Term Sheet For Share Purchase Agreement Template for the United Arab Emirates

A Term Sheet For Share Purchase Agreement is your preliminary roadmap when acquiring shares in a UAE company. This document establishes the commercial framework before you commit to detailed due diligence or final legal agreements, helping you secure key terms while maintaining flexibility during negotiations.

When do you need this document?

You need this term sheet when you're considering purchasing shares in any UAE company, whether it's a private limited company, public joint-stock company, or free zone entity. It's essential during the initial negotiation phase when you've identified a target company and reached preliminary agreement on basic commercial terms. The document is particularly valuable in complex transactions involving foreign investors, as it helps navigate UAE's foreign ownership regulations and ensures compliance with Federal Decree-Law No. 19 of 2018. You'll also need it when multiple parties are involved, such as investment banks or financial advisors, as it clarifies each party's role and expectations before expensive legal work begins.

Key legal considerations

Your term sheet must address several critical elements to protect your interests and ensure enforceability. The purchase price mechanism should clearly specify whether it's fixed, subject to completion adjustments, or includes earn-out provisions tied to future performance. Payment terms need careful structuring, especially regarding escrow arrangements and conditions precedent that could affect completion timing. You should include specific provisions for due diligence scope and timeline, as UAE law requires thorough disclosure in share transfers. Consider including exclusivity periods to prevent the seller from negotiating with other buyers, and ensure your term sheet addresses regulatory approvals required under UAE Commercial Companies Law. Key warranties and indemnities should be outlined, even if detailed terms will be negotiated later, particularly regarding the target company's compliance with UAE corporate governance requirements.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 32 of 2021, share transfers must comply with specific procedural requirements that your term sheet should acknowledge. If you're a foreign investor, your acquisition must align with the foreign ownership limits specified in the Commercial Companies Law and any applicable free zone regulations. The term sheet should reference compliance with UAE Central Bank regulations if the target company operates in financial services, and acknowledge any sector-specific licensing requirements. For listed companies, you must consider SCA Resolution No. 3 R.M of 2000 regarding disclosure obligations for significant shareholdings. Your term sheet should also address UAE Civil Code requirements for contract formation and specify that the final agreement will comply with all applicable UAE laws. If the target company has existing shareholder agreements or articles of association with transfer restrictions, these must be acknowledged in your preliminary terms to avoid future complications during the completion process.