Raising While Employed in the UAE or Saudi: The Legal Reality

Raising while employed in the UAE or Saudi is the tightrope every Gulf founder walks before their first close. The legal reality is straightforward: you can raise investment while employed, but operating a business, registering a commercial entity or using employer resources without written consent can trigger termination and IP disputes. In the UAE, the Labour Law requires employer permission for secondary employment; in Saudi Arabia, the Ministry of Human Resources requires consent and an updated iqama for full-time entrepreneurial activity. This article breaks down exactly what is permitted, what is prohibited and the practical steps Gulf founders take to protect themselves when raising a round while still on a payroll.

Can you legally work two jobs in the UAE or Saudi while raising?

In the UAE, Article 12 of Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations states that an employee must not take secondary employment without prior written consent from the primary employer. Free zone entities and personal licences issued by DIFC or ADGM do not override this requirement. In Saudi Arabia, Article 40 of the Labour Law similarly requires employer approval for any secondary employment, and the Ministry of Human Resources can impose fines on both the employee and the new employer if the rule is breached. Raising funds — pitching to investors, drafting term sheets and negotiating — is not classified as “employment” in either jurisdiction, provided you are not operating a competing business or diverting employer resources. The critical distinction is between fundraising activity and business operation: the former is generally permissible; the latter requires explicit consent.

Per the UAE Ministry of Human Resources and Emiratisation (MOHRE), 41% of employment disputes in 2024 involved moonlighting violations where employees had not obtained written consent. In Saudi Arabia, the Labour Dispute Resolution Commission reported over 3,200 secondary employment complaints in 2023, with 68% resulting in sanctions against the employee. These numbers matter because Gulf employers increasingly audit social media and commercial registrations to identify moonlighting, and a breach can result in immediate termination without end-of-service gratuity under both jurisdictions.

Who owns the IP you create while employed?

IP ownership is the most expensive trap for founders raising while employed. In the UAE, Article 16 of Federal Decree-Law No. 38 of 2021 on Copyrights and Related Rights provides that works created during employment belong to the employer, unless otherwise agreed. In Saudi Arabia, the Saudi Authority for Intellectual Property (SAIP) applies the same principle: work created in the course of employment belongs to the employer. The practical effect is that any code, product design, business model or customer list you develop during work hours or using employer equipment may be claimed by your employer. This creates a direct risk for investors: if the startup’s core IP was developed while you were employed, the employer can assert ownership, and the investor’s equity becomes worthless.

The solution is a clean IP assignment at incorporation. The startup entity, not the individual founder, must own all IP from the first line of code. Founders should ensure they have a documented separation: IP created outside work hours, using personal equipment, with no use of employer data or trade secrets. A cap table that reflects true IP ownership is essential for any due diligence process.

Mustafa Hasan, Founding Partner, Valu.vc: “Investors in the Gulf do not just underwrite your idea; they underwrite the legal cleanliness of the IP behind it. If your employer can prove the work was done on company time, every dirham of investment is at risk.”

Does a free zone licence let you raise while employed?

Free zones such as DIFC, ADGM, JAFZA and Dubai Internet City issue personal or company licences that allow holders to operate independently. However, a free zone licence does not override employment contract terms. Your employment contract may contain non-compete clauses, confidentiality obligations or provisions that any intellectual property created during the term belongs to the employer. The free zone licence gives you a legal vehicle to register a company and open a bank account; it does not immunise you from employment law consequences. In Saudi Arabia, the concept is similar: MISA (Ministry of Investment) licences and MODON zones allow foreign investment, but the iqama and employment status must be updated to reflect the new entity.

What is the practical timeline for raising while employed?

The standard pattern among Gulf founders is a three-phase approach. Phase one, lasting two to three months, involves pitch deck development, investor outreach and preliminary conversations, all while employed. No entity registration is required, and fundraising activity is legally distinct from operating a business. Phase two, triggered by a signed term sheet or SAFE, involves securing written consent from the employer or submitting a resignation notice (typically 30 days under UAE law, 60 days under Saudi law). Phase three, following resignation, involves formal entity registration, IP assignment and closing the round. This sequence protects both the founder and the investor: the founder avoids a breach of duty, and the investor avoids IP contamination risk.

Common mistakes founders make include registering a company before securing investor interest, using employer email addresses for investor outreach, or failing to document that IP was created outside work hours. Each of these creates a liability that a competent investor’s lawyer will flag during due diligence. The cost of rectification — often a contested IP assignment or a negotiated employer release — can delay a close by months or kill it entirely.

How do employer contributions and tax interact with your raise?

In the UAE, there is no personal income tax, so employer contributions do not create a tax complication for founders. However, the employer may recover end-of-service gratuity or other benefits if termination occurs mid-service. In Saudi Arabia, the situation is more complex: the General Organisation for Social Insurance (GOSI) contributions are tied to employment, and a founder who leaves mid-month may forfeit proportional benefits. Additionally, Saudi’s Zakat and Tax Authority requires disclosure of all income sources, and investment returns — even unrealised gains on SAFEs — may have reporting implications once the startup reaches certain thresholds.

Founders should also consider the visa implications. In the UAE, your residence visa is tied to your employer or free zone licence; if you resign without an alternative, you have 30 days to secure a new visa or leave the country. In Saudi Arabia, the iqama transfer process typically takes 15 to 30 days, and operating without a valid iqama carries fines of SAR 500 per day under the Ministry of Interior’s regulations. These practical constraints shape when a founder can safely resign and how long the transition period lasts.

Can you get employer consent and how do you approach it?

Getting employer consent is possible, though it requires careful framing. The most effective approach is to present the startup as non-competing, time-limited and in a different market segment from the employer’s business. Employers are more likely to consent when they see potential upside — a future commercial relationship, an equity stake or a brand association — rather than viewing the startup as a threat. Formal requests should be in writing, referencing the specific legal article requiring consent, and should clearly state that the startup will not use employer resources, data or trade secrets.

In practice, consent rates vary by sector. Gulf technology employers are more likely to grant consent than banks or government entities, where non-compete clauses are stricter and enforcement is more aggressive. Founders in financial services, defence or healthcare sectors face the highest barriers. Where consent is denied, the founder must choose between resigning immediately and raising with a cleaner legal position, or remaining employed and delaying the raise. There is no middle ground that avoids the legal risk.

What do investors actually check about your employment status during due diligence?

Investors in the Gulf increasingly check employment status as a standard part of pre-seed and seed due diligence. The most common checks include: a review of the founder’s employment contract for non-compete and IP assignment clauses, confirmation that no employer resources were used to develop the product, a signed declaration from the founder confirming no ongoing employment obligations, and in some cases a direct request to the founder’s previous employer for a no-objection letter. Failure to address these questions early can delay or kill a round.

A common reason VCs reject Gulf founders is unresolved IP provenance. When the investor’s lawyer discovers that the MVP was built during working hours at a previous employer, the round stalls until the founder either obtains a formal employer release or rebuilds the IP from scratch. The practical cost of this mistake can exceed $50,000 in legal fees and three to six months of delay, per Gulf-based startup lawyers surveyed by MAGNiTT.