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Compulsory Convertible Debentures Agreement

Compulsory Convertible Debentures Agreement Template for United Arab Emirates

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Compulsory Convertible Debentures Agreement

"I need a Compulsory Convertible Debentures Agreement for a UAE-based technology startup, issuing AED 5 million worth of debentures with mandatory conversion in March 2025, including Shariah-compliant profit rate structures and anti-dilution provisions."

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Document background
The Compulsory Convertible Debentures Agreement is utilized when companies in the UAE seek to raise capital through debt that will automatically convert to equity, typically during expansion phases or strategic growth initiatives. This instrument is particularly attractive for companies looking to defer equity dilution while securing immediate funding. The agreement must comply with UAE Federal Law No. 32 of 2021 (Commercial Companies Law) and relevant UAE Central Bank regulations, while potentially incorporating Shariah-compliant structures. It details the issuance terms, conversion mechanisms, profit rates, and rights of debenture holders, making it essential for both conventional and Islamic financing structures in the UAE market. The document serves as a critical tool for companies balancing immediate funding needs with future equity arrangements, while ensuring regulatory compliance in the UAE's sophisticated financial framework.
Suggested Sections

1. Parties: Identification of the Issuing Company and the Debenture Holders/Trustees

2. Background: Context of the issuance, corporate approvals, and purpose of the debentures

3. Definitions and Interpretation: Key terms, calculation methods, and interpretation rules

4. Issue of Debentures: Terms of issuance, face value, number of debentures, and subscription details

5. Status and Ranking: Priority status of the debentures and ranking among company's obligations

6. Interest/Profit Rate: Profit rate calculation, payment periods, and Shariah-compliant structure

7. Conversion Terms: Mandatory conversion trigger events, conversion ratio, and mechanics

8. Conversion Process: Procedural requirements for conversion, including notices and documentation

9. Representations and Warranties: Standard and specific warranties from the company and debenture holders

10. Company Covenants: Positive and negative covenants binding the company

11. Events of Default: Circumstances constituting default and consequences

12. Debenture Holder Rights: Rights prior to conversion, including voting and information rights

13. Transferability: Restrictions and procedures for transfer of debentures

14. Notices: Communication procedures between parties

15. Governing Law and Jurisdiction: UAE law application and dispute resolution mechanisms

Optional Sections

1. Shariah Compliance: Detailed section on Islamic finance structure when the debentures need explicit Shariah compliance

2. Multiple Tranches: Section dealing with multiple series or tranches of debentures if not issued simultaneously

3. Tag-Along Rights: Rights of debenture holders in case of change in company control pre-conversion

4. Anti-dilution Provisions: Protection against dilution through corporate actions before conversion

5. Security: If debentures are secured, details of security structure and enforcement

6. Regulatory Compliance: Specific section on compliance with UAE Central Bank or SCA requirements if applicable

7. Put Option: Optional early redemption rights for debenture holders in specific circumstances

Suggested Schedules

1. Debenture Certificate Format: Template of the debenture certificate to be issued

2. Conversion Notice: Format of notices for implementing conversion

3. Calculation Methods: Detailed formulae for conversion ratio, adjustments, and interest/profit calculations

4. Corporate Authorizations: Company resolutions and regulatory approvals for debenture issuance

5. Shariah Board Approval: If applicable, Shariah board certificates and structure approval

6. Subscriber Information: Details of initial debenture subscribers and holding percentages

7. Term Sheet: Commercial terms summary including key financial terms

8. Post-Conversion Shareholding: Projected shareholding structure after conversion

Authors

Alex Denne

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Applicable Law
Articles of Association
Board
Business Day
Calculation Agent
Company
Completion Date
Conversion Date
Conversion Notice
Conversion Period
Conversion Price
Conversion Ratio
Conversion Rights
Conversion Shares
Debenture Certificate
Debenture Holder
Debenture Register
Debentures
Default Interest
Encumbrance
Event of Default
Face Value
Financial Year
Governing Law
Interest Payment Date
Interest Period
Interest Rate
Issue Date
Issuing Company
Maturity Date
Profit Rate
Record Date
Redemption Amount
Regulatory Approval
Relevant Authority
Securities
Share Capital
Shareholder
Shares
Subscription Amount
Subscription Date
Term
Transfer Form
Trigger Event
UAE
UAE Central Bank
UAE Companies Law
Relevant Industries

Financial Services

Technology and Startups

Real Estate Development

Healthcare

Manufacturing

Energy and Utilities

Infrastructure Development

Telecommunications

E-commerce

Education

Hospitality

Retail

Relevant Teams

Legal

Finance

Corporate Finance

Treasury

Compliance

Risk Management

Board Secretariat

Corporate Strategy

Investment

Shariah Advisory

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

Corporate Finance Director

Investment Manager

Legal Counsel

Company Secretary

Compliance Officer

Financial Controller

Treasury Manager

Board Director

Investment Banker

Corporate Finance Advisor

Shariah Compliance Officer

Risk Manager

Industries
UAE Federal Law No. 32 of 2021 (Commercial Companies Law): Primary legislation governing companies in the UAE, including provisions for issuing debt instruments, debentures, and conversion of securities into shares
UAE Central Bank Regulation regarding Debt Instruments: Regulations governing the issuance and trading of debt instruments in the UAE, including debentures and convertible securities
SCA Board of Directors' Decision No. (17/R.M) of 2018: Regulations concerning the offering of securities and issuance of shares, including rules for convertible bonds and debentures
UAE Federal Law No. 14 of 2018 (Central Bank Law): Regulates financial institutions and banking activities, including the issuance of debt instruments and securities
UAE Federal Law No. 2 of 2015 (Commercial Companies Law - Foreign Ownership): Provisions regarding foreign ownership restrictions and requirements for company shareholding
DIFC Law No. 1 of 2012 (if applicable for DIFC entities): Specific regulations for companies operating in Dubai International Financial Centre, including provisions for issuing securities and debt instruments
UAE Federal Law No. 18 of 1993 (Commercial Transactions Law): Governs commercial transactions including provisions related to commercial papers and debt instruments
UAE Federal Law No. 10 of 1980 (Central Bank Law on Interest Rates): Regulations concerning interest rates and profit calculation on debt instruments
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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