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Debt To Equity Conversion Agreement

Debt To Equity Conversion Agreement Template for United Arab Emirates

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Debt To Equity Conversion Agreement Template

I need a Debt to Equity Conversion Agreement Template for converting a 5 million AED loan into equity shares of our Dubai-based technology company, which operates in Dubai Internet City free zone, with the conversion planned for March 2025.

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Document background
The Debt To Equity Conversion Agreement Template is a crucial document used in corporate restructuring scenarios within the UAE legal framework. It is typically employed when a company seeks to improve its balance sheet by converting outstanding debt obligations into equity shares, effectively reducing its debt burden while providing creditors with ownership stakes. This template ensures compliance with UAE Federal Law No. 32 of 2021 and related regulations, including specific provisions for foreign ownership limits, free zone requirements, and Shariah compliance where applicable. The document comprehensively covers the conversion mechanism, valuation methodology, necessary regulatory approvals, and post-conversion shareholder rights. It's particularly relevant during financial restructuring, corporate reorganizations, or when implementing strategic investment arrangements in the UAE market.
Suggested Sections

1. Parties: Identification of the debtor company, creditor(s), and any guarantors or other relevant parties

2. Background: Context of the existing debt, reason for conversion, and current corporate structure

3. Definitions: Key terms used throughout the agreement, including financial terms, corporate terminology, and UAE-specific regulatory references

4. Debt Acknowledgment: Formal acknowledgment of the existing debt amount, origin, and terms

5. Conversion Terms: Details of the conversion mechanism, including conversion ratio, share price calculation, and timing

6. Conditions Precedent: Prerequisites for the conversion, including corporate and regulatory approvals required under UAE law

7. Implementation of Conversion: Step-by-step process for executing the conversion, including share issuance and debt cancellation

8. Representations and Warranties: Standard and specific declarations by all parties regarding their capacity, authority, and compliance with UAE laws

9. Corporate Governance: Post-conversion management rights, board composition, and voting arrangements

10. Regulatory Compliance: Specific provisions ensuring compliance with UAE Companies Law and other relevant regulations

11. Completion Obligations: Actions required by each party to complete the conversion process

12. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for disputes

Optional Sections

1. Islamic Finance Compliance: Required when the transaction needs to comply with Shariah principles

2. Free Zone Provisions: Required when the company operates within a UAE free zone

3. Foreign Ownership Provisions: Required when the conversion involves foreign investors

4. Anti-dilution Rights: Optional protection for existing shareholders

5. Tag-Along Rights: Optional inclusion for minority shareholder protection

6. Drag-Along Rights: Optional inclusion for majority shareholder protection

7. Exit Rights: Optional provisions regarding future sale or IPO scenarios

8. Management Rights: Optional detailed provisions about post-conversion management participation

Suggested Schedules

1. Existing Debt Details: Detailed breakdown of the debt being converted, including principal, interest, and other charges

2. Conversion Calculations: Detailed methodology and calculations for the debt-to-equity conversion

3. New Shareholding Structure: Post-conversion shareholding details and share class rights

4. Corporate Approvals: Copies of board resolutions, shareholder approvals, and other corporate authorizations

5. Regulatory Approvals: Copies of required UAE regulatory approvals and licenses

6. Share Certificates: Form of new share certificates to be issued

7. Amended Articles of Association: Draft of the amended constitutional documents reflecting the new capital structure

8. Valuation Report: Independent valuation report supporting the conversion ratio

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
Articles of Association
Board
Business Day
Companies Law
Company
Completion
Completion Date
Conversion Price
Conversion Ratio
Conversion Rights
Conversion Shares
Creditor
Debt Amount
Debt Instruments
Directors
Economic Department
Effective Date
Encumbrance
Existing Shareholders
Financial Year
Free Zone Authority
Governing Law
Interest Rate
Issued Share Capital
Liabilities
Maturity Date
New Shares
Ordinary Shares
Original Debt Agreement
Party
Principal Amount
Regulatory Approvals
Relevant Authority
Securities
Share Capital
Share Certificate
Shareholder Resolution
Shareholders Agreement
Shares
Subscription Price
UAE
UAE Central Bank
Valuation Report
Working Day
Clauses
Definitions and Interpretation
Debt Acknowledgment
Conversion Mechanism
Conversion Price
Share Issuance
Conditions Precedent
Completion
Representations and Warranties
Corporate Authorization
Regulatory Compliance
Share Rights
Anti-dilution
Board Composition
Voting Rights
Transfer Restrictions
Pre-emptive Rights
Tag Along Rights
Drag Along Rights
Confidentiality
Assignment
Notices
Amendment
Severability
Waiver
Further Assurance
Costs and Expenses
Entire Agreement
Counterparts
Governing Law
Dispute Resolution
Relevant Industries

Banking & Financial Services

Private Equity

Investment Banking

Corporate Finance

Real Estate & Construction

Manufacturing

Technology

Healthcare

Retail & Consumer

Energy & Resources

Professional Services

Hospitality & Tourism

Relevant Teams

Legal

Finance

Corporate Finance

Treasury

Compliance

Risk Management

Corporate Secretariat

Investment

Corporate Development

Restructuring

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Corporate Lawyer

Investment Manager

Restructuring Officer

Company Secretary

Compliance Officer

Financial Controller

Chief Executive Officer

Investment Banker

Private Equity Manager

Risk Manager

Corporate Finance Manager

Treasury Manager

Industries
UAE Federal Law No. 32 of 2021 (Companies Law): The primary legislation governing companies in the UAE, including provisions for share capital, corporate restructuring, and shareholders' rights. This law is crucial for understanding the requirements for issuing new shares and modifying capital structure.
UAE Securities and Commodities Authority (SCA) Regulations: Regulations governing the issuance and listing of securities, relevant for public joint-stock companies and when new shares are being issued as part of the debt conversion.
UAE Central Bank Regulations: Regulations concerning debt restructuring and financial institutions, particularly relevant if the debt holder is a bank or financial institution.
UAE Federal Law No. 14 of 2018 (Central Bank Law): Governs banking operations and financial activities, including debt restructuring mechanisms and requirements for financial institutions.
UAE Federal Law No. 19 of 2018 (Foreign Direct Investment Law): Relevant for understanding foreign ownership restrictions and requirements if the debt-to-equity conversion involves foreign investors.
UAE Federal Law No. 4 of 2000 (Capital Market Law): Governs securities markets and trading, relevant for valuation and trading of newly issued shares.
Free Zone Regulations: Specific regulations applicable if the company is established in one of the UAE's free zones, as these may have different requirements for capital restructuring.
UAE Federal Law No. 18 of 1993 (Commercial Transactions Law): Contains provisions relevant to commercial debt instruments and their transformation into other forms of obligations.
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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