Document background
The Break Fee Agreement is a critical document in UAE corporate transactions, particularly in mergers, acquisitions, and significant commercial deals. It serves as a risk allocation mechanism, providing financial protection to parties investing time and resources in potential transactions. Under UAE law, these agreements must be carefully structured to ensure enforceability, particularly considering the UAE Civil Code's provisions on compensation and penalties. The document typically specifies the quantum of the break fee, trigger events, payment terms, and any conditions or exceptions. It's essential in transactions where parties need security against deal failure or where significant due diligence and transaction costs are involved. The agreement must be drafted in compliance with UAE federal laws and may require consideration of specific emirates' regulations where relevant.
