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Convertible Debt Agreement

Convertible Debt Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Convertible Debt Agreement

"I need a Convertible Debt Agreement for my Dubai-based technology startup to secure AED 2 million in funding, with conversion rights triggering either at a qualified financing round of AED 5 million or at the lender's option by March 2025, including standard UAE regulatory compliance provisions."

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Document background
The Convertible Debt Agreement is a sophisticated financing instrument used in the UAE when companies seek flexible funding options that combine elements of debt and potential equity investment. This document is particularly relevant for growth-stage companies that may not want to establish a firm valuation immediately or prefer to defer equity dilution. The agreement must comply with UAE federal laws, including the Commercial Companies Law and relevant securities regulations, while potentially incorporating Sharia-compliant elements depending on the parties' requirements. It typically includes detailed provisions on conversion mechanics, price adjustments, investor rights, and corporate governance matters, all structured within the UAE's legal framework. The document is especially crucial for UAE companies seeking bridge financing or strategic investment while maintaining compliance with local regulatory requirements.
Suggested Sections

1. Parties: Identification of the Lender(s), Company (Borrower), and any guarantors or other relevant parties

2. Background: Context of the agreement, including company status and purpose of the convertible debt financing

3. Definitions: Key terms used throughout the agreement, including financial, technical and legal definitions

4. Loan Amount and Terms: Principal amount, interest rate, maturity date, and payment terms

5. Conversion Rights: Terms and conditions for converting debt to equity, including conversion price, timing, and mechanics

6. Conversion Price Adjustments: Mechanisms for adjusting conversion price based on corporate actions or anti-dilution provisions

7. Representations and Warranties: Statements of fact by the company regarding its legal status, authority, and financial condition

8. Company Covenants: Ongoing obligations of the company during the term of the debt

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

10. Conversion Procedures: Detailed process for executing conversion, including notice requirements and documentation

11. Rights of Lender: Specific rights granted to the lender, including information rights and board observer rights

12. Assignment and Transfer: Terms governing the transfer of the convertible debt instrument

13. Amendments and Waivers: Process for modifying the agreement terms

14. Governing Law and Jurisdiction: Specification of UAE law application and jurisdiction for disputes

15. Notices: Communication procedures between parties

16. General Provisions: Miscellaneous legal provisions including severability, entire agreement, and counterparts

Optional Sections

1. Sharia Compliance: Additional provisions ensuring compliance with Islamic finance principles, used when the agreement needs to be Sharia-compliant

2. Security: Provisions for any collateral or security arrangements, used when the debt is secured

3. Subordination: Terms regarding the ranking of the debt, used when there are multiple creditors

4. Tag-Along Rights: Rights of lender to participate in sale of company shares, used in specific investment scenarios

5. Pre-emptive Rights: Rights of lender to participate in future financing rounds, used for sophisticated investors

6. Corporate Governance Rights: Special voting or board representation rights upon conversion, used for strategic investors

7. Intellectual Property Protection: Special provisions protecting company IP, used for technology companies

8. Foreign Investment Provisions: Additional terms for compliance with UAE foreign investment laws, used with foreign lenders

Suggested Schedules

1. Schedule 1 - Conversion Notice Form: Template form for exercising conversion rights

2. Schedule 2 - Cap Table: Current and post-conversion capitalization table of the company

3. Schedule 3 - Financial Statements: Latest financial statements of the company

4. Schedule 4 - Corporate Information: Key corporate documents and information about the company

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

6. Schedule 6 - Warranties: Detailed list of company warranties

7. Schedule 7 - Existing Indebtedness: List of company's existing debt obligations

8. Appendix A - Board Resolution: Company board resolution approving the convertible debt issuance

9. Appendix B - Shareholders' Resolution: Shareholders' approval of the convertible debt issuance if required

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
Agreement
Applicable Law
Board
Business Day
Company
Completion
Conversion Date
Conversion Notice
Conversion Price
Conversion Rights
Conversion Shares
Default Interest Rate
Dirhams
Drawdown Date
Encumbrance
Event of Default
Financial Year
Fully Diluted Share Capital
Interest Payment Date
Interest Period
Interest Rate
Investment Amount
Lender
Loan
Long Stop Date
Material Adverse Effect
Maturity Date
Ordinary Shares
Principal Amount
Qualifying Financing
Regulatory Approvals
Repayment Date
Securities
Security Documents
Share Capital
Shareholders Agreement
Subscription Price
Subsidiary
Trade License
Transaction Documents
Transfer
UAE
Valuation
Warranties
Relevant Industries

Technology and Digital

Real Estate and Construction

Financial Services

Healthcare and Life Sciences

E-commerce

Manufacturing

Renewable Energy

Trading and Distribution

Media and Entertainment

Professional Services

Telecommunications

Food and Beverage

Retail

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Compliance

Risk Management

Board of Directors

Executive Leadership

Investment

Company Secretariat

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Investment Director

Legal Counsel

Corporate Secretary

Finance Director

Investment Manager

Venture Capital Partner

Private Equity Manager

Treasury Manager

Corporate Development Director

Financial Controller

Company Director

Board Member

Compliance Officer

Risk Manager

Industries
UAE Federal Law No. 32 of 2021 (Commercial Companies Law): Governs company formations and corporate affairs, including share issuance, capital structure modifications, and shareholder rights - crucial for the conversion mechanism of debt to equity
UAE Federal Law No. 10 of 1980 (Central Bank Law): Regulates banking operations and financial institutions, including provisions on lending and interest rates
UAE Federal Law No. 14 of 2018 (UAE Central Bank and Organization of Financial Institutions): Provides framework for financial institutions and regulatory compliance for debt instruments
UAE Federal Law No. 5 of 1985 (Civil Transactions Law): Contains general principles of contract law, including formation, validity, and enforcement of contractual obligations
SCA Board of Directors' Resolution No. 3 of 2000: Regulations concerning disclosure and transparency in securities issuance and trading
UAE Federal Law No. 4 of 2000 (Capital Markets Law): Governs securities markets and financial instruments, including convertible securities
UAE Federal Decree Law No. 19 of 2018 (Foreign Direct Investment Law): Relevant for foreign investors participating in convertible debt arrangements with UAE companies
UAE Federal Law No. 2 of 2015 (Commercial Companies Law - Anti-Commercial Concealment): Ensures transparency in commercial transactions and prevents concealment of actual ownership
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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