typically offering priority in dividends or capital returns over ordinary shares. This agreement, governed by UAE law and regulations, particularly the Commercial Companies Law (Federal Law No. 2 of 2015), establishes the complete framework for preference shares, including dividend rights, voting powers, conversion or redemption terms, and protective provisions. It's commonly utilized when companies need to attract investors while maintaining existing control structures, or when creating structured investment vehicles. The document must carefully balance UAE corporate law requirements, any applicable SCA regulations, and market expectations, while ensuring enforceability under local jurisdiction.
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1. Parties: Identification of the Company and the Preference Shareholders
2. Background: Context of the preference share issuance, including company details and purpose of the issuance
3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement
4. Preference Share Terms: Core terms including nominal value, issue price, and class designation
5. Dividend Rights: Detailed provisions regarding dividend rates, payment dates, and cumulative/non-cumulative nature
6. Capital Rights: Rights on return of capital and participation in surplus assets
7. Voting Rights: Scope and limitations of voting rights attached to preference shares
8. Conversion Rights: Terms and procedures for conversion of preference shares to ordinary shares, if applicable
9. Redemption: Conditions and procedures for redemption of preference shares
10. Transfer Restrictions: Limitations and procedures for transferring preference shares
11. Representations and Warranties: Standard warranties from both company and shareholders
12. Covenants: Ongoing obligations of the company and shareholders
13. Events of Default: Circumstances constituting default and consequences
14. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction provisions
1. Tag-Along Rights: Include when preference shareholders are to have the right to join in sales by majority shareholders
2. Anti-dilution Protection: Include when preference shareholders are to be protected against dilution from new share issues
3. Board Representation: Include when preference shareholders are to have rights to appoint board members
4. Information Rights: Include when specific information rights are to be granted beyond statutory requirements
5. Liquidation Preference: Include when preference shareholders are to have priority rights in liquidation
6. Dividend Stopper: Include when restrictions on payments of other dividends are required
7. Change of Control Provisions: Include when specific rights are triggered by change in company control
8. Shari'ah Compliance: Include when the preference shares need to comply with Islamic finance principles
1. Share Certificate Form: Template for preference share certificates
2. Dividend Calculation Examples: Detailed examples of how dividends will be calculated
3. Transfer Form: Standard form for transfer of preference shares
4. Conversion Notice: Form for exercising conversion rights
5. Redemption Notice: Form for exercising redemption rights
6. Constitutional Documents: Company's articles of association and other relevant constitutional documents
7. Regulatory Approvals: Copies of relevant regulatory approvals for the issuance
8. Shareholders' Resolution: Copy of the shareholders' resolution approving the preference share issuance
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