Case Study - Structuring for Investment in a UAE Clinic
Peter Ivantsov
Managing Partner of GCG Structuring | Enabling Success Through Professional, Real-Time Corporate Services & Strategic Advice
Last month, a client came to me with an interesting inquiry:
"How should I structure a legal setup to secure funding for a new clinic in the UAE?"
Basically, they needed a setup that would support growth, appeal to investors and stay compliant with UAE regulations.
Here’s how my team & I approached this:
The Initial Setup Challenges
? Classes of Shares: The client planned to issue multiple classes of shares with different rights - some voting, some non-voting; all with specific vesting tied to project milestones.
This is common in startup funding structures, as it allows flexibility for investors and key stakeholders.
? UAE Mainland Restrictions: Unfortunately, UAE mainland regulations don’t support flexible share classes in the Memorandum of Association (MOA) due to Sharia Law requirements, making it complex to tailor voting rights and vesting structures.
Given this, we recommended a split structure: an Operational Company (OpCo) and a Holding Company (HoldCo).
Navigating the Next Steps
? Which Entity to Start With: Here’s where it becomes a matter of timing and strategy.
- Immediate Operational Needs (e.g. securing a property, clients ready to onboard)
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In this case, it’s best to set up the OpCo on the mainland first. This allows the business to secure the office space tied to the clinic license, get operational, and then transfer ownership of the OpCo to the HoldCo.
- Investor-Focused Transparency
If the goal is investor confidence and a clean slate for funding, we advised starting with the HoldCo, ideally in ADGM under a British common law framework. This jurisdiction is well-regarded internationally and allows for structured share classes and investor protections.
With all investors subscribed and shares issued, the HoldCo can pass a board resolution to open the OpCo on the mainland. Setting it up this way means investors have full visibility and the structure is solid and free of liabilities from day one.
Benefits of This Structure
1. Flexibility in Share Classes: Using ADGM for the HoldCo provides more flexibility for share types, voting rights, and vesting provisions, appealing to investors who want clear, enforceable rights.
2. Investor Confidence: Starting with a HoldCo before the OpCo assures investors that the operational company is new, has a transparent setup, and carries no pre-existing liabilities.
3. Efficient Operations: Once the HoldCo board authorizes the OpCo, the mainland setup can be completed in days, making it easier to secure local licenses and operate within UAE regulations.
So what are the key takeaways here?
A transparent and strategically layered structure can reassure investors, meet operational timelines and keep potential liabilities clear from the outset. It’s all about aligning the structure with business and investment goals.
I’d love to hear from you - how do you balance operational needs and investor demands in complex setups?
Business Formation & Corporate Administration
5 个月Insightful breakdown on structuring a compliant and investor-friendly setup in the UAE! The dual-entity approach of separating the HoldCo and OpCo is a strategic solution, especially for healthcare, where regulatory compliance and investor confidence are key. Starting with the HoldCo under ADGM’s common law framework provides the flexibility in share classes investors seek, while also ensuring the OpCo is liability-free from the start. This transparent, layered structure not only aligns with UAE regulations but also supports growth objectives. Great case study—thank you for sharing!
M&A, Debt Structuring and Private Equity Experienced Professional
5 个月Fantastic approach, but some of investors may be worried that they are 1 step away from operational company - perhaps board of directors on operational company with some veto rights and agreed scheme on nomination of such director can be also implemented in order to make investors happier. Or just sell of 1 share in OpCo to potential Investor in case Board of Directors solution can’t be implemented.