Why setup a financial services firm in the ADGM?
The ADGM is one of two onshore financial centres in the UAE. Established in 2015, it quickly rose through the rankings and is now counted as one of the top 25 financial centres in the world. ADGM’s innovative SPV regime, its initiatives in the fintech space and its issuance of the region’s first cryto-asset regulatory framework, have all contributed to its success.
Here are some specific advantages of establishing in the Abu Dhabi Global Market.
LEGAL AND REGULATORY FRAMEWORK:
- Legal framework supports cross-border activities
- 100% foreign ownership permitted
- No restriction on foreign talent or employees
- No restrictions on capital repatriation
- Zero tax for 50 years on profits, capital or assets from 2004
- Zero tax on employee income
- Well regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE legal system
- Risk-based regulatory approach
- Central to regional deal making
- High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
- World-class regional and international law and auditing firms, and other professional services
- A growing fund domicile in the region
- Management offices, holding companies and family offices are located closer to the assets they own or manage
- The Middle East, Africa and South Asia (MEASA) is increasingly the centre of gravity for the global economy
- The UAE plays a central role in the growing South-South trade, principally between Asia and Africa
- Well-positioned to harness the potential of emerging markets.
ADGM Digital Banking License
The ADGM recently announced its intention to accept applications for digital banking licenses. A digital bank accepts deposits, provides credit, and engages in related financial services activities. This is done primarily through online, digital or electronic means, in contrast to physical interaction with customers as in the case of conventional banks. Digital banks are financial institutions that seek to provide novel customer and transactional solutions.
The Financial Services Regulatory Authority, or FSRA, reviews applications from firms who wish to carry out financial services from the ADGM. For the ADGM digital banking license, the regulators aim to accept applications from existing banking institutions, and from firms with innovative value propositions.
ADGM Capital requirements
The category of licence determines the amount of base capital required. The capital requirement for a Category 1 Digital Banking License is $10 million. This is the base capital – It is likely, however, that the Risk-Based Capital Minimum will apply as the higher requirement. This is calculated on the basis of the totality of risks the digital bank will face in the course of its business and operations, and includes core Tier 1 (CET1) and Tier 1 capital adequacy ratios of 6% and 8% respectively, with a Capital Conservation Buffer of 2.5%, along with a minimum leverage ratio of 3%.
ADGM Authorisation Process
Applications for Digital Banking licenses will go through a rigorous process of authorisation. Applicants will have to demonstrate a credible, comprehensive and sustainable business plan, adequate control mechanisms and robust compliance processes.
The following are mandatory appointments:
Licensed Directors – the FSRA will review the composition of the Board
Senior Executive Officer – Must be UAE resident
Compliance Officer – Must be UAE resident
Money Laundering Reporting Officer – Must be UAE resident
Senior management positions – Business Heads, Chief Risk Officer, Chief Technology Officer
Setting up an AGDM Digital Banking License involves the following interactions:
Financial Services Regulatory Authority (FSRA)
Application fee – from US$ 30,000
Annual fee – from US$ 30,000
Registration Authority (RA)
The RA helps to set up the legal structure of the ADGM Firm. In most cases, this would be a Private Company Limited by Shares. Shareholders can be individual, or corporate. The costs for setting up such a company are:
Application for reserving a name: US$ 200
Application for Incorporation of a Private Company Limited by Shares: US$ 1,500
Commercial License on Incorporation: US$ 4,000 (annual fee)
Business Activity fees: US$ 9,000 (annual fee)
The data protection notification is part of the process of registering a new entity in the ADGM. The costs involved are as follows:
Registration - US$ 300
Annual renewal – US$ 100
Every entity registered in the ADGM is required to lease a physical office. You can choose from business center options, or physical spaces within the ADGM.
Here is an indication of the prevailing rates:
Business Centre – from a one-desk office at US$ 19,000.
Fitted Offices – from US$ 55 per square foot.
Establishment Card Application – US$ 273
E-channel – US$ 1,100 (one-time)
E-channel deposit – US$ 1,360
Visas (per visa) – from US$ 1,500
We provide turnkey services for ADGM Digital Banking License. From fintech consulting, to assistance in authorisations, to assistance in preparation of the legal documentation, 10 Leaves helps you navigate the FSRA Rulebook and submit an application that is comprehensive, complete and compliant.
• Reviewing the business model and advice on the applicable regulatory framework;
• Preparation of the Regulatory Business Plan and comprehensive financial projections;
• Preparation of all policies, processes and manuals required;
• Provision of Outsourced Compliance Officer and Outsourced Finance Officer services;
• Finalising the legal structure, including holding company setup and customisation of Memorandums; and
• Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.