Document background
The Convertible Loan Stock Agreement is a sophisticated financing instrument used in the UAE when companies seek to raise capital while offering investors the flexibility to convert their loan investment into equity shares. This document is particularly relevant for growth-stage companies in the UAE market that require significant capital injection but want to defer equity dilution, or when traditional debt or equity financing alone may not be suitable. The agreement must comply with UAE federal laws and regulations, including UAE Federal Law No. 32 of 2021 and relevant UAE Central Bank directives. It typically includes detailed provisions on conversion triggers, price mechanisms, anti-dilution protections, and may need to consider Sharia compliance depending on the parties involved. The document is commonly used in series funding rounds, bridge financing scenarios, or when companies are preparing for significant corporate events such as IPOs or acquisitions.
