The Preference Share Agreement is a crucial document used when a UAE company wishes to issue shares with preferential rights, typically for raising capital while maintaining existing control structures. This agreement, governed by UAE law, particularly Federal Law No. 32 of 2021, outlines the specific rights and privileges attached to preference shares, including priority dividend payments, voting rights, and capital return preferences. It is commonly used in private equity investments, corporate restructuring, and strategic financing rounds, providing investors with preferred status while protecting both the company's and shareholders' interests. The document must address specific UAE requirements regarding corporate governance, foreign ownership restrictions, and local regulatory compliance, making it essential for both local and international investment transactions in the UAE market.
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1. Parties: Identification of the Company issuing the preference shares and the Preference Shareholders
2. Background: Context of the agreement, including company information and purpose of issuing preference shares
3. Definitions and Interpretation: Definitions of key terms and interpretation rules
4. Subscription and Issue: Details of preference share subscription, including number of shares, price, and payment terms
5. Preference Share Rights: Core rights attached to preference shares including dividend rights, voting rights, and capital return preference
6. Dividend Provisions: Detailed terms regarding dividend calculations, declaration, and payment
7. Conversion Rights: Terms and conditions for converting preference shares to ordinary shares, if applicable
8. Transfer Restrictions: Limitations and conditions on transfer of preference shares
9. Exit Rights: Provisions for exit scenarios including redemption and put/call options
10. Company Covenants: Company's obligations to preference shareholders
11. Representations and Warranties: Standard representations and warranties from both parties
12. Events of Default: Circumstances constituting default and consequences
13. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction details
1. Anti-dilution Protection: Protection against dilution of shareholding, used when there's likelihood of future share issuances
2. Tag-Along Rights: Rights of preference shareholders to join in sale of shares by majority shareholders
3. Drag-Along Rights: Rights to force minority shareholders to join in sale of shares
4. Board Representation: Rights of preference shareholders to appoint board members, if applicable
5. Information Rights: Special information access rights for preference shareholders
6. Liquidation Preference: Special rights in case of liquidation, if different from standard preference rights
7. Shariah Compliance: Additional provisions for Shariah-compliant preference shares
8. Foreign Ownership Provisions: Special provisions if foreign ownership is involved
1. Schedule 1 - Share Certificate: Form of preference share certificate
2. Schedule 2 - Subscription Details: Detailed information about share subscription including shareholder information and payment details
3. Schedule 3 - Company Information: Detailed corporate information including capital structure and existing shareholders
4. Schedule 4 - Dividend Calculation: Formula and examples of dividend calculations
5. Schedule 5 - Conversion Mechanics: Detailed procedures for share conversion if applicable
6. Schedule 6 - Form of Transfer Notice: Template for share transfer notifications
7. Schedule 7 - Deed of Adherence: Template for new shareholders to become bound by the agreement
8. Appendix A - Board Resolutions: Copy of board resolutions approving preference share issuance
9. Appendix B - Regulatory Approvals: Copies of required UAE regulatory approvals
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