Term Sheet Share Purchase Agreement Template for the United Arab Emirates

A Term Sheet Share Purchase Agreement is a preliminary document that outlines the key commercial and legal terms for acquiring shares in a UAE company. While typically non-binding on transaction terms, it serves as a crucial roadmap that helps parties align their expectations before proceeding with detailed due diligence and final documentation. This agreement establishes the foundation for complex share acquisition transactions under UAE law.

When do you need this document?

You need this document when initiating discussions for acquiring shares in a UAE company, whether it's a minority stake or full acquisition. It's particularly essential when multiple parties are involved in competitive bidding processes, as it helps establish clear terms and timeline expectations. The document is also crucial when foreign investors are acquiring shares, as it allows parties to address regulatory compliance requirements early in the process. Use this agreement when the transaction involves significant due diligence periods, complex payment structures, or when parties want to establish exclusivity periods for negotiations.

Key legal considerations

Several critical legal aspects must be addressed in your term sheet. Purchase price mechanisms and payment structures should be clearly defined, including whether payments will be made in cash, shares, or a combination. Conditions precedent are vital and typically include regulatory approvals, due diligence completion, and third-party consents. You must specify the scope and timeline for due diligence activities, including access to financial records, legal documents, and operational information. Confidentiality obligations protect sensitive business information shared during negotiations. Consider including exclusivity clauses that prevent the seller from negotiating with other potential buyers during specified periods. Address potential deal-breaker issues early, such as key employee retention, ongoing management roles, and post-completion restrictions.

Legal requirements in United Arab Emirates

UAE share purchase transactions must comply with Federal Law No. 32 of 2021 (Commercial Companies Law), which governs corporate structures, share transfers, and board approvals. Foreign ownership restrictions under the FDI Law must be carefully considered, particularly the 49% foreign ownership limit in certain sectors, though recent reforms allow 100% foreign ownership in many industries. Securities Law requirements may apply if the target company is publicly listed or if the transaction triggers disclosure obligations. The term sheet should address necessary approvals from the UAE Central Bank for financial services companies, or sector-specific regulators for telecommunications, healthcare, or other regulated industries. Consider free zone regulations if the target company operates within a UAE free zone, as different ownership and transfer rules may apply. Ensure compliance with anti-money laundering and know-your-customer requirements, particularly for high-value transactions or when parties include foreign entities.