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ADGM SPV (Special Purpose Vehicle) Setup in Abu Dhabi Global Market

Updated 12 August 2024

UAE is a marketing and trading center that has earned fame from all over the world. It is the best place for small or large businesses to conduct their operations in the country without any serious limitations. The UAE has done a lot to benefit entrepreneurs, businessmen, and freelancers so that they can prosper in […]

Brenda13 min read

UAE is a marketing and trading center that has earned fame from all over the world. It is the best place for small or large businesses to conduct their operations in the country without any serious limitations. The UAE has done a lot to benefit entrepreneurs, businessmen, and freelancers so that they can prosper in the country. To take a step further, the UAE government has introduced a new business model in the form of holding companies like an SPV (Special Purpose Vehicle) company. A holding company is one that lets entrepreneurs hold their assets while efficiently conducting certain business activities or operating their businesses. SPVs allow owners to isolate financial risk, reduce liability, and offer many other benefits.

Let’s find out how you can form an SPV company in ADGM (Abu Dhabi Global Market) and other markets along with its key features.

What is an SPV Company Setup?

A Special Purpose Vehicle (SPV) is a holding corporation that enables owners to isolate their financial risks and reduce their legal liability. Ras Al Khaimah International Corporate Centre (RAK ICC) and the Abu Dhabi Global Market (ADGM) are the two markets that provide this type of legal company structure. Let’s briefly talk about ADGM.

What is ADGM (Abu Dhabi Global Market)?

The Abu Dhabi Global Market (ADGM) is the first International Financial Free Zone in the Middle East where English Common Law is directly applied.

ADGM is well-known for its business-friendly, strong, responsive, and progressive ecosystem all over the world. The Registration Authority (RA), ADGM Courts, and Financial Services Regulatory Authority (FSRA) are three independent governing bodies that oversee it. This makes this market one of the most reliable financial hubs in the area.

ADGM has registered 2,385 applications since the time of its launch, six years ago. At present, it manages assets worth over USD 26 billion and employs 22,000 skillful people.

Benefits of English Common Law

Operating under English Common Law gives several important advantages to companies. Its principles are well-known in the corporate sector and have undergone rigorous testing in the past. The principles of the English Common Law make sure that the company strictly adheres to the business standards of the world.

A level of assurance is also provided by conducting operations under the English Common Law, which is supported by English courts.

Reasons to Set Up an ADGM SPV (Special Purpose Vehicle) Company in UAE

There are many advantages to setting up Special Purpose Vehicles in the Abu Dhabi Global Market (ADGM). Following are some of these advantages:

No Need for Attestation

If not specified, there is no requirement of attesting the corporate documents in the ADGM.

Tax Residency

In order to take advantage of the UAE’s network of Double Tax Treaty, any company or firm established under the ADGM is allowed to apply for a Tax Residency Certificate from the UAE Federal Tax Authority (FTA). The registered firms and companies would need to satisfy the FTA’s requirements or criteria.

Ability to Use a Corporate Service Provider or Agent

The ADGM allows the management of the SPV by an agent or corporate service provider. This market also gives you a registered office address.

Legal System

The legal system of the ADGM follows the principles of the English Common Law and the Foundations Regulations of 2017. Every registered entity in the AGDM needs to follow its Civil and Commercial Laws. These Laws depend on the laws of England and Wales. This makes sure that the entities setting up an SPV in the ADGM follow extraordinary international business standards.

Employee Stock Option Plan

An SPV allows you to create an ESOP (Employee Stock Option Plan). Plus, you are also allowed to issue options or shares to your SPV on the basis of the number of options you give to your employees.

Continuance Permitted and Migration

ADGM lets the companies redomicile and relocate from their current jurisdictions to other jurisdictions. But before you take a step, you need to check if your current jurisdiction lets the entities migrate outside of it. Guernsey, the British Virgin Islands, Jersey, and the Cayman Islands are some of the many jurisdictions that allow continuance and migration into other jurisdictions.

Benefits of Setting Up an SPV with Abu Dhabi Global Market (ADGM)

SPV can be used for a lot of purposes. The following are a few well-known benefits of establishing ADGM SPVs:

  • Any property which is even worth $100 can be regarded as an asset.
  • There are no physical office requirements
  • You can establish a company in a Tier 1 global financial center.
  • Multiple classes of shares are available
  • There is no need to audit or file an account unless the Registrar requests it.
  • You can access the broad UAE Double Tax Treaty network and an extensive network of the tax treaty.
  • No minimum share capital requirement
  • There is a requirement for only one shareholder

Required Application Documents for ADGM SPVs

Setting up an SPV may require the following documents to be submitted

  • Articles of Association (You can submit either the bespoke articles, model articles with amendments, or model articles)
  • Your business plan
  • A copy of the resolution of the board of shareholders or directors
  • Copy of signature page and passport of the beneficial owners, authorized signatories, secretary, shareholders, or directors
  • A copy of Emirates ID for GCC national or UAE Authorized Signatories
  • Your Emirates ID
  • Visa copy or entry page
  • Bank reference letter
  • NOC if the shareholder owns a UAE Visa
  • A registered office address of the ADGM SPV is required. An exempt ADGM SPV can use a registered office address of its ADGM-registered parent or any other related entity. For non-exempt SPVs, a copy of the signed consent letter for the provision of a registered office is required. The letter is signed by the appointed Company Services Provider.
  • Utility bill
  • A certified copy of the Certificate of Registration or Incorporation for each shareholder and director. The copy must be certified within the last three months.
  • CV

The Setup Process of the ADGM SPV Company

The UAE provides a quick and easy procedure for setting up or incorporating an SPV business. ADGM SPV company saves time and money by simply requiring the certification of documents rather than the whole consultation of foreign business documents as part of the SPV company formation procedure. Also, to make things simpler, ADGM often does not require setup-related personal visits or the submission of original copies of any paperwork.

Nonetheless, because of the company structure’s delicate nature, it is preferable to get help from someone with knowledge of UAE company formation in the procedure.

The online registry solution provided by the ADGM website or online portal is used to complete the ADGM SPV application and payment processes, which are both entirely digital.

Within two weeks, you can establish your Special Purpose Vehicle Corporation in only four simple steps. Find the steps for submitting an ADGM SPV application below:

Step 1

Create a Profile

First, create your profile through the portal. Review and prepare the documents to be submitted for the application process. A brief business plan including shareholders, purpose, and structure will also be needed for application and pre-approval. We have already mentioned the documents required for the application.

Step 2

Application Completion

Complete all required forms and submit the duly filled application through the official portal along with the above-listed documentation and required payment.

Step 3

Notification

The procedure can be finished in a few days, provided that all the necessary documents and information are submitted in the right way. The Abu Dhabi Global Market (ADGM) will evaluate or review the Abu Dhabi Immigration clearance along with the application of Authorized Signatories.

Your online dashboard will show the status of your application. Also, you will receive updates through email if your application needs any change. You will be notified via email after the Registrar has made the final decision.

Step 4

License Issuance

If your application is successfully accepted, a soft copy of your license will be issued. The email will also have a link that you can use to schedule a time to pick up all original documents.

Key Uses of an ADGM SPV

The most typical way to hold shares in other UAE-based businesses is through an ADGM SPV. It can effectively take the role of the 49% foreign shareholder in an onshore UAE LLC while enabling the shareholders to possess intellectual property and assets collectively under a strong local English Common Law jurisdiction.

The typical uses of an ADGM SPV are as follows:

01

Risk Sharing

An SPV company enables it to legally separate itself from financial and legal risk. SPVs are frequently utilized to set up project companies for joint ventures to represent managerial responsibilities while isolating the risks of partners linked with the joint venture.

02

Financing

With the use of an SPV, investment can be obtained without putting the parent’s assets at risk of cross-liabilities or adding to the parent company’s debt. Also, it makes it possible for investors to fund particular initiatives rather than invest directly in the parent company.

03

Securitization

Organizations frequently employ SPVs to securitize receivables such as loans. By granting securities to investors on the capital markets, the SPV can fund the acquisition of these assets.

04

Real Estate Investment

You can also use SPVs to buy properties. The SPV can be sold instead of the properties if the taxes on the sale of the properties are higher than the taxes on the capital gain. Then, rather than paying tax on the property sales tax, the tax is paid on the capital gain.

05

Asset Transfer

As some assets are difficult to transfer, a parent company could establish an SPV to hold onto those assets. The SPV can be sold as a self-contained package when they want to sell the asset.

06

Raising Capital

An SPV can receive favorable borrowing rates when raising money. As the SPV owns the underlying assets, the credit rating may be suitable for the parent entity.

07

Intellectual Property

An SPV can also be used to own the parent company’s intellectual property. There will be less risk because this is a non-operational entity. The operating companies can be granted access to intellectual property through license agreements.

Types

Types of ADGM SPV

The following types of SPVs can be incorporated into the ADGM:

Restricted Scope Company (RSC)

A Restricted Scope Company (RSC) is a special ADGM legal structure that offers complete disclosure to the ADGM Registrar but provides limited information disclosure on the Public Register.

It can be incorporated as a subsidiary of a Single-Family Office, a subsidiary of some other corporate body, or a subsidiary of a company formed by Emiri decree.

Private Company (Limited by Shares – LTD)

A Private Company (Limited by Shares – LTD) is a Passive Holding Company or a Standard Private Limited Company.

Exempt and Non-Exempt Applicants

Here is the difference between the applicants who are exempted and who are non-exempted:

Exempt Applicants

A body corporate is an Exempt Applicant for an ADGM SPV if it is a subsidiary meeting any of the set criteria. Such an applicant will not require the services of a company service provider.

The criteria are as follows:

  • Any person regulated or licensed by the Central Bank of the UAE.
  • An authorized person as defined in the Financial Services and Markets Regulations 2015.
  • Any person exempt as per the Commercial Licensing Regulations of 2015 (Exemptions) Order 2020.
  • A company that has either employees, substantial assets, and turnover in the UAE (to the satisfaction of the Registrar); adequate governance procedure and policies as defined by the guidance given by the Registrar or the rules made by the Board.
  • A company whose shares are admitted to trading on the Abu Dhabi Global Market or any other regulated market in the UAE.

The Registrar may look into some factors to verify if a company has demonstrated adequate presence in the UAE or not. These factors are:

  • The governance procedures and policies of the company.
  • Guidance issued by the Registrar or any rules made by the Board.
  • The turnover, employees, and assets of the company in the UAE.

If required, the Registrar can demand such supporting documentation and information.

Non-Exempt Applicants

Applicants who are unable to meet the criteria of Exempt Applicants are considered Non-exempt applicants which we have defined above.

Before applying to ADGM Registration Authority, non-exempt applicants will have to hire a company service provider licensed by the ADGM.

He/she will be responsible for both the administration and establishment of the SPV in the AGDM.

Frequently Asked Questions

A Special Purpose Vehicle, or SPV, is a type of legal entity that enables a number of investors to pool their funds and invest in a single business. SPVs are useful in a variety of commercial contexts. SPVs are sometimes used by public corporations to isolate specific holdings from the parent company’s financial sheet.

Easy SPV Company Setup in ADGM

So, that was all about the SPV company setup in ADGM. We hope you have learned everything that is required to start your company in the UAE. If you follow the setup process in the right way and submit all the required documents, you can easily establish your business in Abu Dhabi.

If you are looking to start your company in the UAE, contact RIZ & MONA CONSULTANCY, professional business setup experts in Dubai, UAE. We will handle your application and take care of everything on your behalf. Get in touch with us now and book your free appointment today.

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Brenda

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Published 17 April 2023 · Updated 12 August 2024