Guide on Convertible Loans in the UAE

A convertible loan is a loan agreement in which the borrowed amount, instead of being repaid in cash, can later be converted into equity in the company under agreed conditions, such as achieving specific financial milestones or reaching a particular valuation. This guide is for those who are interested in convertible loans nuances in the UAE.

Guide on Convertible Loans in the UAE

Guide

Content

  • The prohibition on interest-bearing loans in Islamic law
  • Differences in regulation of interest-bearing loans between the UAE mainland and the ADGM and DIFC free zones, which apply English law
    • The need to obtain a license when providing loans “by the way of business”
    • Risks for foreign creditors providing loans to companies in the UAE
  • Alternative financing instruments that comply with Islamic law

For Whom

FOUNDERS AND INVESTORS OF FREE ZONES AND MAINLAND COMPANIES IN THE UAE

About the Guide

Convertible loans, a unique hybrid between debt and equity, have become an industry standard for structuring venture investments in early-stage startups worldwide. Understanding the legal aspects of convertible loans is crucial for investment success, especially in the UAE, where specific regulations apply. Our guide provides insights into the implementation of convertible loan agreements in the UAE market and how they align with global best practices.

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Al Hulaila Industrial Zone, Ras Al Khaimah, United Arab Emirates