Equity Participation Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Equity Participation Agreement

"I need an Equity Participation Agreement for a UAE technology startup, where a foreign investor will acquire a 30% stake with board representation rights and standard minority protections, with completion planned for March 2025."

Document background
An Equity Participation Agreement is a crucial document used when an investor seeks to acquire an ownership stake in a UAE company, whether through direct share subscription or purchase from existing shareholders. This agreement is particularly important in the UAE context due to specific regulatory requirements around foreign ownership, local sponsor requirements, and compliance with UAE Commercial Companies Law. The document typically covers share valuation, payment terms, corporate governance structures, shareholder protections, and exit mechanisms. It's commonly used in various scenarios including private equity investments, joint ventures, strategic partnerships, and corporate restructuring. The agreement must carefully balance international investment practices with local UAE legal requirements, particularly regarding ownership restrictions, board composition, and shareholder rights.
Suggested Sections

1. Parties: Identification of all parties to the agreement, including full legal names, registration details, and addresses

2. Background: Context of the transaction, current ownership structure, and purpose of the agreement

3. Definitions: Detailed definitions of key terms used throughout the agreement

4. Subscription and Purchase: Details of the equity participation, including number of shares, price, and payment terms

5. Conditions Precedent: Prerequisites that must be satisfied before the equity participation becomes effective

6. Completion: Process and requirements for closing the transaction

7. Representations and Warranties: Statements of fact and assurances from all parties

8. Corporate Governance: Management structure, board composition, and voting rights

9. Reserved Matters: Decisions requiring special approval or unanimous consent

10. Transfer Restrictions: Limitations on share transfers and pre-emptive rights

11. Exit Rights: Provisions for future sale, IPO, or other exit mechanisms

12. Confidentiality: Protection of confidential information and trade secrets

13. Non-Competition: Restrictions on competitive activities

14. Term and Termination: Duration of the agreement and grounds for termination

15. Governing Law and Jurisdiction: UAE law as governing law and jurisdiction details

16. General Provisions: Standard boilerplate clauses including notices, amendments, and entire agreement

Optional Sections

1. Tag-Along Rights: Optional protection for minority shareholders to join in sale of majority stake

2. Drag-Along Rights: Optional right for majority shareholders to force minorities to join in sale

3. Anti-Dilution Protection: Optional protection against dilution in future funding rounds

4. Intellectual Property Rights: Include if IP is a significant asset of the business

5. Employee Matters: Include if specific employee arrangements are part of the transaction

6. Islamic Finance Compliance: Include if transaction needs to comply with Shariah principles

7. Free Zone Specific Provisions: Include if company is located in a UAE free zone

8. Foreign Ownership Provisions: Include specific provisions if foreign ownership exceeds 49%

Suggested Schedules

1. Schedule 1: Company Information: Details of the company including registration, licenses, and current shareholding

2. Schedule 2: Subscription Details: Detailed breakdown of shares, price, and payment terms

3. Schedule 3: Conditions Precedent: Detailed list of all conditions to be satisfied before completion

4. Schedule 4: Completion Requirements: Checklist of documents and actions required at completion

5. Schedule 5: Reserved Matters: Comprehensive list of decisions requiring special approval

6. Schedule 6: Warranties: Detailed warranties given by each party

7. Schedule 7: Corporate Governance Rules: Detailed procedures for board meetings and shareholder decisions

8. Appendix A: Share Certificate Form: Template for new share certificates

9. Appendix B: Board Resolution Templates: Standard forms for required board resolutions

10. Appendix C: Shareholder Resolution Templates: Standard forms for required shareholder resolutions

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

Relevant legal definitions
Clauses
Relevant Industries

Technology

Real Estate

Manufacturing

Healthcare

Financial Services

Retail

Education

Construction

Energy

Telecommunications

Professional Services

Hospitality

Transport and Logistics

Media and Entertainment

Relevant Teams

Legal

Finance

Corporate Development

Mergers & Acquisitions

Compliance

Business Development

Strategy

Corporate Secretariat

Investment

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

General Counsel

Legal Director

Corporate Secretary

Investment Director

Managing Director

Chief Legal Officer

Business Development Director

Finance Director

Compliance Officer

Corporate Development Manager

Investment Manager

Mergers & Acquisitions Director

Strategic Planning Director

Industries
UAE Federal Law No. 32 of 2021 (Commercial Companies Law): Primary legislation governing company formation, structure, and operations in the UAE. Crucial for determining permissible ownership structures and corporate governance requirements.
UAE Federal Decree-Law No. 19 of 2018 (Foreign Direct Investment Law): Regulates foreign investment and ownership in UAE companies, including permitted ownership percentages and restricted sectors.
UAE Federal Law No. 4 of 2000 (Securities and Commodities Authority Law): Governs securities, share transfers, and capital market activities, particularly relevant for listed companies or future IPO considerations.
UAE Federal Law No. 5 of 1985 (Civil Transactions Law): Provides the basic framework for contract formation, validity, and enforcement, essential for the agreement's general terms and conditions.
UAE Federal Law No. 4 of 2012 (Competition Law): Regulates competitive practices and market concentration, relevant for ensuring the equity participation doesn't violate anti-monopoly provisions.
UAE Federal Decree-Law No. 14 of 2018 (Central Bank Law): Relevant for any financial aspects of the agreement, particularly if the target company is in the financial sector.
UAE Federal Law No. 2 of 2015 (Commercial Companies Law - Free Zones): Specific regulations for companies established in UAE free zones, with different ownership and operational requirements.
UAE Federal Law No. 6 of 2018 (Anti-Money Laundering Law): Compliance requirements for ownership verification and source of funds in equity transactions.
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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