The Loan Against Shares Agreement is a specialized financing document used in the UAE when shares are pledged as security for a loan facility. This agreement is essential for financial institutions and borrowers engaging in share-backed lending transactions within the UAE jurisdiction. The document must comply with various UAE federal laws, including banking regulations, securities laws, and commercial regulations. It typically contains detailed provisions regarding the pledge mechanism, valuation methods, margin maintenance requirements, and enforcement procedures. The agreement becomes particularly relevant in scenarios where companies or individuals seek to leverage their shareholdings for financing while retaining ownership rights, subject to the security interest of the lender. The document must be structured to ensure enforceability under UAE law and often requires registration with relevant authorities such as the Securities and Commodities Authority or relevant stock exchanges.
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1. Parties: Identifies the lender, borrower, and any guarantors or security providers
2. Background: Sets out the context of the loan arrangement and the purpose for which the shares are being pledged
3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation rules
4. Loan Amount and Purpose: Specifies the loan amount, currency, and permitted use of the loan proceeds
5. Interest and Fees: Details the interest rate, calculation method, payment periods, and any applicable fees
6. Security Arrangements: Describes the share pledge mechanism, perfection requirements, and maintenance of security
7. Representations and Warranties: Sets out the borrower's confirmations regarding their authority, share ownership, and financial condition
8. Covenants: Lists ongoing obligations of the borrower including financial covenants and share maintenance requirements
9. Events of Default: Specifies circumstances constituting default and their consequences
10. Enforcement Rights: Details the lender's rights and remedies upon default, including share disposal
11. Payments and Calculations: Describes payment mechanics, business days, and calculation conventions
12. Duration and Termination: Sets out the term of the agreement and termination provisions
13. Notices: Specifies how formal communications between parties should be made
14. Governing Law and Jurisdiction: Confirms UAE law as governing law and specifies jurisdiction for disputes
1. Security Margin Requirements: Used when there are specific loan-to-value ratios to be maintained
2. Guarantee Provisions: Required when there is a third-party guarantor for the loan
3. Additional Security: Included when other assets besides shares are provided as security
4. Dividend Rights: Specifies treatment of dividends during the security period
5. Share Voting Rights: Details voting arrangements for the pledged shares
6. Tax Provisions: Required when there are specific tax implications to be addressed
7. Currency Protection: Needed for loans denominated in foreign currencies
8. Insurance Requirements: Used when insurance of the pledged shares or related assets is required
1. Schedule 1 - Share Details: Lists the pledged shares, including company details, share certificates, and quantity
2. Schedule 2 - Conditions Precedent: Lists documents and conditions required before loan disbursement
3. Schedule 3 - Repayment Schedule: Details the loan repayment dates and amounts
4. Schedule 4 - Security Perfection Requirements: Lists steps required to perfect the security interest in shares
5. Schedule 5 - Form of Transfer Instruments: Contains pro-forma share transfer documents for enforcement
6. Schedule 6 - Financial Covenants: Details specific financial ratios and requirements to be maintained
7. Appendix A - Form of Drawdown Notice: Template for requesting loan disbursement
8. Appendix B - Form of Compliance Certificate: Template for periodic compliance confirmations
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