Founder Loan Agreement for United Arab Emirates

Founder Loan Agreement Template for United Arab Emirates

A comprehensive legal agreement governed by UAE law that establishes the terms and conditions under which a founder borrows money from their company. The document addresses key aspects including loan amount, interest/profit rate, repayment terms, and default provisions, while ensuring compliance with UAE commercial law and corporate governance requirements. It includes necessary declarations, warranties, and conditions precedent, with optional provisions for security and Sharia compliance where required under UAE jurisdiction.

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What is a Founder Loan Agreement?

The Founder Loan Agreement is utilized when a company in the UAE extends a loan to one of its founders, requiring careful documentation to ensure legal compliance and protect both parties' interests. This arrangement must comply with UAE Companies Law, particularly regarding related party transactions and corporate governance requirements. The document typically includes comprehensive terms covering loan amount, repayment schedule, interest/profit calculations (with consideration for Sharia principles if applicable), and default provisions. It's essential to structure these agreements properly to maintain transparency and meet regulatory requirements while facilitating the financial arrangement between the founder and the company.

What sections should be included in a Founder Loan Agreement?

1. Parties: Identification of the Founder (as borrower) and the Company (as lender), including full legal names and addresses

2. Background: Context of the loan agreement, relationship between parties, and purpose of the loan

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

4. Loan Amount and Purpose: Specification of the loan amount, currency, and permitted use of funds

5. Interest/Profit Rate: Details of interest or profit rate (ensuring Sharia compliance if required), calculation method, and payment periods

6. Repayment Terms: Repayment schedule, payment methods, and prepayment provisions

7. Conditions Precedent: Conditions that must be satisfied before the loan becomes effective

8. Representations and Warranties: Standard declarations by the founder regarding their capacity, authority, and financial status

9. Covenants: Ongoing obligations of the founder during the loan term

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

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

What sections are optional to include in a Founder Loan Agreement?

1. Security: Include if the loan is to be secured by any assets or guarantees

2. Sharia Compliance: Include if the loan needs to be structured in accordance with Islamic finance principles

3. Board Approval: Include if company's constitutional documents require board approval for related party transactions

4. Shareholders' Approval: Include if shareholders' approval is required under UAE Companies Law thresholds

5. Set-off Rights: Include if there are other financial relationships between the parties

6. Tax Provisions: Include if there are specific tax implications to be addressed

7. Assignment and Transfer: Include if either party may need to transfer their rights or obligations

8. Subordination: Include if this loan needs to be subordinated to other company debts

What schedules should be included in a Founder Loan Agreement?

1. Repayment Schedule: Detailed schedule of repayment dates and amounts

2. Form of Drawdown Notice: Standard form for requesting loan disbursement

3. Security Details: Details of any security or collateral provided (if applicable)

4. Corporate Authorizations: Copies of relevant board and/or shareholder resolutions

5. Conditions Precedent Documents: List of required documents and evidence to be provided before loan effectiveness

6. Related Party Transaction Disclosure: Required disclosures under UAE Companies Law regarding the founder's relationship with the company

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

Publisher

Genie AI

Document Type

Financing Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Technology

E-commerce

Financial Services

Real Estate

Healthcare

Manufacturing

Professional Services

Retail

Hospitality

Education

Construction

Media and Entertainment

Relevant Teams

Legal

Finance

Compliance

Corporate Secretariat

Risk Management

Corporate Governance

Treasury

Executive Leadership

Relevant Roles

CEO

CFO

General Counsel

Legal Director

Corporate Secretary

Finance Director

Compliance Officer

Board Director

Company Founder

Managing Director

Financial Controller

Legal Counsel

Corporate Governance Officer

Industries
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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