Directors’ and Officers’ Insurance. An insurance policy to cover directors’ and officers’ liabilities arising out of their activities in those positions as directors or officers of the company. The policy is normally taken out by the company on behalf of the directors and officers. VC investors normally require D&O Insurance be put in place by a company prior to their investment in it.
Dubai Financial Services Authority. The financial services regulator in the DIFC.
Dubai International Financial Centre. The financial centre Free Zone in the emirate of Dubai.
The courts of the DIFC.
The reduction in a Shareholder’s percentage ownership in a company triggered by the company issuing new Shares. The exercise of rights under Options or other instruments may also cause dilution. As the number of shares in a company increases, each Shareholder will own a smaller percentage of the company.
A person who is a member of the Board of Directors and is elected by the company’s Shareholders.
A form of Distribution of a company’s profits (after tax, where applicable) to its Shareholders.
Dubai Multi Commodities Centre. An international commodities trading Free Zone in the emirate of Dubai.
Drag-Along Rights allow a majority of the Shareholders to approve a sale of their shares in the company and to force the remaining minority of the Shareholders to also vote to approve such sale (i.e. the majority Shareholders “drag along” the minority Shareholders in a sale scenario). Investors (usually the majority Shareholders) want to receive the full value for their Shares and this may not be possible unless they can sell all the Shares in the company to the buyer. Founders (usually the minority Shareholders) may be reluctant to agree to these rights because investors (the majority Shareholders) normally have a Liquidation Preference and may negotiate the terms of a sale which benefit those investors and not the minority Shareholders. So Drag-Along Rights typically include some protection against abuse for minority Shareholders (e.g. minority Shareholders will sell their shares on the same terms, including price, as the majority Shareholders).
Tag-Along Rights work in a similar but opposing manner.
A process where a buyer or investor examines an asset, company, or business. A due diligence exercise may include reviewing relevant documents and financial statements, inspection of premises and operations and interviews with key personnel including the management team, accountants, legal counsel, customers and suppliers. A buyer or investor will usually engage lawyers and accountants to assist with the review in their respective areas of expertise. For example, in a sale scenario, a buyer will examine the company’s records to (i) confirm that those records support the valuation; (ii) find any matters which it can use as a basis on which to renegotiate the price; or (iii) request any further information it needs.
Due Diligence Questionnaire
DDQ. Also known as Due Diligence Request List. A questionnaire given by a potential buyer or investor to the company they are contemplating buying or investing in. The questionnaire is designed to obtain certain documents, records and information from the target so that the buyer or investor can conduct Due Diligence on it. The form of the questionnaire, and the information it intends to flush out from the target, will vary depending on the type of company, how long it has existed, what industry it is operating in and where it is located.