Term Sheet For Investors Template for the United Arab Emirates

A Term Sheet For Investors is a preliminary document that outlines the key terms and conditions of a proposed investment transaction between your company and potential investors. Under United Arab Emirates law, this document serves as the foundation for investment negotiations, establishing critical parameters such as valuation, investment amount, securities type, and governance rights while ensuring compliance with UAE's comprehensive regulatory framework.

When do you need this document?

You need a Term Sheet For Investors when your startup or company is actively seeking funding from angel investors, venture capital firms, or institutional investors in the UAE. This document becomes essential during Series A, B, or later funding rounds where you're negotiating complex investment structures involving preferred shares, board representation, and investor protection rights. The term sheet is particularly crucial when dealing with foreign investors, as it must address UAE's foreign direct investment regulations and specify whether the investment will occur through mainland UAE entities or within designated free zones like DIFC or ADGM. You'll also require this document when converting earlier convertible instruments or when existing shareholders are participating in follow-on investment rounds.

Key legal considerations

The term sheet must clearly define the type of securities being issued, whether ordinary shares, preferred shares, or convertible instruments, ensuring compliance with UAE securities regulations. Critical clauses include anti-dilution provisions, liquidation preferences, drag-along and tag-along rights, and board composition requirements. You must carefully structure investor rights provisions, including information rights, inspection rights, and approval rights for major corporate decisions. The document should address exit mechanisms such as IPO requirements or trade sale provisions, while considering UAE's specific exit regulations. Confidentiality and exclusivity clauses protect both parties during the negotiation period, and the term sheet must specify governing law and dispute resolution mechanisms, particularly important given UAE's dual court system and arbitration options.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 32 of 2021 (Companies Law), foreign ownership limitations may apply depending on your company's sector and jurisdiction, though recent reforms have expanded 100% foreign ownership opportunities. Your term sheet must comply with UAE Federal Decree-Law No. 19 of 2018 (FDI Law) if involving foreign investors, specifying permitted ownership percentages and any sector-specific restrictions. Companies operating in financial free zones must additionally consider UAE Federal Law No. 8 of 2004 (Financial Free Zones Law) and relevant DIFC or ADGM regulations. The document must address UAE Central Bank regulations if your investment involves banking or financial services activities. Additionally, you must ensure compliance with UAE Federal Law No. 4 of 2000 (Capital Markets Law) regarding securities offerings and investor protection requirements, particularly for larger investment rounds that may trigger public offering thresholds.