Simple Agreement For Future Equity Term Sheet Template for the United Arab Emirates

When you're navigating startup investments in the United Arab Emirates, a Simple Agreement For Future Equity Term Sheet serves as your roadmap for structuring early-stage funding arrangements. This document establishes the preliminary framework for SAFE agreements, allowing you to secure investment while postponing complex valuation discussions until your next formal equity round.

When do you need this document?

You'll require this term sheet when seeking pre-seed or seed funding from angel investors, venture capital firms, or family offices in the UAE. It's particularly valuable when your startup operates in free zones like ADGM or DIFC, where foreign ownership rules are more flexible. The document becomes essential when traditional equity rounds would be premature due to early-stage operations or when you need to bridge funding gaps between major investment rounds. You'll also need it when international investors require clear documentation that complies with UAE securities regulations before committing capital.

Key legal considerations

Your term sheet must clearly define conversion triggers, including qualified financing events and liquidity scenarios that activate the equity conversion mechanism. Pay careful attention to valuation cap provisions, which protect investors by setting maximum conversion valuations, and discount rates that reward early investment risk. The document should specify pro-rata participation rights and information rights that investors will receive upon conversion. Consider including most favored nation clauses to ensure fair treatment across multiple SAFE rounds. Address dissolution and liquidation scenarios explicitly, as these provisions determine how SAFE holders rank against other stakeholders in adverse outcomes.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 32 of 2021 (Companies Law), your term sheet must comply with corporate shareholding restrictions and foreign ownership limitations outside designated free zones. Ensure the document aligns with UAE Federal Law No. 18 of 1993 (Commercial Transactions Law) regarding commercial instruments and financial arrangements. If your investor is foreign, verify compliance with UAE Federal Decree-Law No. 19 of 2018 (FDI Law) governing foreign direct investment permissions. The term sheet should reference applicable SCA regulations if your company falls under securities oversight. Include appropriate governing law clauses specifying UAE jurisdiction and ensure all parties have proper legal capacity and authority to enter binding investment commitments under UAE corporate law.