Share Charge Agreement Template for the United Arab Emirates

A Share Charge Agreement is a security document that allows you to use shares as collateral for financial obligations in the United Arab Emirates. This agreement creates a legal charge over shares, giving the lender (chargee) rights to the shares if you default on your obligations. Understanding this document is crucial when entering into secured lending arrangements or corporate transactions where shares serve as security.

When do you need this document?

You need a Share Charge Agreement when obtaining secured financing where shares serve as collateral, such as business loans, credit facilities, or acquisition financing. This document is essential in syndicated lending arrangements where multiple lenders require security over shares. It's also required in corporate restructuring transactions where existing shareholders pledge their shares to secure new obligations. Additionally, you'll need this agreement when refinancing existing debt facilities that require share security, or when entering into joint venture arrangements where one party's shares secure performance obligations. The agreement is particularly important in UAE free zones where specific registration and perfection requirements apply to share charges.

Key legal considerations

The agreement must clearly identify all charged shares, including class, number, and certificate details to ensure proper security creation. You need to include comprehensive representations and warranties about your ownership of the shares, absence of other charges, and authority to create the security. The document should specify whether the charge is fixed or floating, and detail any restrictions on share transfers or dealings while the charge exists. Voting rights provisions are crucial – the agreement should clarify whether you retain voting rights or transfer them to the chargee. You must also address dividend and distribution rights, including whether payments go to you or are held as additional security. The enforcement provisions should outline the chargee's rights upon default, including share sale procedures and surplus distribution. Consider including step-in rights that allow the chargee to take control of the shares in certain circumstances.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 32 of 2021 (Commercial Companies Law), share charges must be properly documented and may require registration with the company's register. The agreement must comply with the UAE Civil Code regarding contract formation and validity, ensuring all parties have proper authority to enter the arrangement. For companies incorporated in UAE mainland, you may need to comply with specific Ministry of Economy requirements for share pledge registration. Free zone companies have distinct requirements – charges over shares in ADGM, DIFC, or other free zones must comply with the respective free zone regulations and may require registration with zone authorities. The agreement should include proper UAE governing law and jurisdiction clauses, and consider whether notarization is required for enforceability. You must ensure the charge doesn't violate any restrictions in the company's articles of association or shareholder agreements. For listed companies, additional Securities and Commodities Authority regulations may apply to share charges and disclosure requirements.