The UAE has **no exchange control**, no pricing guidelines and no filings on foreign investment. What it has instead is a **structural constraint**: mainland share mechanics are slow and notarised, so the investment layer usually sits at an ADGM, DIFC or offshore holding company. Get that right before the term sheet, not after.
Raising Investment
Term sheet, subscription and closing in the UAE
The UAE has no exchange control, no pricing guidelines and no filings on foreign investment. What it has instead is a structural constraint: mainland share mechanics are slow and notarised, so the investment layer usually sits at an ADGM, DIFC or offshore holding company. Get that right before the term sheet, not after.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME] |
| Investment entity | [Mainland LLC / Free zone / DIFC / ADGM / Offshore holdco] |
| Operating entity, if different | [NAME AND JURISDICTION] |
| Lead investor | [NAME] |
| Round | [Seed / Series A] |
| Amount | [CURRENCY] [AMOUNT] |
| Pre-money valuation | [CURRENCY] [AMOUNT] |
| Option pool | [PERCENTAGE] post-closing, [in the pre-money / post-money] |
| Investor stake | [PERCENTAGE] fully diluted |
| Exclusivity | [45] days — binding |
| Target closing | [DATE] |
| Binding? | No, except exclusivity, confidentiality and costs |
1. Structure First
| Question | If… | Then |
|---|---|---|
| Where will the investor take shares? | Mainland LLC | Reconsider. Notarised transfers, DED approval, constrained classes, awkward option schemes |
| ADGM or DIFC | Workable — common law, familiar share structures, predictable courts | |
| Offshore holdco | Common; adds a layer but solves the mechanics | |
| Does the operating business need a mainland licence? | Yes | Hold the mainland entity beneath the investment entity |
| Will there be an employee option pool? | Yes | It needs an entity that can actually operate one |
| Is the investor a fund with its own requirements? | Yes | They will usually require a common-law holdco |
| Is there an existing mainland entity with the trading history? | Yes | Restructuring before the round is easier than after |
1.1Redomiciliation between the mainland and free zones is now possible under the amended Commercial Companies Law, which makes an early structural error less permanent than it was. It remains a process with approvals, not a switch.
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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 is a poor investment vehicle — constrained share classes, notarised transfers, DED approval on every change, and option schemes that are difficult to operate. Most UAE venture deals place the investment at an ADGM, DIFC or offshore holding company above the operating entity. Restructuring before the round is far easier than renegotiating at closing.
A preference structure, an option pool and drag provisions all assume an entity that can create share classes and transfer shares readily. Agreeing terms in a term sheet that the chosen entity cannot implement means renegotiating under time pressure. Confirm feasibility as part of the structural decision.
A detailed term sheet without a clear non-binding statement invites an argument that a contract was formed, especially where the parties then act as though bound. Carve out exclusivity, confidentiality and costs, which genuinely are binding.
A pool created inside the pre-money dilutes existing shareholders only; the investor’s percentage is unchanged whatever its size. The investor therefore has no incentive to keep it small. Model both treatments — reducing an oversized pre-money pool is often worth more than a valuation argument.
A higher valuation with a participating preference can leave founders worse off than a lower valuation with a 1× non-participating preference. Model the waterfall at realistic exit values, not just the optimistic case.
Full ratchet reprices the investor’s entire holding as though it had invested at a later lower price, which at a small down round is severely dilutive to founders. Broad-based weighted average is the market standard and worth holding out for.
Amending constitutional documents, issuing shares and recording a director all require notarisation and authority approval where the entity is a mainland LLC. Overseas signatories need attested powers of attorney, which take three to six weeks to prepare. This is the difference between a UAE closing timetable and a common-law one.
An investor crossing the 25 per cent threshold becomes a registrable controller, with register and filing obligations. It is a closing step, not a follow-up item, and it is checked in banking and licensing.
Joint liability lets an investor pursue one founder for the entire warranty claim, leaving them to chase the others. Several liability capped at each founder’s own consideration is the position to insist on — among the most important negotiating points for founders.
Warranties are given subject to what is fairly disclosed. A disclosure letter that lists document titles or attaches a data room index does not fairly disclose anything. Founders benefit from disclosing generously; investors from insisting on specificity.
The UAE has no exchange control, no prescribed valuation methodology and no foreign investment filing regime. Term sheets ported from jurisdictions with those regimes carry clauses that do nothing except confuse counsel and slow the process.
Licence validity, visa quota, WPS records, Emiratisation position, UBO filings and corporate tax registration are all standard diligence items in the UAE and are all commonly deficient in a growing company. Fix them before the data room opens, not during exclusivity.
Exclusivity is binding and is a real concession — keep it to what diligence genuinely requires, and make it fall away if the investor materially changes terms. Cap the legal cost undertaking and make it payable on closing only.
Code, designs and brand created by founders before incorporation belong to them personally unless assigned. It is the most common serious defect found in early-stage diligence and it can stop a round. Execute the assignments before diligence starts.
Reflects UAE law and market practice current as of {{DATE OF USE}}. The Commercial Companies Law was amended by Federal Decree-Law 20 of 2025 including redomiciliation, and DIFC, ADGM and free zone company rules, UBO obligations and tax treatment all change — take UAE legal and tax advice on the structure before signing a term sheet.
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.