The UAE has no equivalent of Singapore’s CARE or a domestic standard instrument, so what gets used is a **SAFE or convertible note adapted from elsewhere** — usually issued by an ADGM, DIFC or offshore holding company rather than a mainland LLC, because mainland share mechanics make conversion impractical.
Convertible Instruments
SAFEs, convertible notes and bridge funding
The UAE has no equivalent of Singapore’s CARE or a domestic standard instrument, so what gets used is a SAFE or convertible note adapted from elsewhere — usually issued by an ADGM, DIFC or offshore holding company rather than a mainland LLC, because mainland share mechanics make conversion impractical.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME] |
| Issuing entity | [ADGM / DIFC / offshore holdco / mainland LLC] |
| Can this entity actually convert? | [Y/N] — see Section 1 |
| Investor | [NAME] |
| Instrument | [SAFE / Convertible note] |
| Amount | [CURRENCY] [AMOUNT] |
| Valuation cap | [CURRENCY] [AMOUNT] |
| Discount | [20] per cent |
| Qualifying financing threshold | [CURRENCY] [AMOUNT] |
| [Interest — notes only] | [RATE] per cent per annum |
| [Maturity — notes only] | [DATE] |
| Governing law | [ADGM / DIFC / other] |
1. Can the Entity Convert?
| Issuing entity | Conversion mechanics | Verdict |
|---|---|---|
| Mainland LLC | Every share issue needs a notarised MOA amendment and DED approval; classes are constrained | Impractical — conversion takes weeks and needs the investor at a notary |
| Free zone company | Depends on the zone — some support classes and straightforward issues | [Confirm with the zone] |
| ADGM or DIFC | Common-law share mechanics, board resolution and register update | Workable |
| Offshore holdco | Per its own jurisdiction | Common in practice |
1.1Ask this before signing anything. An investor who puts money into a mainland LLC on a convertible instrument may find that converting requires a notary appointment, an attested power of attorney if they are overseas, DED approval and a licence amendment — at the exact moment a priced round is trying to close.
2. SAFE or Note
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This is page 1 of the Word document, exactly as it appears when you open it. Fields shown like THIS are placeholders for you to complete.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
A mainland LLC makes conversion impractical — notarised MOA amendment, DED approval, licence amendment, and the investor or an attested attorney at a notary. That is weeks of process arriving exactly when a priced round is closing. Issue convertibles from an ADGM, DIFC or offshore entity, or accept the friction knowingly.
Unlike Singapore, which publishes the CARE as part of a free model suite, the UAE has no domestic standard. What circulates is adapted from US or English precedents, sometimes without adjusting the conversion mechanics to the entity actually issuing it. Read the mechanics against your entity.
The note accrues interest, matures, and ranks as debt on a dissolution. The SAFE-style instrument has no maturity and no repayment obligation. That difference is the whole choice, and it determines what happens if the next round is late.
If the next round has not closed by the maturity date the note becomes repayable, typically when the company has least cash. It gets renegotiated in practice, but from a weak position. Either allow generous runway or specify what happens at maturity other than repayment.
Where the next round prices above the cap, the cap determines the conversion price entirely and the discount is irrelevant. Founders focus on the discount because the percentage looks larger; the cap is what decides dilution in a good outcome.
A cap applied to fully diluted capitalisation including the option pool produces a different price from one applied pre-money or excluding the pool. "Valuation cap" alone does not settle it, and the difference is material.
Several instruments issued over eighteen months at different caps convert together. The aggregate is routinely far larger than founders expect from any single instrument. Maintain the table in Section 6 and update it before issuing another.
A holder who is not yet a shareholder should not have veto rights over operations. Information rights are reasonable; reserved matters create a second control layer alongside the eventual equity documents.
If the company is acquired before conversion, does the investor take their money back, a multiple, or their converted share? Silence produces the most expensive argument in the instrument. Specify it, and specify whether accrued interest is included.
A convertible note is a loan. Where the lender is carrying on a lending business, regulatory questions arise. Where a mainland entity issues a note to a related party, the interest rate also engages transfer pricing. Confirm both rather than assuming.
Where interest accrues and converts with principal, dilution is larger than the principal alone suggests and grows the longer the round takes. Model conversion at the realistic date, not the earliest.
Too low and a small bridge triggers conversion at a price nobody intended. Too high and a genuine financing does not trigger it. Set it at a level that clearly signals a real priced round.
Constitutional amendment where a class is created, approvals, pre-emption, register update, filings and a deed of adherence. Companies treat conversion as arithmetic and skip the corporate steps, which surfaces in the next diligence.
Employees holding options are diluted by conversion exactly as shareholders are, and are rarely told. A short explanation before the round closes costs nothing and is noticed if omitted.
Reflects UAE law and market practice current as of {{DATE OF USE}}. Company law including the 2025 amendments, free zone and financial free zone share mechanics, lending regulation and transfer pricing rules all change — take UAE legal and tax advice on the issuing entity before signing a convertible instrument.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.